Benchmarks and entitlement values provides measures that help businesses understand where they stand and within which part of the business there is room for improvement.

Benchmarks

Benchmarking’s definition is the evaluation of something with comparison to a standard.It turns out that such a simple process is one of the best analytical tool out there. The devil is however in the details and finding what should be considered a standard for something turns out to be quite a challenging tasks.

Benchmarks help you get an understanding of how you compare versus what usually similar products, companies, initiatives or processes. They give you a sense of how you are performing in relative term and provide some understanding of what are you strength and weaknesses and what can be improved. Benchmarks have for instance been setup to measure productivity in car manufacturing, used to understand sales performance or for instance how customer perceive you compared to the rest of your industry.

When comparing values, an entire process of normalization needs to happen to provide measure estimates that are comparable. Sometimes a normalization process might proved in itself a bit biased, let’s consider for instance comparing videos shared on Facebook and Instagram, Facebook limits the length of a video to about 4h while on Instagram the length of a video is limited to 60s. If we wanted to get a better understanding of how much users are sharing across platforms, what should be the right metrics to benchmark? Number of videos uploaded? Total Video Time uploaded? If we want to have truly effective benchmark it is often necessary to standardize processes, products or features themselves to be truly comparable.

For on site web metrics, Google analytics provides a decent way to get benchmark across multiple types of metrics, be it channel benchmark, location or device. It is possible to define benchmarks based on industry vertical (eg: Computer & Electronics, Arts & Entertainment, Food & Drinks) as well, as well country or region of traffic as well as the overall popularity of the site by daily sessions.

For instance, it allows to compare how the number of sessions obtained during a given period of time with a given benchmark (define as above),and see where we stand respective to “comparable” websites.

In the above picture we can see that this website performs well at getting traffic on mobile and tablet devices, but performs behind the benchmark in getting desktop traffic and in general at getting as much traffic. The other things that we can see from these comparison is that the website has a significant lower share of new sessions and that it the website is marginally better at acquiring tablet users but cruelly lagging behind on desktop.

Interpreting these benchmark can tell us that we might have been lagging behind in our overall traffic acquisition effort, especially towards desktop users and that there might be an opportunity to increase traffic in that device category.

Benchmarks, only provides indicators however and need to be taken into consideration respective of thew overall strategy and metrics of the business. If your specific business model is not able to monetize as well as competitors desktop users, it would make sense to not be investing so much in acquiring them. But at the same time, it raises the questions as to why we wouldn’t be able to monetize these customers as well as competitors.

The role of benchmarks is really to inform this process and direct the formulation of questions based on data as well as (depending on the context) provide a goal or estimate on the size of the opportunity.

Entitlement Values

Entitlement values provides a different type of value to compare against. This time not a “standard”, but an optimal norm. Entitlement value defines what you could expect as a value if you would run an operation in an optimal way. Nevertheless the concept can be extended to a (more) optimal way.

Let’s look at a company trying to place inventory in the warehouse, each item needs to be shipped to the customer and this has a cost. Items are typically ordered together and shipping them as one shipment has economic sense but is directly reliant on the placement of inventory to be set Effectively. We could have one entitlement value that defines what should be the cost of shipping items if everything was setup as to avoid to split an order into multiple shipment. But there is always a better and more optimal way. We could then consider as a follow up from having avoided split shipments, what if all the shipments were placed the closest to the customer ordering them.

Let’s take the example of Jim as shown in the picture above. Jim is based in France and orders some earls grey tea and a box of lego for his nephew. Unfortunately these items are not available in the same warehouse and need to be shipped separately in order to arrive to Jim within the promised timeframe. One of this item the earl grey is only available in the Spanish warehouse and need to be shipped internationally at an extra $5 of shipping cost. The total shipping costs that we are incurring in order to fulfill Jim’s order is $25, had we placed these items within the same warehouse and in France we would have been able to fulfill Jim’s order at a $10 cost and that is our entitlement value (within the set of optimization parameters ie: no split order and closest location).

Going through the process of finding these different entitlement values help us provide a quantification of the different opportunities and help us understand how much room there is for improvement. For instance, if our typical order is like Jim’s we could potentially save $15 on shipping cost per order by better placing inventory on a $25 average shipping cost or 60% of the shipping cost, quite a large share. If however the typical order only consist of 1 item, with an average shipping cost of $12, there is much less room for improvement.

Entitlement values in such a sense provides a sense of direction as the completeness or an initiative and provides some guidance as whether it is needed to switch to a different type of program to derive improvements and value.

Wrap Up

Benchmark and entitlements both provide complimentary view on how a business or process is performing, and provides measures that help set establish goals, size opportunities and help question the status quo.