How Vanity Metrics Are Killing Your Business
When a peacock fans its feathers, it looks like the ultimate symbol of vanity in the animal kingdom. "Look at this!" he seems to say. "You have to admit, this is some impressive plumage. Look at the colours on me!" It's hard to tell from all the strutting and showing off, but there is actually a good reason. According to Audubon magazine, it's a mating ritual used by males to get a mate.
In the business world, metrics are used to gauge many things, such as sales and profit. They are powerful guideposts along the way to make sure goals are met and growth is sustained. But not all metrics are created equal. Some are used more for vanity than practicality. They don't serve a useful purpose and should be avoided, or at least minimized, when evaluating metrics for your organization.
Vanity metrics are problematic because they can fool you into thinking you have real feedback when you may not. Separate vanity metrics from actionable metrics to get real information that helps you make better business decisions.
In the fast-moving world of tech startups, vanity metrics are common. According to Fred Wilson, a long-time venture capitalist in Silicon Valley, both web and mobile startups in his company's portfolio, as well as companies looking for investment, share their metrics with him.
Although they are confidential, over the years he began to see similar patterns from multiple companies across industries.
One metric that repeated itself is the ratio of registered users/downloads to active users both monthly and daily, as well as maximum concurrent users. The ratio he surmised over time was “30/10/10”:
- 30 percent of mobile app downloads or registered users are active on the service every month.
- 10 percent of mobile app downloads or registered users are active every day.
- The maximum number of concurrent users, or those using the product in real time, is usually around 10 percent of daily active users.
He said this ratio was consistent across games, social mobile apps, music services, social web apps and a plethora of other popular mobile and web applications.
But how do you make this data actionable? Wilson proposed that companies could tie their email marketing to their metrics in order to accelerate usage and increase the number of users. For example, when someone posts on Facebook and you make a comment to that post, and if the original author responds to your comment, you will likely get an email indicating this action. It encourages you to return to the original post and continue this discussion. This is a good example of translating what might originally be seen as vanity metrics into concrete actions that help companies grow.
Eric Ries at Harvard Business Review says you can avoid the problem of vanity metricsby focusing on metrics that are actionable, accessible and auditable:
An actionable metric is one that ties specific and repeatable actions to observed results. Examples of actionable metrics include:
- Conversion goals: By evaluating actions against the goal, you will have a concrete number that indicates the success or failure of each campaign.
- A/B testing: A/B tests allow you to test hypotheses and variables against one another, determining which is best for your audience. An popular story in Silicon Valley is how then-Google-executive Marissa Meyer tested 41 shades of blue on search links results, bringing in an additional $200 million a year for the company.
- Source attribution: There is a belief in some sections of the e-commerce world that customers take a linear path from searching for a product online, clicking on a link, adding a product to a shopping cart and checking out for a complete sale, but this is not the norm. More often, customers research products, comparing one vendor to another, before committing to purchase. If you only keep track of their last action before arriving at your site, your attribution may be incorrect.
- Visitor product page view percentage: Pageviews are often considered a vanity metric, it's more useful to evaluate the percentage of website visitors who look at product pages. A low metric could indicate poor navigation on your site, poor menu descriptions, confusing link structure and more. Better navigation and internal search capabilities are simple actions to take to remedy any speed bumps in this area.
- Average order value: More traffic doesn't always result in more sales, a better solution is to get more results from the traffic you have. You can increase the average order value by up-selling complementary products, examining your traffic sources and tracking keywords to figure out which are pulling more revenue per order.
- Track form fields: Form field tracking locates fields that clients don't understand, allowing you to revise them for clarity or remove them completely. Most analytics software allows you to create events that can track form field completion.
Accessible metrics are available and easy to understand by everyone viewing them. In recent years, data visualization dashboards have evolved that provide almost real-time, clear feedback for managers, salespeople, technicians, support staff and, in some cases, outside vendors.
Imagine a scenario where the CEO of your company asks you to collect data on an important project, present it to the board in the next meeting, and provide recommendations that will impact the company's bottom line for years to come. You'd want to make extra sure that data is accurate.
Unless metrics are credible and auditable, people in the organization won't want to use the information. Make your metrics auditable by keeping reports plain and simple. You should be able to trace data back to the original source so you can verify its accuracy. Translate vague data metrics into concrete examples people can understand in the real world, and you will make a bigger impact.
Managing your metrics
From startup skunkworks to the boardrooms of dynamic enterprises, vanity metrics inevitably sneak onto the stage. Sometimes it happens in the early stages of a project, when you don't have enough outputs to determine your progress, so you begin to evaluate inputs. This becomes a challenge because you still don't have evidence that your desired results will come about due to your current activities.
If you're not sure if a metric is an actionable or vanity metric, ask yourself this question: Does it help me make better business decisions? Vanity metrics make you and people in your organization feel good, but they may not help you build a better company. With actual metrics, you'll know pretty quickly where you need to make adjustments to make your business a success.