Vanity Metrics Could Be Killing Your Business:
How to Measure What Really Matters
Are you measuring the success of your business, or are you falling prey to the allure of vanity metrics?
We’ve all been there, caught up in the excitement of a new product launch or marketing campaign, eagerly tracking likes, views, clicks, sign-ups, or downloads. But let me ask you this: do these metrics truly reflect the health and growth of your business, or are they simply a distraction?
As executives and product leaders, our responsibility is to concentrate on metrics that matter. We need to be laser-focused on the metrics that reflect our core business objectives and help us make data-driven decisions. Metrics that can help us understand user engagement, product usage, and revenue growth are the ones that matter.
Unfortunately, many businesses fall into the trap of relying on vanity metrics, which can be misleading, even dangerous. Some metrics might look impressive on the surface but in reality, they don’t measure the health or success of your business. Metrics like total page views, social media followers, and app downloads can all fall into this category.
Don’t get me wrong. These metrics can still provide some value in certain contexts. But they should never be the primary metrics you rely on to measure the success of your business. Instead, focus on the metrics that truly matter to your business goals.
So, how do you ensure you’re measuring the right metrics?
Start by clearly defining your business objectives and key results. Identify the metrics that will help you achieve those objectives. This may vary depending on the stage of your company or product. For any metric, you need to be clear on what it is actually measuring and what actionable data it can provide to help run your business effectively. Be ruthless in weeding out any metrics that don’t truly align with your business goals.
Getting it right can be nuanced.
For example, Net Promoter Score (NPS) measures user experience. A high Net Promoter Score is good, but it is not necessarily a measure of someone’s willingness to purchase your product. It also doesn't mean they are actively engaged with using it. Metrics like retention, upgrades, and churn tell you how customers are voting with their dollars and provide a measure of the material impact of that on your business. Daily Active Users (DAU) or Monthly Active Users (MAU) will tell you if customers are actively using your product regardless of the NPS.
Similarly, Customer Acquisition Cost (CAC) is insufficient on its own. A high CAC is not necessarily bad. A complete picture requires more context. Consider instead the payback period to recover the cost of acquiring a customer. It is a much better metric to help drive the correct business decisions. A high CAC with a quick payback leading to a high customer lifetime value is great. A low CAC that takes forever to recoup is not a healthy situation.
Remember, metrics are only valuable if they help you make informed decisions that drive your business forward. Don’t let vanity metrics distract you from what truly matters. Stay focused, stay data-driven, and watch your business thrive.
Originally published in Bootcamp on Medium.