How can benchmarking help you save money in vendor negotiation?

2 Why is benchmarking important?

Benchmarking can help you save money in vendor negotiation by giving you more leverage and confidence. By knowing how your vendors compare with others in the market, you can have a better sense of their strengths and weaknesses, their competitive advantages and disadvantages, and their margins and costs. This can help you negotiate more effectively, ask for discounts or concessions, or switch to alternative vendors if necessary. Benchmarking can also help you avoid overpaying or underpaying for your vendors' services or products, which can affect your profitability and reputation.

3 How to do benchmarking?

Benchmarking can be done in various ways, depending on your objectives, resources, and data availability. To start, you must define your scope and criteria, such as which aspects of vendor performance and prices to benchmark, and the metrics and indicators to use for measurement. Subsequently, you should identify sources and methods for collecting the data and information needed for benchmarking. This could involve internal sources such as records or reports, external sources like databases or associations, or methods such as desk research or interviews. After collecting and analyzing the data with tools like spreadsheets or graphs, you can apply the results to inform negotiation strategies and tactics. Additionally, you can communicate the results to vendors, stakeholders, or team members to provide feedback or recommendations.

4 What are some challenges and pitfalls of benchmarking?

Benchmarking can be a powerful tool for vendor negotiation, but there are some challenges and pitfalls to be aware of and avoid. Data quality and availability should be accurate, reliable, and relevant, with enough data and information to make meaningful and fair comparisons. However, the data and information needed may be hard to find, outdated, incomplete, or inconsistent. For an apples-to-apples comparison, the vendors should have similar size, scope, industry, market characteristics, capabilities, or offerings. Additionally, confidentiality and ethics should be respected when obtaining and using data and information. Privacy and confidentiality of vendors and sources should be maintained while avoiding disclosing or misusing any sensitive or proprietary information. Acknowledging sources and methods is also important to avoid plagiarism or copyright infringement.

5 What are some best practices and tips for benchmarking?

Benchmarking can be a valuable and effective way to save money in vendor negotiation, but it also requires careful planning and execution. To do it successfully, you should first define your purpose and objectives, and align them with your business strategy and priorities. You should then choose your benchmarks wisely, selecting criteria and metrics that are relevant, meaningful, and measurable. Additionally, you should be flexible and adaptable when benchmarking, being open to new ideas and perspectives. Lastly, remember to use benchmarking as a tool to inform your vendor negotiation, not as a goal in itself.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?