What are vanity metrics?
Metrics that make you look good but don’t offer actionable information to boost your company’s growth are known as vanity metrics.
Believe me, it’s very easy to be attracted to numbers that make you look good. It’s instant gratification. But does it really contribute to your business growth? Not necessarily.
Here are a few examples of vanity metrics:
- Social media likes
It’s a nice feeling to see an increase in social media likes and followers. But if you think about your own consumer habits, how many times have you moved on to purchase a product after liking or following a page?
To understand the value of your social media activity better, look at your social media engagement instead. If your website analytics data shows social media as a large proportion of your traffic source, it means that whatever you’re doing on social media is relevant to your audience.
A high engagement rate also indicates that the content you’re sharing on social media is providing value and is relevant to your followers. They are more likely to convert as a paying customer.
- Free trial users
Free trials are great for giving your customers a taste of your product. But it’s not an actionable metric when looking at it in isolation.
Let’s say you signed up 300 free trial users one day, but only two converted to paying customers at the end of their trial period. What happens then?
While it is great to see a growing user base, you need money to keep your business going. That means you need paying customers. Therefore, your focus should be on converting them into paying customers instead.
Perhaps you need a better onboarding process or to improve your product’s features and functionality. By tracking user conversion month-on-month, you’ll be able to gauge your company’s success.
- Traffic
Attracting thousands of visitors to your website is great. It means that people are learning about you. But what’s even better?
Converting them into leads.
The good news about attracting visitors who don’t convert into leads means that at least your marketing efforts are working. But your product doesn't meet their needs.
Remember, we never look at any metric in isolation. When you look at traffic as a metric on its own, it becomes a vanity metric.
But if you combine it with other data, you’ll get a better picture of what needs to be done. For example, track your bounce rate instead.
A high bounce rate means that you’re attracting the wrong audience. The more relevant your content to your visitors, the more likely they are to return to your website and eventually convert into leads.
- Total users
The total number of users doesn’t tell you much about your business. It's a metric that doesn’t differentiate between free trial users and paying customers. It also doesn’t tell you how much you grew on a weekly or monthly basis.
During the early days of a SaaS startup, growth matters a lot because it affects other metrics and your valuation. It’s not that you won’t be able to determine your growth rate from tracking your total users. It just requires a lot more manual work.
In this case, weekly sign ups would be a more effective metric to track.
Your metrics will become more complex as your company matures and grows. During the early days, the ultimate objective of your metrics is to measure your product market fit. Whether or not you’ll be able to build and grow a customer base depends on it. So make sure you track the right metrics.
Here’s a tip: Always track your growth rate.
Growth is everything when you’re scaling. When you’re tracking your growth rate, make sure to select a timeframe—for example, daily, weekly, monthly, quarterly, or annually.
Let’s say you’re tracking the number of new users on a weekly basis. Real growth means that the weekly number increases all the time. A shorter time frame means you learn and iterate faster about what’s working and what’s not. It’s best used for A/B testing different strategies.
However, that isn’t necessarily always the case. Some metrics may require a longer timeframe, while others will generate more noise than information when you have a timeframe that’s too short. It all depends on your offering and what industry you’re in – B2C or B2B.
The bottom line is: choose a timeframe that suits your business best.
Key takeaway:
The great thing about data is being able to make informed business decisions and justify them to your stakeholders. It’s also to make sure you don’t run out of money too soon. But it’s important to know what metric is worth paying attention to and what’s fluff.
Happy Calqulating!
