Vanity Metrics and What Is The Problem With Them?

Alisa Adamska

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In modern marketing, data is key, especially in fintech companies. Marketing specialists and market experts use data to measure success, make data-supported decisions and build strong strategies.

However, this only works if the right KPIs are used to measure.

What are Vanity Metrics?

Vanity metrics, or beauty metrics, are metrics that are actually not metrics at all. They are statistics that look spectacular on the surface but don’t necessarily translate to any meaningful business results. They measure things that usually have nothing to do with the actual goals. They are misleading and the opposite of so-called “Actionable Metrics”, i.e. meaningful KPIs that enable action. An example of a vanity metric could be the number of subscribers on a business page. It can seem superficially impressive, but does it depict the real picture? How high is the proportion of bots and trolls? How many competitors are there who follow and comment to be more present themselves? How many followers really belong to the community – comment, like, buy?

What are the signs of Vanity Metrics?

As ProductPlan suggests, these metrics have 5 telltale signs that help you recognize them:

  • They lack substance;
  • They are too simple to measure;
  • They are not detailed and have no context;
  • They are often misleading;
  • They don’t help you improve your product or business in any meaningful way.

How do you avoid Vanity Metrics?

You do not need to collect and analyze all data just because it is available. It is helpful to take a step back and ask yourself: What are the real goals of the measure or the company? Generating as many leads as possible is not the actual goal – instead, it’s about increasing sales. Many leads without sales turn out to be a vanity metric. The numbers that seem the most obvious should always be the ones that should be examined most closely. Instead of listing a lot of data, it is more worthwhile to evaluate only the most important ones – even if it takes time.

“Actionable Metrics” in FinTech

One example of a more simplistic marketing performance metric is Cost Per Lead (CPL), which means the marketing cost to make a single sale. This metric, however, is more of a vanity metric, as it doesn’t show the real level of leads that needs to be generated. The real, actionable metric to measure the marketing cost is Cost Per Acquisition (CPA). It can be challenging to measure it as you need to track from the source right through to closing the sale.

Ideally, the equation should include all marketing costs as well as sales and support resource costs needed to bring a new customer on board, along with any associated product or technical costs. Another useful metric for FinTech companies is Lifetime Customer Value (LCV). LCV is a prediction of the total value of a customer in terms of either revenue or net profit.

It includes average customer value, average repeat purchase rate, and average number of years you keep a customer or a retention rate. Measuring LCV can help you understand how much you are willing to spend in order to acquire and keep a new customer.

Based on materials from T3N and ProductPlan

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