What is a vanity metric?
Vanity Metrics are measurement metrics that give false perceptions of growth, when in reality they have little or no actionable value towards improving the business’s product or service. This prompts us to ask the question of what is a vanity metric? Depending on your company or industry vanity metrics can vary across a range of different metrics, however, all vanity metrics generally have a wowing surface appearance with little underlying value. To determine whether or not a metric can be considered a vanity metric we must evaluate its impact on the organisation’s key drivers. Questions we can ask are how this impact active users, and user engagement and does this impact cost of acquiring new customers? If the answer the to latter is metrics are impacted, then it’s likely your statistic doesn’t qualify as a vanity metric.
Examples of Vanity Metrics:
As previously mentioned, what qualifies as a vanity metric for one industry or company doesn’t necessarily qualify it for another. It is important to ask if this metric informs key business aspects such as client strategic goals and KPIs. A key distinguishing factor when examining vanity metrics is usually a large spike in traffic, without quantifiable results. As a general guidance here are some statistics that can qualify as vanity metrics:
(1) Number of followers/likes on social media
(2) Users visiting a webpage
(3) Number of app downloads
(4) Open rates of emails
(5) Number of raw pageviews
(6) Total amount of customers
(7) Overall number of purchases or downloads
(8) Social Media Followers
(9) Number of new users (gained daily)
(10) Total Number of Registered Users
As vanity metrics are subjective based on industry, it is important to consider the metrics that inform and influence your business strategy. The allure of vanity metrics is that they can detract focus from areas that drive change or increases in sales without purporting tangible value.
Why are Vanity Metrics potentially misleading?
Although visually appealing, vanity metrics are potentially misleading as they detract focus from key business areas, giving a false portrayal of what informs key business decisions. The issue arising from solely relying on vanity metrics is the inaccurate reflection, of key business dimensions and underlying strategic decisions. This does not state that they are not impactful, however, a component that is critical to understand is the context in which the metric was actualised. Vanity Metrics can be considered an informed metric with the appropriate background. However, to be considered as an informed metric, other additional information and comparison standards are needed.
Other potential area where the business can be misled is that the intent of the vanity metrics is often unclear. Vanity metrics are additionally difficult to correlate with key business areas, and often translating the metrics into actionable insights is not straightforward. As there are no clear actionable insights gleaned from the metrics it does not guide business action and learning. It is the missing context that impacts the ability of the business to translate its actions into goals and business improvements.
What are the key differences between Vanity and Actionable Metrics?
The key difference between vanity metrics and actionable metrics is often the cause and effect of the metric in impacting business goals and decisions. Whilst providing visual appeal, vanity metrics as opposed to actionable metrics provide a flashy statement but do not help your company understand performance indicators that inform future strategies. Overall an indication of vanity metrics vs actionable metrics are:
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Which Actionable Metrics should we monitor?
Actionable metrics are scalable metrics that can be directly attributed to business revenue and costs. These metrics inform and potentially alter business decisions as they are directly related to key organisational drivers. Any metric that has a direct link to business revenue informs key business decisions, so it is important to be aware of these. Examples of revenue metrics that provide valuable insights are:
- Customer Lifetime Value: Overall quantifiable value for the customer’s duration with the business.
- Total Revenue: Yearly business profit before taking into account expenses.
- Net Profit: Profit before taking into account expenses.
- Monthly or annual revenue: Either monthly or yearly revenue.
- Customer Acquisition Cost: Average cost to acquire new customers.
Other actionable metrics that are considered important are those that contribute to value, growth and purpose. Understanding and aligning these key metrics are crucial to achieving informed organisational goals. It is key that we understand which metrics drive sales.
The importance of understanding acquisition metrics
It is through an understanding of key acquisition metrics that we are able to better understand and track performance over business areas that shape insights. By understanding user acquisition metrics, we are able to better drive growth and drive performance over key business areas. Acquisition metrics that provide valuable information can include cost per acquisition, click-through rate, conversion rate, retention rate, lifetime value, return on investment, return on ad spend, average revenue per user and average revenue per daily active user.
TCA Tips:
- Prioritise quality over quantity by laser-focusing on the data and KPIs that matter to the campaign and organisation. That way, you won’t get lost in a sea of irrelevant data.
- Your metrics should also be accessible and auditable
Conclusion
Understanding the key metrics which drive organisational decisions and impact sales and growth is crucial to business operations. It is through actionable, quantifiable metrics that we gain an informed understanding of areas that improve business performance. As a digital marketing agency in Sydney, we can help you track the right metrics to achieve your business goals. Contact us now to learn more.
