The great trap of SaaS Businesses: Vanity Metrics
Every business's goal is to grow as much as possible and metrics are an essential part of growth. If you cannot measure your metrics, you cannot grow. This is a known fact. But as with everything metrics varies in terms of usefulness too. There are vanity metrics and actionable metrics. In this post, vanity metrics will be discussed in-depth with SaaS examples.
What are vanity metrics?
Vanity metrics are metrics that are not helpful in terms of converting more, taking action, or reaching a KPI. Vanity metrics look good on paper and boost the ego of founders but in reality, they are not a reflection of the business' performance. You must know that every metric can be a vanity metric and vanity metrics vary from business to business. For example, if you have a mobile app with in-app purchases, your goal would be to sell more and grow your audience. A vanity metric in this example might be your 10.000 total users. **Because this metric doesn't tell you how many of them buy in-app purchases or how many of them use your app daily or monthly.** With this metric, you cannot change, improve, or reach your KPI. On the other hand, this metric can be useful and actionable if you have a Saas and all users pay a monthly subscription. Because then 10.000 users are paying you every month. If you lost %10 percent of your users since last year, then this metric is also a vanity metric. Because it doesn't help you to retain more users. In short vanity metrics make it seem like bigger is better, whereas in reality context is needed to make a data useful. It seems a little complicated but the next paragraphs will, fortunately, enable you to identify vanity metrics easily.
Questions to identify a vanity metric
Does this metric have a direct effect on my progress?
The first question you should ask yourself when you see a metric should be: Does this metric have a direct effect on my progress? or Will it help me to achieve my desired goal? For example, you have a total registered metric and your goal is to increase traction. You want your users to visit your landing page every single day. Now, will 20.000 registered users help you to decide to increase traction? Probably not. It looks good on paper as every other vanity metric does, but in reality, it has no direct effect on your progress. A good and actionable metric might be the rate of users who visit your landing page every day and their cohort group. If you know their persona, you can find others who share a similar persona.
Can I understand the reason behind an action?
Vanity metrics are just like case studies they cannot create cause-effect relationships. With vanity metrics, you cannot know the reason behind an action. On the other hand, actionable metrics are like experiments. They can build cause-effect relationships and you can understand the reason behind the action. Reasons speak louder than numbers because if you know the reason, you can find more users who have the same reason.
Can I intentionally reproduce the desired action?
For a metric to be actionable, it must be reproducible. If your blog goes viral with a tweet of Donald Trump and your monthly visitors increase rapidly, this metric is a vanity metric. Because the result is tied to an erratic external factor, thus you can’t intentionally reproduce the result. Vanity metrics may be hard to identify and can vary depending on the industry and individual business needs. The central question to ask yourself when considering a metric is whether or not it will help your business achieve its goals.