Vanity Metrics vs Actionable Metrics
You’re a Founder putting together a sales process for the first time and know you need to have KPIs. You ask Google for a breakdown of Key Performance and get a plethora of advice. Making you privy to becoming a victim of setting vanity metrics.
The metrics shown above in the infographic are good examples of the key differences.
There are four important qualities that make metrics valuable for your business. Aka your actionable metrics. Let’s break down these qualities and why they are important for your success.
They’re Easy to Understand and Keep Track of:
Metrics that are accessible and comprehensible, create a unified understanding of your goals and progress. When a metric changes, whether it goes up, stays the same or goes down, you should understand what it means and make smart decisions based on that information.
They Can Be Compared Over Time:
Easy to understand and keep track of metrics that can be compared over different time periods. This helps you see trends and patterns in your business performance.
For example, instead of looking at the total number of active users, you can compare the number of active users each month. This comparison gives you important information. For example, if you had “10,000 active users,” it’s hard to tell if that’s good or bad. But if you had “1,000 active users in 1 month,” it shows a 10x increase, which is definitely positive.
They Can Be Turned into Rates or Ratios :
In addition to tracking metrics like Users/Month, useful metrics also involve measuring percentages or ratios that show how engaged users are. For example, you can monitor the percentage of Monthly Active Users (MAU) compared to the total number of users who signed up. If you have “1,000 active users out of 2,000 who signed up,” it means you have achieved 50% of MAU. These rates and ratios help you understand how successful and engaged your user base is.
Changes in Metrics Require Action and Decisions:
Useful metrics have the power to make you take action and make decisions. you can adjust your strategies and change direction when needed. This gives you the power to make proactive choices that can help your business succeed.
Examples of Useful Metrics
The specific metrics that matter will depend on your business and industry, but here are some examples that can help you focus your efforts:
Customer Acquisition Cost (CAC):
This metric shows how much it costs to get a new customer. It helps you understand how effective your marketing and sales efforts are and lets you improve your customer acquisition strategies.
Churn Rate:
Churn rate measures the percentage of customers who stop using your product or service over a specific time. By tracking this metric, you can find out why customers are leaving and take action to keep them.
Conversion Rate:
Conversion rate is the percentage of visitors who take a specific action, like making a purchase or signing up for a newsletter. By watching this metric, you can see how well your marketing campaigns work and improve your conversion process.
Customer Lifetime Value (CLTV):
CLTV shows how much money a customer brings in during their time with your business. This metric helps you understand the long-term value of your customers and helps you make decisions about acquiring and keeping customers.
Remember, these metrics are just examples, and the most important metrics for your business will depend on your industry and goals. Understanding the qualities of useful metrics will help you find and prioritize the metrics that really help.
Focus on actionable metrics that are easy to understand, can be compared over time, can be turned into rates or ratios, and require action and decisions. So, forget about vanity metrics and embrace the power of useful metrics to achieve long-lasting and sustainable growth.
Tell me about your experience with finding the most important metrics for your business!
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