Metrics matter, but why do they matter? It all starts with understanding the history of metrics. People have always needed a way to measure. Unusually for something we consider a bit cold and factual the word itself has it's origin in poetry. The ancient Greeks used the word metron as a word to describe the meter used in poetry to give it a rhythmical and melodious sound. In Latin, this became the word metricus. Later, in Old English the word meterlic was used to referred to physical weights an measures. It was really with the introduction of the metric system during the French Revolution that the word metric came into common usage to refer to measurement.
Fast forward a couple of centuries and the metrics have become to mean the measurement of all kinds of things. It's use has also changed, years ago we measured to be able to quantify things, but now with the rise of systematic management we use metrics to understand how efficiently we are doing something.
You only have to look at the amount of metrics in sports. Years ago the only metrics were scores or time. Now, we now track distance, passes, tackles, impacts, height, even diet. The reason is to be able to improve performance. That is why metrics matter.
metrics matter only if they help you improve performance
Unfortunately, metrics have a dark side too, there are a lot of metrics that are irrelevant or worse vanity metrics.
Vanity metrics are metrics that are designed to be impressive as opposed to actionable or relevant to core business goals such as revenue and operating margins. They tend to include things like website page views or signups that don't necessarily result in revenue.
Basically, vanity metrics make us feel good. There is nothing wrong in taking pride in your numbers but remember that metrics only matter if they help you improve. The challenge is to identify good metrics. For that I would suggest that good metrics have the following criteria:
- The metric should help you make business decisions. That means it has to be relevant to your business goals. For a SaaS business, the amount of freemium users do not really matter. They only matter if they can generate revenue, so the key metric is not the number of users but the number of paying users. The only metric to be concerned with for the freemium users is the conversion rate to paying users.
- The metric should be understandable and repeatable. Beware magic metrics. What is no use is a metrics that has no relationship to the normal business. For example, if you get a random mention on Oprah and your web page views go through the roof, that's great, but the reality is that it is a once off. Even a second mention may not have the same effect. If you can't control the variables and create a similar result then it does not help you improve performance.
- The metric should be honest. Sometimes metrics can be misleading. For example, Google could change its ranking algorithm and this makes it look like your site is really popular (or unpopular). It's easy to get carried away. So, it is important to think about how the metric helps your business achieve it's goals. In this case its not the popularity of the site its the conversion rate that is more important. An unpopular site with 100% conversion can often be a better result that a popular site with a 1% conversion rate.
Metrics do not solve every problem, but good metrics help you make data informed decisions. The reality is that most business improvement is incremental and small changes matter. The change could be as small as changing the location of the buy button or the color of the landing page. It could be seeing when your users use your products, and what they use it for. Metrics are your guide but only if you measure what matters.
The point of metrics is that they should inform you as to what is working and what is not working so that you can adjust. It does not have to be a big adjustment, event a small adjustment that just results in a 1% improvement per day will make a 37% improvement over the year. So small changes do matter and metrics give you a tool to help you undestand what changes work and what changes do not.