How to choose right metrics

Photo by Yomex Owo on Unsplash

Data speaks to you via metrics. Each metric has a noisy voice which volume you have to adjust. Amplify what’s important, mute what distracts you. Build a melody, sometimes sweet, often bitter, yet always actionable.

To decide upon a volume, you need to triage metrics into buckets by their leverage and importance.

  1. North Star. It is a single metric that helps to focus on growth. North Star reflects on the value you bring to users. For example, for Spotify, the North Star is time spent listening; for Airbnb — booked nights, for Uber — rides per week.
  2. North Star proxies. Looking at these metrics you will understand what influences the North Star and why it goes up or down. For Spotify example, proxy metrics are time spent per session and how often users come back. More sessions = more time listening.
  3. Levers. Indicators that stay behind main North Star influencers. For example, session length in Spotify depends new discovered music or playlists created. Both of these Spotify can affect by improving the discovery algorithm and adding new artists.
  4. Red Flags. Everything that indicates technical performance and affects user experience. For example, crashes, exception, bugs.

Almost all North Star related metrics are user-oriented. Another big cluster of metrics is business-oriented metrics. For example, customer acquisition cost (CAC), LTV, MRR for SaaS, ARPU, Conversion. We can categorise them as:

  1. Main metrics and KPI. These say how your business is doing. For example, the return of investments (ROI), which is roughly LTV / CAC, tells you how much money you get from each dollar spent. The business sets goals to increase LTV and decrease CAC to maximise ROI. Therefore, LTV and CAC fall into this category, like all metrics that define business performance.
  2. Secondary metrics. These metrics say the same thing but from a different angle. For example, average revenue per daily active user, daily active paying users, conversions. They are important to track, and the goal is to increase those, but they are less actionable and indicative than main metrics.

Good metrics should all tie back to the product strategy. Done right, they lead to better business and product decisions, help to understand your users, prioritise roadmap and do not let you rely solely on intuition. And it’s nice if they are SMART.

I’m grateful you make it to the end. Thanks for reading. If you want to give feedback or say “hi”, feel free to DM me on Twitter or send an email.

Beams of appreciation,
John

Originally published at https://johnhellion.com.

Data Scientist