Companies are bombarded with Excel spreadsheets, dashboards, numbers, key performance indicators, and metrics of all varieties. We live in a world where data is coming at us with velocity, variety, and value. Metrics like lifetime value (LTV), lost customers (churn), number of views on website or app, and active customers/users are just some of the go-to metrics when trying to gauge the success of companies. Every startup, small business, or organization will be wondering what the metrics are they should be tracking, and which are the most important. Choosing the right metrics at the right time for your business can be a complicated journey and you may find yourself lost along the path to insights about your customers.
Many businesses often fail when they cannot identify their most important numbers or metrics and are unable to drive growth and set a goal based on those.
For example, if your business only looks at the number of site visits, you are missing understanding about who is coming to your site and why. The number of site visits is called a vanity metric because a high number of site visits has no indication of whether customers are buying their products or how long those potential customers engaged on their website. This business would eventually fail because they are not tracking the metrics that will determine their long-term success.
Being lost in the universe of metrics and your data is a common and critical mistake businesses make. Having the ability to boast about large numbers doesn’t necessarily mean it would be a useful gauge of your success. True insights are formed from understanding your business and the metrics that will help drive YOUR growth. Exploring the path for your business to grow through establishing Footprint Metrics is vital and necessary when you are flooded with all sorts of numbers from various parts of your organization. Cut through the BS and give your business a chance for real growth and stickiness with your customers.
Let’s face it, if you read Lord of the Rings or watched the successful movies, you know that something bad happens when “one ring rules them all”. In the case of a Footprint Metric, we believe that choosing one metric or value or number (whatever you want to call it) is important for those just starting to examine their data in an insightful and meaningful way. Focusing on this one value means that you have a chance to really show growth (or loss) over a specified amount of time. For instance, recently I moderated a panel with Dave Fowler, CEO of Chartio, and he brought up an interesting story about his experiences (2x) in the Y-Combinator in California. He explained that during the intensive incubator period, they were asked to focus on “one metric” to drive toward. It stripped away all the needs for various numbers and cut the distractions for the business overall. They could focus on moving the “one thing” that would really help the business grow.
Others have also argued for this type of key metric approach in previous discussions. According to Sean Ellis, the CEO of GrowthHackers, the “North Star Metric” is the single metric that best captures the core value that your product delivers to your customers and optimizing your efforts to grow this metric is key to driving sustainable growth across your full customer base.
Why is the Footprint Metric important? It gives your company focus. Instead of having 10-50 different metrics for one company and being lost in the many decisions to optimize each metric, your company can concentrate on the Footprint Metric. You’ll unite your team under one common goal and allow them to work towards that collaboratively. This does not mean that other metrics do not matter but that the Footprint Metric is where the most effort should be placed.
When choosing a Footprint Metric, always avoid “vanity metrics”. Vanity metrics are metrics that may seem to be impressive but does not help you fully understand your current performance and future actions that you should take. Examples of vanity metrics are metrics like page views, total registered users and total likes.
According to Buckley Barlow, MySpace chose a vanity metric which was the number of Registered Users. At roughly the same time, Facebook chose a much more insightful Footprint Metric related to Monthly Active Users. This strategic difference led Facebook to be more successful than MySpace in the long run. They were able to focus on those customers who were using the product, rather than MySpace’s just checking on how many registered users they had at a moment in time.
To determine your Footprint Metric, you must determine things your most loyal customers value most and quantify it into one single metric. According to Hila Qu, VP of Retention & Experiments @Acorns, these are some basic principles to choose your Footprint Metric:
• Does the metric indicate whether the user experienced the core value of the product?
• Does the metric indicate the user’s level of engagement and activity?
• Can this single metric determine if the organization is moving in the right direction?
• Is the metric easy to understand and communicate across teams?
Josh Elman from Medium says that
while big numbers are a nice signal of, well, big numbers, I don't think they are an indicator at all for whether a product is really working.
Elman points out that “at LinkedIn, we didn't talk about "total page views", but instead "profile views" - how many people were using LinkedIn to search for and find other people, and how many people were on LinkedIn being viewed. At Twitter, we found that if you visited Twitter at least 7 times in a month, then it was likely you were going to be visiting Twitter in the next month, and the next month, and the next month.”
Recently, a startup with about $1 million in recurring revenue discovered that if they could get the administrator on the 30-day free account to sign up 6+ members of their team, paid conversion rates were at 80% and stayed consistent no matter what the industry, size of the business, and any other segment you can think of to slice and dice the data on. It became a footprint metric in the funnel to convert from free to paying customers.
To get a better understanding of the Footprint Metric, here are some examples from established companies:
Each of these Footprint Metrics by successful companies satisfies the 4 basic principles. All these metrics help measure the rate at which customers are experiencing the core value of the product. These Footprint Metrics also help gauge customers engagement with their product. You need to understand what the customer is doing and how they are using your product or service. If you can find that metric, and drive growth of it, 9/10 times you will be successful.
The most important metric for a company is the Footprint Metric. According to Gokul Rajaram, the second most important metric for every company is a check metric on the Northstar Metric or Footprint Metric. It’s a metric that constrains the Footprint Metric and ensures that the Footprint Metric grows in a way that is sustainable and creates long-term value.
These Footprint Metrics are all well thought out, but these metrics cannot always tell the full story. Here are some examples of Footprint Metrics growing in unsustainable ways and how a check metric can verify the effectiveness of the actions taken to boost the Footprint Metric.
E-commerce: For example, the company wanted to boost their Footprint Metric: number of orders per month. One way to boost the number of orders per month would be to give customers a discount or a gift coupon. This technique is a common way E-commerce businesses like online clothing shops reel customers in and tempt them into buying more products from their website. In the short run, the number of orders per month will probably increase due to the increase in discounts of products. However, this strategy of offering discounts may be unsustainable in the long run as it may cut your profits significantly and growth in sales because of discounts may become stagnant after a while. This is where a check metric would be important in keeping the Footprint Metric sustainable. A solid check metric in this situation would be Gross Profit. Gross Profit would measure the change in profit in the long run. A simplified Gross Profit would be calculated like so: Gross Profit=Monthly Revenue-Discount Offered. If Gross Profit increases throughout the months, this is a good sign that the expenditure of offering a discount is outweighed by the increase in profits due to the increase in the number of orders.
Website: For example, a company’s Footprint Metric is Daily Active Users. One way to boost Daily Active Users would be to reel in more customers to use their website more often. Knowing this, the marketing team works towards increasing Daily Active Users by spending more on advertisements and promotions. They spend a higher portion of their budget on Google advertisements and even allocate more money towards their graphic design team to attract customers. Through this, they manage to increase their Daily Active Users by a 100 by the end of the month. However, using only the Daily Active Users as their metric can be dangerous since there is no measurement of the retention time of customers on their site. The number of Daily Active Users may be high, but it would be pointless if most customers only stay on the site for an average of 5 seconds because customers aren’t being engaged to the website. Hence, a good check metric for this company would be Time Spent on Site. This measures customer’s engagement to the site and works perfectly in conjunction with Daily Active Users. The main goal of this combination of metrics would be to measure the growing customer base as well as make sure customers are finding value in their site.
SaaS: The Footprint Metric of a SaaS company is the number of monthly subscribers. This company relies on the recruitment of new customers and retaining old customers to earn a profit. The number of monthly subscribers falls for the past two months due to a bad marketing move which tarnished their reputation. To recover from this, the SaaS company decides to offer a discount on their software for a limited period. Because of this, the number of monthly subscribers increases for the next month. However, solely basing their success on the number of monthly subscribers does not tell a story about their customer base. How many of them are new, how many of them are returning customers even after the marketing blunder and how many of the old customers stop subscribing from the service. A solid check metric would be the percent of returning customers. A simple way of calculating this would be: [(number of returning customers)/(total customers)]*100. This check metric measures customer loyalty and to see what the impact of their marketing move had on their past customers.
In all these situations, the Footprint Metrics were solid but there were no check metrics and constraints on how the Footprint Metric should be achieved or whether the focus on this metric was sustainable. Unfortunately, having a Footprint Metric and checks on that are not always enough to ensure business success. However, it is an amazing start to using data insightfully, and more importantly actionably, in your startup or small business. Having this Footprint Metric drives and unites the company towards a common goal.
Yes, the Footprint Metric is used to build focus and simplify communication between teams in a company. However, larger companies often have multiple departments and it can be difficult for each department to work on the same metric. Therefore, each department should have their own Footprint Metric which complements and supports the company-wide Footprint Metric. Often these metrics can get created via OKR process or Rocks to be moved within the whole organization. At the end of the day, your business will grow if you can get the key metric established and the measurement of it secured and accepted across the entire business. In startups and small businesses, it is a lot easier to gain this acceptance and buy-in early. In large organizations, takes data literacy and education to advance.
For example, the company-wide Footprint Metric could be the number of orders while the marketing team could have their Footprint Metric set to be the number of site visitors. Even though the marketing team has a different Footprint Metric, they still complement the company-wide Footprint Metric. Growing the Footprint Metric is a collaborative effort between all teams in a company. Every department in the company must be motivated and find new ways to contribute to the company-wide Footprint Metric.
Also, your Footprint Metric may change at different stages of growth. In the early days of Facebook, Facebook used Monthly Active Users as their Footprint Metric. Now their Footprint Metric is Daily Active Users.
Finding your Footprint Metric is challenging in the early stages of a business or organization. What should you focus on and why? You may get hit from 4 different departments with 5-10 different numbers...and sometimes they may be the same metric, but different numbers. CEO’s or Founders or Owners must try to strip back all the BS here and see the importance of driving toward one true goal. All of us at Bigfoot Analytics are focused on hunting for insights to dispel the myths surrounding your business and the customers you serve. We believe every startup or SMB should be on the hunt for a Footprint Metric to help guide and give them direction at each stage of their growth.
It shouldn’t be told to you by an employee or pushed on you by a potential investor. It is the measure that YOU think will drive your business forward. It is part of the process of growing your business or organization. Even if you are not a data or analytics expert, it doesn’t mean you don’t understand what is important for growth…the business acumen of analytics is just as important as the data variables/measures you collect.
Reach out to us if you need exploring, finding, examining, and enhancing your trail to greater insights from data. All it takes is a guide and some examination of what YOU are trying to do as a leader within your organization and how YOUR business acumen combined with our analytics experience can deliver growth in terms of your chosen Footprint Metric.
Author: Dennis Still
Co-Author & Amazing Team Player: Kar Yan Ong