Vanity Metrics vs Actionable Metrics: What’s the Difference and What To Track in SaaS?

Vanity metrics vs actionable metrics SaaS: which ones should you choose for your SaaS business?

The short answer is actionable metrics. It’s easy to get drawn to vanity metrics but they can be misleading. For your product marketing efforts to be successful, it’s crucial to understand the difference between vanity metrics and actionable metrics.

So, let’s find out how you can do that to get actionable product growth insights.

TL;DR

• A vanity metric in SaaS makes your business appear impressive on the outside but actually doesn’t provide insights into business performance.
• A vanity metric lacks substance. It is overly simplistic to monitor and measure and is not contextual.
• An actionable metric provides actionable information about business performance and helps you form product growth strategies based on it.
• In the era of product-led growth, actionable metrics help businesses understand whether their products satisfy customer needs and make improvements whenever needed.
• A few examples of vanity metrics are the number of free trial users, total customers acquired, and the number of total users. Instead, you should use the trial to paid conversion rate, customer acquisition cost, and customer engagement score.
• The four key actionable metrics are activation rate, monthly recurring revenue, customer churn rate, and customer retention rate.
• The customer activation rate measures how many of the trial users performed the key in-app actions and thus got value from your product.
• Monthly Recurring Revenue (MRR) is the total revenue you earn each month from subscriptions.
• The customer retention cost is a measure of the customer retention rate that measures how much you spend per user to retain them for the long term.
• The customer churn rate is the opposite of the retention rate and tells you the amount of revenue loss from canceled subscriptions.

What are vanity metrics in SaaS?

Vanity metrics are the metrics that may look impressive on the outside but don’t reflect actual business performance for your SaaS. Since they aren’t actionable, you can’t use them to make informed strategies.

For instance, 12,000 new subscribers may look appealing, but they don’t mean anything if the number of monthly active users is only 200, and you can’t form any strategies targeted at this vague metric.

How to identify vanity metrics?

How do you know which metric is not relevant to your SaaS business growth?

Vanity metrics have certain characteristics not found in actionable ones. They:

• Are usually misleading
• Lack substance
• Don’t help you improve your business or product meaningfully
• Are overly simplistic to track and measure
• Are not contextual

What are actionable metrics in SaaS?

Actionable metrics are the metrics that directly relate specific business actions to observable results. They enable marketers to align their teams properly around the most important metrics to meet business objectives.

Actionable metrics are tied to any aspect of your business that you can control in a meaningful way.

Why is tracking actionable metrics important for SaaS businesses?

In the era of product-led growth, actionable metrics help businesses understand whether their products satisfy customer needs and make improvements whenever needed. Moreover, a Forrester Research study revealed that proper alignment allows businesses to experience a 32% rise in revenue growth.

Vanity metrics vs actionable metrics: What’s the difference?

Vanity metrics are misleading and superficial. They include metrics like social media followers, time spent on websites, social media engagement, and website traffic. Plus, marketing efforts should target getting a customer instead of a qualified marketing lead.

On the other hand, actionable metrics are clearly defined and are aligned with business goals. With metrics like the trial to paid conversion rate, cart abandonment rate, and customer lifetime value, your teams can predict the direction your business is headed and form successful marketing strategies.

SaaS vanity metric examples and what to track instead?

Here are a few examples of vanity metrics that many SaaS companies tend to use. If you use any of the following vanity metrics, check out the actionable metrics you can use to replace them.

• Number of free trial users
• Number of total users
• Total customers acquired

Number of free trial users

It’s good to know the number of free trial users, but this prevents you from knowing the percentage of those users who are really trying out your app and using it. You cannot form a good strategy without knowing the underlying situation.

For instance, 12,000 new free trial users in a month may look very appealing. But this large figure doesn’t mean anything if the number of monthly active users is only 200.

What is the actionable metric for this case?

Instead, you should track the trial to paid conversion rate that will help you understand how many users found actual value by using the app and upgraded to paid accounts. To calculate this metric, divide the number of free trials converted during a specific period by the number of free trial signups within that period and multiply the result by 100.

Number of total users

Again, the number of total users is a vanity metric since a large customer base doesn’t necessarily indicate that all of them are active and loyal users. Suppose 10,000 people subscribed to a paid account in January, but only 100 of them turned out to be monthly active users. This makes the large figure pointless.

What is the actionable metric for this case?

Instead, you should track the customer engagement score (CES) to see how many of the total customer base, both free trial users and paying customers, are engaged and active. Every user gets a CES based on their activity level and product usage. The higher the CES, the higher the customer engagement rate.

The customer engagement score is a summation of all total event values. First, you need to determine the key in-app events and assign each of them a score of 1-10 based on importance. Then, multiply this score by the event frequency in the last x days to get the total event value.

Total customers acquired

This is similar to the total-users count, but this includes only the acquired and paying customers. Here too, the number of active users should make up a significant portion of the total customers acquired.

What is the actionable metric for this case?

What you should track instead is the customer acquisition cost (CAC). It measures the cost to acquire a new user for the organization, thus helping you make more informed decisions like creating a better budget for your sales and marketing campaigns. To measure this metric, divide the total sales and marketing expenses during a specific period (monthly/annually) by the number of new users acquired.

4 key SaaS actionable metrics and how to improve them?

Now let’s look at the 4 most important actionable metrics for SaaS product growth and how you can improve them.

• Activation rate
• Monthly Recurring Revenue (MRR)
• Customer retention rate
• Customer churn rate

Activation rate

The customer activation rate tells you how many of the trialists completed the key in-app actions and thus experienced the value of your product. In fact, a 25% rise in the activation rate boosts the monthly recurring revenue by 34%. The in-app events depend on the particular user persona a customer belongs to.

How to improve customer activation rate?

New product marketing trends showcase the importance of building behavioral and personalized user onboarding experiences in improving activation. Use behavioral analytics to set up relevant triggers depending on specific user behavior or lack thereof.

Furthermore, you can give customers a better experience by gaining a better understanding of their behavior and needs. You can personalize onboarding in multiple ways, such as by:

• user behavior
• milestones
• user state
• user role

To build a behavioral flow in onboarding, you can set the activation events in 2 ways:

• Monitoring and analyzing critical in-app events that would make customers reach the activation milestone. Here, customers actively use your product to meet their objectives.
• Determining the various user personas. Segment your customer base into different groups based on characteristics like user role, knowledge, age, etc. This allows you to easily identify the key triggers for both AHA moment and activation for each group.

Personalization involves using onboarding elements like checklists, tooltips, interactive walkthroughs, etc. that contextually help users reach the activation point.

Onboarding checklists, like the one given below, break down a complex process into simpler tasks to make it easier and quicker for users to find value.

You can add a progress bar to the checklist to help users keep track of their progress and motivate them to move forward. Therefore, checklists are a valuable tool for improving the activation rate.

Monthly Recurring Revenue (MRR)

The Monthly Recurring Revenue (MRR) is the stream of revenue you earn each month from subscriptions. To find your MRR, multiply the number of monthly subscribers by the Average Revenue Per User (ARPU). If your company depends on annual subscriptions instead of monthly, just multiply the MRR by 12 to get the yearly figure.

How to improve monthly recurring revenue?

Use onboarding modals to improve your monthly recurring revenue. They are large UI elements that are used for in-app messaging.

You can leverage modals to drive account expansion in a contextual manner. The greater the account expansion, the higher your MRR will be.

Modals are considered to be the most intrusive type of in-app messaging. This is why it’s advisable to use them in moderation and use them for making key announcements, such as the launch of a new feature or the need to upgrade to unlock some necessary features.

Therefore, modals tend to be a very effective automated upgrade process. They help users notice the additional value an upgrade can provide right when they need it.

The modal below pops up when a user wants to access some features that are restricted by their free account or current subscription plan. It also adds a visible call-to-action button to prompt users to take action.

Customer retention rate

The customer retention cost is a measure of the customer retention rate. Customer retention cost measures how much you spend per user to retain them in the long run. Thus, it’s equal to the total annual cost of customer success and retention teams and their initiatives divided by the total number of active users.

A Forbes research showed that it costs 5 times less to retain existing customers than to acquire new ones.

How to improve customer retention rate?

Continuous onboarding is crucial for improving the customer retention rate. This is because users won’t stick around unless you keep driving value as they move across their user journey.

Onboarding is an ongoing process of making users learn by doing.

As you engage users with personalized in-app messaging and provide in-app guidance, they are finally able to access all features relevant to their use case. And as your product benefits them more and more, they keep renewing their subscriptions.

Below is the multiple AHA moments journey. AHA moment is when a user realizes the expected value of your product. Users need to experience more such moments after the initial one each time they get to know about a valuable feature.

After activation, secondary onboarding comes into play. Users discover relevant secondary features and adopt them when they get value. Finally, repeated value boosts retention, and customers may even become brand advocates and spread positive reviews.

Customer churn rate

Churn is the opposite of retention. The customer churn rate is the number of customers you lost from subscription cancellations during a specific period divided by the number of customers present at the beginning of that period, multiplied by 100.

This metric helps you measure the revenue loss from the churn and also take actions to address customer pain points.

How to improve the customer churn rate?

Your churn rate might be below the industry average but will still not be zero. However, you can reach negative churn by increasing your revenue up to a point after which it surpasses the sum you lose from churn.

Secondary onboarding efforts help to reduce churn while improving retention at the same time. Onboarding tools like tooltips, interactive walkthroughs, and checklists come in handy again here.

In addition, collecting user feedback from in-app churn surveys allows you to understand why your customers are leaving and make improvements accordingly. You can even add suggestions along with it to encourage users to pause their accounts instead of deleting them.

Keep in mind to be proactive so that you can discover potential churn customers before they really leave. You can do so by segmenting customers who show signs of leaving.

Userpilot lets you build advanced user segments based on:

• user behavior
• custom events
• engagement
• user identification.

Key takeaways

It’s easy to get lost in the vast pool of data available and measure vanity metrics. But now that you can hopefully distinguish between vanity metrics and actionable metrics, get rid of all unnecessary data and focus on the valuable ones.

The 4 key metrics that would offer actionable insights into your business performance are:

• Activation rate
• Monthly Recurring Revenue
• Customer retention rate
• Customer churn rate.

Want to create product experiences code-free to improve your actionable metrics? Get a Userpilot demo and see how you can achieve product growth.