The Change Dude’s Blog

TOP 5 MOST IRRELEVANT BUSINESS METRICS

Metrics, metrics, metrics there are so many business metrics in the world today that most of them have little or no relevance. Sometimes I think business gurus stay awake at night concocting a new metric, so they have something new to talk about or sell to clients.

Making decisions based on numbers a.k.a. metrics the numbers need to be relevant, meaningful and actionable. Here are a my Top 5 most irrelevant numbers that businesses collect:

Number 5- Customer Satisfaction (CSAT)Scores: You would think that CSAT scores are the most valuable number any business can collect. They are highly subjective and bias laden. The results of these scores seldom reflect actual customer behavior but more a snapshot perception of a specific interaction with a product or service. Using CSAT or Net Promoter Scores (NPS) alone provides minimal insights into customer behavior or advocacy. Understanding customer needs, perceptions, and behaviors require a combination of hard metrics like customer retention and share of wallet, average order value (AOV), Customer Lifetime Value (CLV) along with softer metrics like CSAT, NPS, Customer Effort Score (CES) and the most valuable piece of data, unstructured feedback like product reviews, complaints and praises. A holistic approach to understanding customer behavior offers far more value than a single CSAT, CES or NPS number.

Number 4-Gross Revenue: Gross revenue is a totally meaningless number. Focusing on gross revenue without considering costs is highly misleading. Top line revenue without taking into account the costs required to achieve that revenue can lead to complete misunderstanding the health of the business. Insights into the business that are actionable financial metrics should include all costs associated with the gross revenue. Getting to the core of understanding business health requires metrics that reflect net values. Examples include net income and net profit margin that reflect both the incoming revenue stream and outgoing costs.

Number 3-Vanity Metrics: Vanity metrics are interesting but often totally irrelevant to business decisions. Vanity metrics include social media followers, page view or app downloads. While they might look impressive or depressing, depending on the numbers, they don’t necessarily connect with business success or profitability. Some would argue these vanity metrics have value for understanding the success of marketing efforts. I would argue that a more valuable and actionable metric is Return on Marketing Investment (ROMI). ROMI requires a bit of work to calculate because it focuses on the profits of incremental sales attributed to marketing activity like social media, page views, promotions and campaigns. It can be calculated uniquely for each marketing or advertising channel providing insights into the value creation of marketing activities in each channel.

Number 2-Customer Count: Focusing on the gross number of customers doesn’t tell you much about your business. It doesn’t reflect the value of those customers, their behaviors, retention or loyalty. There is no insight with this metric, it’s just a number. Insights leading to action comes form hard metrics that reflect the value of your customer base through understanding segmentation of that customer base, retention of customers, customer lifetime value (CLV) or in B2B scenarios average revenue per account (ARPA). In today’s business world customers move and shake like an 8.0 earthquake. Rely on the data beneath the customer count to make decisions that create value for the business and the customer.

Number 1 – Employee Hours Worked: Not many businesses use this metric but for those that still see value in knowing how many hours employees put on a timecard it’s time to wake up. Simply tracking hours worked doesn’t account for productivity, competency or efficiency. Unless your business relies on timesheets for billing customers to generate revenue hours worked is the top irrelevant metric in history. Focus on output and results to truly measure employee performance. Revenue per employee provides a read on the entire workforce. The more revenue per employee, the more productive is and the more likely its efficiently using resources.

Metrics drive insights that drive action. Use that valuable real estate on an executive dashboard for meaningful metrics that provide a snapshot of business health.

July 24, 2024 - Posted by thechangedude | Uncategorized | Business, content-marketing, digital-marketing, kpis, marketing