These days we are awash with data. Whether its fitness wearables, personal financial planners or business apps, it seems every tool we use has some way to provide reporting mechanisms. It’s almost a must-have feature in any new product.
Yet, I question if people really understand how all this data can help them. Do they know how to get the most from their data, or is just being able to collect it or see it give them a vain sense of control.
So as part of my “metrics” tagged articles, I decided to step back a bit and talk more foundationally about what metrics and analytics are and how they can help us.
To borrow from Lean Analytics (Croll & Yoskovitz), one of the key points of analytics is to use measurable data to drive business outcomes or behavioural change. Decisions around what data to collect and how to interpret or measure the data start with your goals. Then the metric you use needs to measure that goal, or inform on progress towards it.
In simple language, I feel that metrics should measure something, rather than just track or report. I do believe that tracking and reporting have their usefulness in informing us, they just aren’t analytics.
Let’s take an easy personal world example. Health practitioners of all sorts advise that in order to successfully lose weight or maintain an ideal weight then we should track and record our food intake. If this was simply all it took, given the plethora of diet trackers out there, the world should be full of skinny people rather than trending towards obesity as the norm. Tracking your weight and tracking your food intake alone doesn’t lead to a long term change in behaviour.
What would be more useful would be having a way to report on the impact of the behavior and the weight loss effort. For example, a metric or measurement that shows a week’s weight loss/gain against number of days that you kept under a calorie count or maintained a desired nutrition ratio. Or a dashboard that highlighted the foods that you ate that went over a fat percentage threshold alongside your weight loss trend. The point is that a measurement that showed the relationship between the behavior and the outcome would be a real metric. It might highlight to us that the week we went out for that celebration dinner we didn’t lose any weight, in fact we gained. So that the next time we go out, we don’t completely fall of the wagon. Or we live with the temporary pause in progress.
Going back into the business world, an area where most companies measure performance and try to see trends is the metrics that we collect around the marketing and sales funnel. Both in terms of outbound contact by real people, and inbound activity on a website, there are different types of tracking information and metrics that can be collected.
What we now call vanity metrics – visits to a website, time on a page, and even number of cold calls made – are actually more like tracking information. They provide some level of detailed information, but they don’t provide insight that might change behavior or validate the success of the step in the funnel.
In terms of an outbound sales funnel, a better metric might be tracking the number of cold calls made vs the number of sales appointments arranged, and then tracking sales appointments arranged with sales made. Armed with this information, a sales person does know that they have to make a certain number of calls before they make a sale, and it spurns them on when they are tracking the number of calls they make in a day. But the tracking of calls is then a business action, not a metric.
I would even suggest that a call to action conversion rate is still not a quality metric, because though popular, it often isn’t showed in context or as a trending figure. It’s a metric if we are measuring CTA conversion trend during a specific marketing campaign targeted at a specific prospect to measure the effectiveness of the marketing campaign. But a stronger metric to measure performance of the marketing campaign would be measuring trends in Customer Acquisition costs. Then we can compare different marketing campaigns in terms of which generated better quality leads based on cost and effort – not just the amount of interaction they generated.
The point of talking about metrics at this level and trying to better understand what makes a quality metric is that it gets you thinking of what you want to track in terms of a business dashboard. Vanity metrics no longer make onto executive reports. It might be useful to have this detail at some level in the organization – for example the person who is designing the web page might use CTA conversion ratio in designing a page. But it doesn’t inform the executive who is trying to decide how to best spend their marketing budget.
The business dashboard that you design needs to contain the metrics that provide the best picture of the goals of your business. So first you need to understand what you are trying to do in terms of financial goals, traction and growth, and customer satisfaction. Then given the data that is available to you, find ways that you can present insights into the progress and performance of these goals.