In many ways, digital marketing (any form of it, from PPC to SEO) is just like starting and managing a start up.
You might love the ads you created, the new landing page you designed or the email copy you’ve crafted just as much as an entrepreneur believes that his product or his idea will be the next big thing. You start off thinking everyone’s just going to love your ads or your product.
And you’ll have the numbers right there to prove it.
Or do you?
What are vanity metrics
The Vanity metrics concept came about in 2011 when Eric Ries introduced the Lean startup framework and with it, a very different way of doing business. While there are many articles and even a book on the subject, here’s the gist of it.
The Lean Startup is a method for launching new businesses and products based on validating ideas through experimentation and iteration. One of its core ideas is the MVP (minimum viable product), a basic version of the product that allows entrepreneurs to test new business hypothesis. By starting small and experimenting with concepts on a small number of customers, companies can reduce the risk of expensive and inefficient product releases.
A key concept in the framework is actionable metrics. According to Ash Maurya, actionable metrics are metrics that tie specific and repeatable actions to observed results. Actionable metrics help you make informed business decisions that move you closer to your goals.
At the totally opposite side of the spectrum are vanity metrics – metrics that make (you think) things look good, but don’t tell you if you’re moving any closer or further away from your business goals. Common vanity metric examples would be the website traffic you get or your number of followers.
Why vanity metrics are actually a problem
Vanity metrics are dangerous because they don’t hold any value in and of themselves. They just paint a rosy picture and make you think that everything’s going well. Their only purpose is to make you feel good.
Because they don’t tell you what’s really important, vanity metrics don’t move things forward, they keep you stuck. Or worse, they can propel you on a downward spiral because you’re not paying attention to what matters.
You can easily fall into the vanity metrics trap at any time. Entrepreneurs can be mesmerized by the number of signups they get on their new app. In the process, they might overlook the fact that retention is as thin as water and users just come and go.
The same, digital marketers can lose sight of the big picture by looking at shallow metrics. Here are the top 3 vanity metrics digital marketers (and sometimes entrepreneurs) often succumb to.
1. CTR (Click through rate)
This would have to be the all time number one vanity metric.
It literally transcends any digital marketing channel. From search text ads to social ads to email marketing to SERPs, there’s yet to be a digital marketing channel that does not use click through rate as a performance indicator.
I know, I know – click through rate’s been around since the dawn of digital marketing and one generation just passed it on to another. And for a long time, click through rate was the only available performance indicator.
And for good reasons. It shows you within a relatively short time frame (time is a deciding factor for everyone) the percentage of people who click your ads.The higher that percentage, the more people engage and the better your email/ads/campaign/targeting, right?
Still… Let’s take the following somewhat fictional scenario to see why CTR is a vanity metric.
Let’s say that you’re running a right-rail Facebook ads campaign and you get a 0.8% CTR. The benchmark for right-rail Facebook ads is 0.02%. So far, you have a winner. But when you check your Analytics numbers you see that you get a 80% bounce rate on the users that are coming in through those ads.
Now, compare that with a standard display ads campaign that gets a 0.05% CTR (20% lower than the 0.07% worldwide average) and a 45% bounce rate. Which campaign would you rather be running?
OK, so you can argue that a good CTR matters in Google Adwords search ads. It will help you get a better quality score and lower costs. Still, that matters if you’re aiming for the top three ad spots and those aren’t the ones that convert best.
Bottom line: Even if you get a high click through rate and consequently, a lot of users interacting with your ads, are they really the users that you’re interested in? Are they the ones that are really interested in your product?
Which brings us to vanity metric number 2…
Just like entrepreneurs can get carried away by numbers such as the number of signups or the number of followers, marketers can get fascinated with the number of the clicks.
“My, oh my – 7000 clicks. Doesn’t look too shabby, now does it?”
Well, that depends. If you got 7000 clicks from an email that you sent to a list of 20,000 emails, then no – it’s not too shabby. If, on the other hand you got 7000 clicks from a list of 1,000,000 emails (numbers skewed to illustrate the difference), that’s a different story.
Even so, it doesn’t really matter.
The bottom line is just like with CTR: how do you know if any of those clicks are any good? What’s the point of getting a lot of clicks if they’re not relevant?
Please don’t say that it didn’t cost much…
2. CPC (Cost per click)
This is yet another big vanity metrics trap digital marketers fall into. A lost of marketers shoot for a low CPC straight off and get worried when they see a bigger cost per click.
But does it really matter how much you pay for each click your ads get as long as you see a positive return on investment from your campaign?
“Ok, but how do I get that?”
Well, let’s see the actionable metrics.
The number one actionable metric: Total conversion value
Unless you’re aiming to raise brand awareness, this is the number one metric you should look at. The total conversion value is the only one that tells you if your digital marketing efforts are running a loss or not. And that’s why total conversion value is the number one actionable metric.
Let’s take a second fictional case to prove the point.
Let’s say that you have two campaigns: a Google search ads campaign and an email marketing campaign. You’re marketing the same product, reaching a new audience and spent the same – $500 on each. The Google Adwords campaign got 45 conversions. The email marketing brought in 60. So far, email marketing is the winner.
But, let’s say that the total conversion value on the Adwords campaign is $750 and on the email marketing campaign it’s $450. If you looked only at the number of conversions, you would be running a loss. The Adwords campaign is the one that actually brings in results – a plus of $250. Quite a difference, isn’t it?
To get the total conversion value, you need to install tracking codes, set up your conversions and ,very important – assign at least an average conversion value if you can’t pass the value for each of your conversions individually.
3. CPA (cost per conversion or cost per acquisition)
This is the one metric that falls somewhere in between vanity and actionable metrics.
Like with CPC, the tendency is to shoot for a low cost per conversion. That strategy might not be the one that brings results, though.
I’m not saying that you shouldn’t aim or a lower cost per conversion. By all means, that’s one of the greatest things about digital marketing. It shows you how you’re doing and you know you can improve: the ads, the costs, the results.
But don’t look at two campaigns and compare them just on a cost per conversion basis. Even if one campaign gets a lower CPA, it doesn’t mean that it breaks even.
There are two cases when CPA can be considered an actionable metric.
First, when you know the customer lifetime value. That information tells you which is the most you can afford to spend to bring in a new customer. If you go above that sum, you’re running a loss. If you go lower, you’re making a profit.
The second is when you have two campaigns that bring in the same return on investment. In that case, you should keep the campaign that gets a lower cost per conversion.