Making metrics actionable

by Justin Souter on September 19, 2012

Introduction

One of my key things that Bobby taught me at Happiest was to look for actionable metrics and ignore vanity metrics. This can be hard when you’ve got so many fancy graphs and indicators.

I guess it’s hard probably because installing the Google Analytics tracking code seems like a magic bullet, and you don’t have to worry about something which seems complex and overwhelming. But do it you must.

This posts aims to give readers some pointers I’ve found useful, mainly focused on Dave McClure’s AARRR metrics.

Future posts will detail my thoughts about getting an organisation ready to take advantage of data-driven insights, and also my learnings about different analytics packages.

Default view of Analytics

Check out the following from a realistic view of metrics! The whole post is a tremendous read, and brings together powerfully what I learned at Happiest:

How Most People Pick Their Metrics

When some people pick the key metrics they want to track (also known as key performance indicators or KPIs), the first thing they do is log into Google Analytics and figure out what’s easily accessible. Then you get a decision process like this:

  1. Log into Google Analytics
  2. See all the fancy graphs and numbers
  3. Pick a few that sound nice (pages/visit, visitors, and time on site usually make the list)
  4. Report these numbers to the boss and use them to evaluate your own marketing performance

Now you’re stuck with numbers that don’t mean anything. And your salary is now based on them.

Pro-Tip for Terrible Business: For those of you that are judged on how many pageviews your site gets each month, here’s a quick tip on how to impress your boss. Make your navigation super complicated. Your visitors won’t be able to find what they’re looking for and they’ll click all over your site. You’ll crush your quarterly pageview goals and impress everyone in the office. But is this good business? Absolutely not. So stop tracking pageviews.

How You NEED to Pick Your Metrics

Start from the opposite direction. Don’t even look at Google Analytics or any other tool. Start with your business.

  1. Pick 1-5 metrics that tell you how healthy your business is. This will include things like revenue, number of leads, account signups, and lifetime value.
  2. Figure out how to force your analytics tools to get you as close as possible to these metrics. If you have to import and merge data into Excel, do it.

In essence, a step-change is needed to shift from “this is what I can do by default”, to “this is what matters to my business, and how can I measure it?”.

If Google Analytics is a key tool for you, check out “How to Get Actionable Data Out of Google Analytics”, a really great post focusing on goals, funnels, and how to act upon the results.

Measure what matters

In my post “Instrumenting at Happiest” I quoted Eric Ries:

1. Measure what matters. It’s tempting to think that, because some metrics is good, more metrics is better. That’s why vendors routinely list the thousands of reports they are capable of generating as a feature. The truth is, the key to actionable metrics is having as few as possible. Detailed reports are useful when we’ve diagnosed a problem and are looking for clues as to what’s gone wrong. But where does that diagnosis come from in the first place? Actionable metrics help us realize we have a problem and point us in the right direction to start solving it.

Hopefully you will also find my follow-on post Instrumenting at Happiest – a deeper dive insightful.

Metrics for Pirates

My on-going journey to better use analytics to support business decision-making has massively benefited from the wisdom of Dave McClure.

Dave focuses on metrics which concentrate on Acquisition, Activation, Retention, Referral, and Revenue – hence ‘AARRR’. This cuts down what’s normally an overwhelming raft of measures, and I believe, concentrates on a number of levers which actually make an impact on the business (and are tracked by VCs etc.).

Businesses can fast-forward to a set metrics to prioritise [although any situation will need to be considered on its own merits!].

One of the original decks + video

Short, and to the point deck which gives you the outline.

One of Dave’s latest decks

Now, with added Lean Startup, Customer Development, Product-market fit

And a longer video from 2009

Start-up Metrics that Matter by Dave McClure from Carsonified on Vimeo.

Lean Startup Metrics by Stu Eccles

Bobby was fortunate to see Stuart Eccles of Made by Many deliver this presentation. I think the slides are a useful summary of some key points around events, funnels, and A/B testing.

Key Performance Indicators

Check out this page to get hold of The Big Book of Key Performance Indicators, a book by Eric T. Peterson to help you focus your mind on what measures are important for you.

I’m also embedding this brief video about KPIs for Small Business with Eric Peterson:

Hypotheses

It strikes me that often web analytics are the tail that wags the dog! Metrics are only useful in the context of the business, either through e-commerce, or in testing hypotheses about the business.

That means you have a hunch about a product or customer behaviour, and then you turn it into a hypothesis which can be split tested on your site. Put some context on the results, and choose future moves accordingly.

Lean Analytics book

I’ve recently come across the book Lean Startup Analytics: Measuring Your Way to Product-Market Fit, from reading Workshop: Lean Analytics with Alistair Croll and Ben Yoskovitz.

It’s due to be published early next year, however you might be interested in Lean Startup Marketing: Agile Product Development, Business Model Design, Web Analytics, and Other Keys to Rapid Growth in the meantime :-)

What it all means

My own journey continues, and I look forward to working with more businesses to understand what drives their performance – and translating this into effective metrics which make a real difference.

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