One Metric That Matters
When you start the conversation with any strategist, digital marketer, consultant or related to online performance, it’s no surprise that things can get a bit complicated. It’s because they tend to approach cases from an holistic point of view. Which is awesome – never lose sight of the big picture. But everyone needs a first step. And this is how you get to the first step, and know that it’s the right stairs.
What often happens when I ask clients about their current most pressing issues, usually a list of things follows such as: strategic objectives, top line revenue goals, advertising matters, content related things and more in any kind of order. Of course they aren’t made up from thin air – these things are important. Who am I to say that they are not?
But what I do advice is: focus on one most pressing matter at once. At any given time. Alistair Croll tossed the term in his bestseller lean analytics: use data to build a better startup faster.
By the end of this article you’ll know how to drill down to your own one metric that matters (OMTM).
Who is this for?
- Executives and managers who need to lead their marketing teams in an efficient way so that resources are allocated to the most pressing issues at hand
- Digital marketers who feel the marketing operation and business goals are misaligned, but don’t have the domain knowledge to challenge their supervisors on the matter
- Retail owners who don’t know where to start with digital marketing
- Online retailers who have lost clear focus which is reflected by profitability
- Basically every business that has product-market fit (soon more on early stage startups)
Why just One Metric That Matters
Here’s a few examples of focus areas you might have, or recognize:
- Increase average order value of new clients
- Increase the number of onboarded users
- Increase revenues from organic search
- Improve profitability from sales through social paid ads
- Increase website visitors to trial account conversion rates
Each one of those metrics has significant impact on the business. And none of them should be left aside. The OMTM simply reminds us is which one metric is more important above else and to be dealed with accordingly*.* There’s no right or wrong, as long as there is consensus on this metric – so that internal capacity and resources are aligned and directed at getting the best results on this specific number.
Identify risk areas in your business ASAP
Creating unity, focus and clear sense of objectives is one thing. Making sure that all that focus is directed at the right goal is another. If you’re using a business model canvas as your one page business plan it’s fairly easy to identify the most prevalent risk areas of your business. If you’re having trouble to find the riskiest areas through a business model canvas, try the problem-solution canvas instead. It might bring you new ideas.
Let’s say you’re in the software industry: it would generally make sense that the OMTM is either related to onboarding more users, or converting trials into paid plans. While if you’re in a matured ecommerce in fashion that gets tens of thousands of daily visitors already, it makes more sense to narrow down to increasing the average order value or overall conversion rate.
What these OMTMs have in common is: they carry the most potential uplift or losses when they are not dealt with. If you think about your business – think of the riskiest area by look into your operation, revenue streams, channels, or cost structures, narrow it down to a metric: and then you’ll have your one metric that matter.
Determine success metrics and goals
Say you want to increase the average order value of new clients and you have some data on current average order values. What is a proper goal then? What should the average order value be? This is where you just pick a number. Try to guestimate it. What will happen is that that number is going to be the center of focus for you and your team during that period.
Assume a SaaS business that’s has entered the scaling phase. By that time you should have some understanding of your current user base (free VS trial VS paying) in terms of feedback, usage rate, and revenues generated. That allows you to determine what is the riskiest area of your business. If you’re 12 month goal is to penetrate the market by X percent, the OMTM for one quarter could be new user onboarding. Or the OMTM could be to reduce existing base churn by 50% in order to achieve compound growth.
$growing total base = exising base – existing base churn + new base $
Vanity Metrics VS Metrics That Matter
Reads, clicks, add to carts, views, likes. All these metrics say something contextual about your content performance, but none of theme actually say something valuable about business performance. Even metrics such as conversion rates, content views, add to carts can be vanity metrics if you look at them in isolation instead of by comparison.
So instead of reporting on reads. Report on conversions from reads.
Instead of conversion rate, report on conversion rate compared to last week.
And the more corporate your company is, the more likely you should focus on the numbers that drive or change company behavior. So if we need to increase EBITDA, let’s look at the most impactful components of the company, what do they consists of, and how can we address them? Anything that will satisfy the board or other stakeholders that care.
Which business are you in?
Every business is here to make money, but how they get to that point varies per business type. Let’s take a look at few of them.
This is the typical ecommerce where someone buys something, whether it be products or subscriptions. Primary drivers for success are ad channel impact, organic impact, social proof, add to carts, purchases or conversion value. Here, acquisition costs, average order value, customer lifetime (value) and cart abandonment rates, cart retrieval rates and conversion rates are important metrics that can significantly improve the business.
In some ways similar to the subscription business, since people use a service / product in return for a transaction. The main difference is in the success metrics that are SaaS specific: how well does the solution fit to the needs of the person / business paying for it? In short, there are a few primary drivers that allow you to scale up: acquisition costs customer lifetime value, onboarding (get the customer to know and see the benefits of your product), usage rate and churn.
Monetization through reach, visitors and metrics such as time spent on page, pages per visit and (outbound) CTRs. On top of that: as volumes grow, it gets easier to profile and segment visitors by browsing behavior. By building up these personas you can serve more specific content towards personas that are most likely to interact, engage or convert with that content.
Which stage of your business are you in?
While it’s easy to know which business you’re in, determining which stage of your business you’re in might get trickier.
Seth Godin says it right: marketing is about doing work that matters for people who care. Launching your Minimum Viable Product in beta. Interviewing your potential audience, get prospects on the line, talk to them. Get their feedback. Drill down to their pain, and how well your solution solves that problem.
This is where things get exciting. This is where you see your base growing, your retention rates doing well, and churn rates being low while getting more and more happy customers. When you found product-market fit, the next step is to scale up your business through solid, systemic approaches such as the pirate funnel. You’ll be looking at top funnel acquisition all the way to activation, revenue and retention metrics in order to find the best performing channels and maximizing cash and ROI.
Set-up your data infrastructure
Make sure that you collect data on every step of the journey, from acquisition channels types to conversion rates. Measuring performance along every step of the customer journey enables you to analyze results and determine which step of the journey needs to do better.
By applying the steps we covered above, you should be able to determine the One Metric That Matters. And remember that the OMTM might change over time. The riskiest area of your business today may not be the most risky area of your business tomorrow, or next month, or next quarter.
So, what is your one metric that matters at this moment?