Why You Ought to Throw Away Your Vanity Metrics for These 5 Customer Metrics

Have you ever logged into your analytics account and noticed how your traffic and pageviews are up? And when you notice that your pageviews have gone up, you probably get excited and try to figure out what caused it to go up, right?

But when you dig a bit deeper and start to analyze the impact of those increased pageviews, you probably notice that your revenue hasn’t really gone up at all.

Increasing pageviews and flat revenues

So what’s the point of measuring and improving metrics like pageviews when they don’t even impact your bottom line? You see, those metrics are called vanity metrics, because they simply give you a brief, warm-and-fuzzy feeling. However, the sobering reality is that vanity metrics aren’t important to your business.

Instead of wasting your time tracking vanity metrics like pageviews, consider tracking the following 5 customer metrics:

Metric #1: Lifetime Value

Do you know the lifetime value of your customers? If you don’t, then how can you possibly maximize your revenue and profit?

For example, Amazon spends millions of dollars on advertisements each month and in many cases they lose money the first time someone clicks through on an advertisement and buys from them. Simple logic would have us think that Amazon should stop advertising, right?

That’s actually wrong because Amazon knows that if you buy something from them once, you will continue to buy from them over the next 5 or 10 years. Amazon is willing to lose money on you during year one because they know they’ll make it up over the next few years.

Tracking your customer lifetime value helps you make better marketing decisions. If you know a customer is worth $100 a year and an average customer stays on board for 3 years ($300 in total revenue), then you might be willing to pay upwards of $100 to acquire that customer. Heck, you could even pay over $200 to acquire a customer in that scenario assuming your profit margins are high enough. They key here is: having the knowledge of your customer lifetime value allows you to make better marketing decisions.

By tracking the customer lifecycle and being able to understand your lifetime value, you’ll actually be able to maximize your revenue and profits the right way which will enable you to grow your business faster.

Metric #2: Events

Events Timeline Screenshot

Don’t you love seeing how many purchases are coming through your website? Tracking that is great, but are you also tracking what people do before they make their purchase?

The reason you need to track specific actions (events) on your website is so that you can figure out what steps people need to take before they purchase. Knowing this enables you to get more people to take those same actions.

Example: KISSinsights

A little background information: As you may know, our main product KISSmetrics, is a customer analytics tool. We also provide a website survey tool called KISSinsights.

With KISSinsights we offer a basic free survey tool as well as a couple of premium subscription plans. We know that before people upgrade into a premium account, not only do they create a survey, collect some responses and view the responses, but they also go through this 3 times on average.

By tracking these events that are specific to our business, we were able to learn what exact activity led to people purchasing our premium plans. We were able to take action on this by encouraging people to create more surveys, get more responses and view the results in a shorter amount of time. This has led to a substantial increase in revenue for us.

Metric #3: Cohorts

Cohort Analysis Screenshot

According to Wikipedia, a cohort is:

In statistics and demography, a cohort is a group of subjects who have shared a particular time together during a particular time span (e.g., people born in Europe between 1918 and 1939; survivors of an aircrash; truck drivers who smoked between age 30 and 40). Cohorts may be tracked over extended periods in a cohort study. The cohort can be modified by censoring, i.e. excluding certain individuals from statistical calculations relating to time periods (e.g. after death) when their data would contaminate the conclusions.

The term cohort can also be used where membership of a group is defined by some factor other than a time-based one: for example, where a study covers workers in many buildings, a cohort might consist of the people who work in a given building.

The purpose of a cohort report is to help you understand if you are actually improving your metrics over time. This is accomplished by viewing your metrics based on time-based cohorts of users.

For example, with KISSinsights we regularly get free signups each day and we also get a some of those free users to upgrade into paid accounts each day. So if you look a graph that plots out the total number of free and paid users we have, things APPEAR really good.

But when we ran a cohort report we noticed something was off. Although we were constantly getting new free signups each day, all of our paid signups were coming from people who signed up before August, 2011. Very few, if any of the people who signed up after August were upgrading. When we dug deeper, we realized that in August we changed the way new users were prompted to upgrade into premium accounts.

Since we were still seeing a increasing number of upgrades each day, we wouldn’t have realized that we had a problem if we didn’t do a cohort analysis. The cohort analysis showed us that people who signed up after August had a lower conversion rate to paid plans than people who signed up before August. This would have eventually resulted in a big drop in revenue.

With a cohort report you can measure your business by viewing people who signed up during different periods of time and comparing their performance based on your key metrics. Remember, just because your graphs are going up and to the right, doesn’t mean your business is doing well.

Metric #4: Marketing Attribution

Marketing Attribution Screenshot

Do you know how many times someone comes back to your site before they make a purchase? In an ideal world people will buy from you the first time they land on your website, but that isn’t always the case.

Understanding marketing attribution is important if you are buying advertising. Whether it is pay-per-click ads, banner ads, or ads on Facebook, knowing the first entry point, second, third, etc. is useful because then you can figure out what leads someone to purchase.

For example, I recently worked with a remote control car company that spends thousands of dollars on pay-per-click ads each day. At first they thought their campaigns weren’t converting because they just looked at the last entry source that caused a conversion. When they started to look at marketing attribution they realized that people come back on average 2.83 times before they purchased and most of their buyers first found their website through pay-per-click.  Once they found this out they realized that their pay-per-click campaigns where actually highly profitable… it just took 32 days on average before the campaigns reached profitability.

Metric #5: People

People View Screenshot

Do you know which of your customers are happy and which ones aren’t? And even if you know that data you are probably thinking why it’s important, right?

Customers that are happy are more likely to keep on paying you and recommend your product or service to others.

Customers who are unhappy are more likely to complain and tell other people about the bad experience they had with your company.

By tracking people, not only can you figure out how to delight your customers, you can also maximize your revenue.

For example, if you take the KISSinsights event tracking example from above you can find out which of your customers haven’t taken the actions that lead to upgrades and then you can re-engage with them by sending them an email to encourage them to take those actions.

If you aren’t tracking people you won’t be able to figure out how to maximize your revenue. You can’t engage with them if you aren’t able to tie the actions they take or don’t take with their actual names and email addresses.

Conclusion

Vanity metrics may seem like the right metrics to track at first, especially since most analytics tools focus on them, but they won’t help you improve your business. Why would you want to waste your time tracking or even improving metrics that won’t help you increase your revenue or profit?

Of course your wouldn’t! Stop wasting time and start getting actionable metrics today.

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  1. “We were able to take action on this by encouraging people to create more surveys”

    How?

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