Are vanity metrics stunting your growth?
The real metrics you should focus on for strategic growth
In an increasingly competitive B2B environment, growth through strategy is vital. Standing still and maintaining the status quo can be a death sentence for a business, so you need to be moving forward at all times.
But how do you know what direction you’re moving in? Or whether you’re moving at all? The tendency, so far, has been to measure as much of your business as possible.
The enormous growth of data analysis
“What gets measured can be improved,” the saying goes. So modern businesses seem to measure everything.
These days getting your hands on data is not the problem. In fact, when it comes to ecommerce and digital marketing, the problem may be too much data. Various automated solutions like Google Analytics run behind the scenes of nearly every website, and more sophisticated programs are in place in most organisations to capture interactions across every digital touchpoint.
This means your company is likely investing a lot of time and resources into collecting and analysing incredible amounts of data. And it’s likely tied your short- and long-term business goals to a host of Key Performance Indicators (KPIs) and Objectives and Key Results (OKRs). Decisions involving budgets, schedules and the strategic aim of the entire business may be swayed by the metrics informing those initiatives.
However, having access to this volume of data doesn’t necessarily lead to valuable strategic insights. Reliance on some of the most easily accessible data can lead to inaccurate conclusions and poor strategic decisions. Regrettably, this is a trap many companies have fallen victim to.
The lure (and the trap) of vanity metrics
Consider the ever-popular click-through rate (CTR). When you create a digital campaign, the initial triggers you use to draw people in are usually social media links, display advertisements or emails. The goal of that outreach is to engage or intrigue your audience enough to want to know more, and that requires that they click the link. By dividing the total number of clicks by how many people saw the link, you arrive at the CTR.
Obviously, each time someone clicks through a given ad or social post, that’s a win. It tells you that the enticement you chose was compelling. A higher CTR can validate assumptions you’ve made about list segmentation, audience engagement and persona creation. It’s also great for A/B testing and optimisation of various top-level campaigns.
But is CTR a metric your CEO or CFO cares about? Does it indicate whether a given campaign was successful from the standpoint of real business objectives? Not at all.
It’s a vanity metric: a measurement that’s quick and easy to find and understand, and which happens to look good on the surface. It even has its place in low-level marketing analysis. This doesn’t mean it should be part of any high-level strategic decisions or performance analysis.
Here are some other examples of easily accessible data that fall into the realm of vanity metrics:
- Website visitors/sessions/page views
- Social media followers
- Ad impressions
- Number of new leads
- Cost per lead
This doesn’t mean, however, that any of these measurements are worthless. In fact, all of them can be informative, and many can be instrumental in arriving at actionable insights. But they simply don’t say enough on their own to justify the importance many marketing pros bestow upon them.
The bottom line is this: if the measurement you are analysing cannot directly inform business-level strategic decision-making – ROI, customer lifetime value, profitability and the like – it’s probably a vanity metric.
The metrics you should be focusing on
So what are some metrics you should be focusing on if you’re looking to move the needle toward strategic growth? The answer is going to differ somewhat for every organisation based on specific circumstances and goals. Generally speaking, these are some that we’ve found far too many companies overlooking.
While the balance sheet is rarely the only consideration, it has to be at the top of the list, or everything else becomes a null issue. Worthy financial metrics you should consider include:
- Total revenue by channel – This should consist of both online and offline channels, with both segmented as narrowly as is practical.
- Cost per new order – Rather than focusing on the cost per lead, this vital metric pits lead generation and other acquisition costs against just those leads that converted to paying customers – a much more important figure.
- Cost per reactivation/returning customer – Generally speaking, it’s easier and cheaper to get a new order from an existing customer than it is to find a new customer. But, if you can’t identify the most cost-effective methods, you may be missing out.
- Average order value – Whether yours is an ecommerce model or not, the value of each order can speak to many different online and offline factors. Increasing average order value should be a goal for just about every business.
- Average revenue per day (week, month) – By tracking revenue over time, you can start to make reasonably reliable assumptions about future sales, as well as the expected ROI of future initiatives.
These and other financial metrics speak to the heart of every business and are going to be the most impactful when reporting to the C-suite on marketing performance.
Without customers, revenue would disappear so you should be analysing data that digs deeper into who your customers are, how they interact with your business, and the best ways to engage, delight and retain them.
- Percentage of registered customers – How many of your customers have formalised the relationship by creating an account or otherwise supplying contact information? This isn’t a consideration in all B2B scenarios, but you can apply it to similar situations like wholesale or credit accounts, supplier exclusivity and more.
- Bounce rate and time on site – In a vacuum, these are both classic vanity metrics. But, in connection with other, more sophisticated metrics regarding the customer relationship, these can be very helpful in determining how engaging a particular piece of content or promotion is.
- Conversion rate – This is another one that could easily be a vanity metric on its own. After all, there are ways to improve conversion rates without helping the business out at all. But when conversion rates are calculated based on customers and revenue outcomes that most effectively meet business objectives, they can be incredibly powerful.
- Lifetime value – In many ways, this is the quintessential metric for B2B organisations. Beyond the number itself, it provides a valuable tracking method for the impact of continuous improvement programs.
- Returning vs. new customers – Whether or not the people visiting your website are new or returning – another commonly overemphasised figure – doesn’t matter much. When you’re talking about customers, however, it becomes a vital statistic. Closely related are the type, frequency and value of orders placed by returning customers.
If anything can temporarily steal the top priority from financial considerations, it will be the acquisition and retention of optimal customers that are most likely to provide a long and profitable relationship.
An often-overlooked essential metric is the process of shedding light on inefficient or unnecessary internal processes and systems that are eating into profitability.
- Return rates – Once again, this figure means little on its own. But, when segmented intelligently and combined with other essential factors like which channels generated the order or how long the customer spent consuming product- or service-related content, it can shine a spotlight on waste and inefficiency across several business units.
- Cost to acquire and sell – This can be eye-opening when combined with routine research into cost-saving opportunities across the supply chain. When this measure proves to be at its lowest possible level, it moves the onus for optimisation back into operations, marketing, sales and service.
- Cost to serve – Many organisations spend far too much of their resources on timely and labor-intensive customer service activities that could easily be replaced by self-service options, automation, or something as simple as an updated FAQ page on the website. Until you break the cost down on a per-customer basis, that waste may not become apparent.
28 October 2020
More in Commerce
Using data to enhance your customer journey maps
Why understanding customer expectations is a kind of alchemy
Putting your store on a solid foundation
Why moving to a new tech platform requires meticulous planning
An eye for a great buy
How image recognition technology is taking search to the next level