A benchmark is a point of reference and is used for comparative analysis. They are used to compare geographies or customer lists - showing how similar or different populations, households, or customers in a trade area are from those in the benchmark. Some common purposes for using a benchmark include:
- Comparing distributions and penetration within a desired market.
- Comparing performance amongst store networks, along with performance relative to the competition. This can further be compared against industry averages.
- Measuring the penetration of a specific population, group, or sub-group within your database.
- Measuring and testing campaigns (eg. response analysis).
Your benchmark is used as the denominator for the penetration and Index calculations. Determining the proper benchmark requires a good understanding of how, where, and to whom the product/service is being marketed, or who is represented in your customer list. A poorly selected benchmark can lead to faulty analysis, so it is important to consider the following:
- The benchmark must include the entirety of the population, households, or customers being analyzed.
- The benchmark must include the entirety of the population, households, or customers who had the opportunity to purchase or respond.
Examples of incorrect benchmarks:
Example of a correct benchmark:
Note: The trade area must be completely surrounded by the benchmark. Ensure that the trade area you create or select represents an area that is fully encompassed by the benchmark.