If you are running a business then metrics such as page views, social media likes, users etc matters a lot. In fact, you are probably monitoring those metrics on regular basis and spending a considerable amount of money and time to up those graphs. But, have you ever noticed that even though some graphs such as raw pageviews, user registration, social media likes are getting higher, you are seeing minimal growth in terms of the most crucial metrics of all, Sales Conversion? Well, you are not alone. Businesses face this situation more often than you think.
But, aren’t these metrics useful? Shouldn’t you feel great about acquiring 1000 new users or getting 500 likes for a Facebook post? Of course, you can feel great. But does this actually help you in making decisions? Or do these metrics truly help you access the health of your business?
While acquiring 1000 new users is great, the real number that matters is the number of the users converting into paying customers. Facebook likes do not matter, unless and until at least some of those users start acting as active brand advocates. Metrics like these may make you feel great about your business, but, they do nothing to help you grow your business. And therefore, these metrics are called vanity metrics.
Vanity metrics are metrics like raw page view, total user registration, social media likes etc that makes you feel like a Rockstar, but do nothing to help you make actionable decisions.
And here lies the danger of vanity metrics!
Ever so often, businesses (especially new ones) get so excited with vanity metrics that they lose sight of the actionable ones. Thus, they keep spending on improving the numbers such as social media reach or new user which have no direct connection with the bottom line. In fact, more businesses than not have gone bankrupt while acquiring a great number of users and not many paying customers.
Okay, so, lets come to the metrics that are important for your bottom line: actionable metrics!
What are actionable metrics? These are the metrics that show you the health of your business (not just your website). And when it comes to actionable metrics, there are basically three segments that you need to focus on:
The best way to track the health of your business is to track the revenue. Every time a customer pays you, you need to track the revenue. The following data are crucial here:
These are the metrics that matter the most. By looking closely into these, you’ll be able to identify your most valuable customers and their purchase patterns, which can be further utilized by your sales team for upselling and cross-selling.
Let’s face it; not all the traffic that lands on your website convert into a sale. In fact, for an average eCommerce website, only 1% of the total traffic converts into paying customers. But, what’s important to find out is when your visitors are leaving your websites. Are they landing on your website and bouncing back? Are they browsing the products and leaving without adding anything to their carts? Or, are they abandoning the carts when they see the shipping charges? These insights are crucial for finding out where your website needs to improve.
In case you are running a B2B business where you mostly collect leads from your website and then follow-up to close the sales, customer journey is even more crucial. Here, one can safely assume that a particular visitor who submits her contact information is interested in your offerings. At what stage she is bailing out would give you a clearer picture of why she left. For example, if a lead stops responding after the initial discussion, you may assume that she got a better offer from your competitors. But, in case you see a pattern of leads bailing after the initial discussion with a particular sales rep, you know there’s something wrong with the approach. Accordingly, you can arrange for training to help improve your team. Similarly, if you see most of your leads are leaving after you send them the quote, then there might be some pricing issues that you can work on.
Here’s an actionable metric that you need to watch out for. While acquiring new customers and taking the internet by storm is truly great accomplishments, if you are continuously spending more then you are earning, it is of no use. Sooner or later, you’ll go bankrupt! The best way to measure the costs is to measure the ROI. If you are running PPC ad campaigns, make sure to track how many of the visitors are converting into customers and how much businesses they are bringing in.
For example, if you are running a Google AdWords campaign with a budget of $5000, and have got 1000 leads from it, it looks pretty amazing from the marketing perspective. But, of only 50 of those leads convert into customers with an average purchase value of $75, then you have a total revenue of only $3750. Not so great, right? While businesses get all excited about how many clicks they are getting and how many leads they are collection from marketing campaigns, many forget to look into the bottom line.
The same principle applies for every kind of business expenditure. It does not matter how much social media buzz you are creating, how many click-throughs you have got or even how many leads you have collected. If you are not selling more and not upping the average sales value, your money-out is greater than your money-in. And, that is a red flag for every kind of business everywhere. So, keep track of the cost and never lose sight of your ROI.
Log into most analytics tools available in the market and the default reports are a wonderful display of vanity metrics. Most of these tools show how many visitors you have, from where they landed on your website, what kind of devices they were using etc etc. While these metrics do have some importance, they are definitely not enough for taking actions. The key here is to look past these vanity metrics and start digging the data that matter.