COMPETITIVE BENCHMARKING
Definition
Competitive benchmarking is the systematic comparison of prices, product assortments, and promotional offers between a retailer and its direct competitors.
More structured than a simple price monitoring system, it incorporates summary metrics (price index, promotional rate, product assortment depth) that enable companies to manage their price image and competitive position over time and by category.
Why it's important
- Objectively assess pricing strategy: replace perceptions with quantitative metrics derived from a panel of competitors.
- Managing by category: A department-by-department benchmark reveals where we are competitive and where we need to make adjustments.
- Internal communication: A shared benchmark dashboard with the sales department helps facilitate decision-making.
Example
A fresh food distributor compiles a monthly benchmark report on 7 competitors (4 brick-and-mortar retailers, 3 online grocery retailers) based on 1,200 SKUs.
The dashboard shows an overall price index of 102 (2% higher than the market average), with variations by department: 95 for dairy (very competitive), 108 for meat (expensive), and 100 for fruits and vegetables (in line with the market).
Targeted portfolio adjustments make it possible to bring the overall index back to 99 within 6 months.
Mistakes to Avoid
- Benchmarking on too broad a scale: including irrelevant competitors skews the metrics.
- Unweighted index: Simply averaging prices gives a bestseller the same weight as a niche title, which skews the analysis.
- Static benchmark: A quarterly benchmark is too slow for a market that changes every day. Aim for at least a weekly update.
Frequently Asked Questions
Competitive intelligence involves continuously monitoring market trends, while competitive benchmarking involves systematically comparing performance, prices, product assortments, or promotions across multiple retailers
. Benchmarking is primarily used to identify gaps and opportunities for improvement.
An effective benchmark goes beyond just prices
It also analyzes price indices, promotions, price differences, product availability, private labels, product assortments, delivery times, and—depending on the category—customer reviews or services offered
The goal is to gain a comprehensive view of your positioning in the market.
Benchmarking must adapt to market dynamics
In e-commerce or highly competitive categories, daily monitoring is often necessary
For other sectors, weekly or monthly benchmarking generally allows you to identify trends without generating unnecessary data.
It’s best to select the brands that actually influence your business: direct competitors, market leaders, local players, pure players, or marketplaces, depending on your categories
A benchmark that’s too broad complicates the analysis, while a relevant sample provides information that pricing teams can use immediately.
Benchmarking should not lead to automatically copying competitors' prices
It allows you to identify positioning gaps, measure your competitiveness on strategic products, simulate different pricing scenarios, and balance margin, sales volume, and price image based on your business objectives.
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