Benchmarking can be a powerful tool to help evaluate performance. You may find that segments you believe are performing well are, in fact, doing poorly compared to your peers. To maximize value benchmarks should be:
Timely
No information is valuable if it comes late. Comparisons should be done on a timely basis that allows you to evaluate how well you are performing not just relative to other vintages and segments in your portfolio but to an independent group where other policies may have been applied.
Detailed
Statistics at the portfolio level are more a curiosity than of real value. You need to have context that looks at customer mix and age. It's important to look at like groups of accounts to make appropriate comparisons.
Relevant
Comparing apples to oranges has little value. The same applies to benchmarks. It's most valuable if you have relevant comparisons including demographic metrics (e.g., income), geographic location, and acquisition channel. It's also important to look at accounts at the same point in the customer lifecycle.
Actionable
If the above benchmark principles are met it becomes possible to make informed decisions to change policies and procedures to improve performance. Taking action moves the value from zero to building your profits.
CECLNow plans to make benchmarking a critical part of the information we deliver to each client each month. The data will include application mix and approval rates along with performance data segmented by characteristics such as product type, collateral values, risk levels and demographics. We believe that benchmark data will add a higher level of insight over and above what you can see from just your own data.
