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How to Focus on the Key Analytics Metrics

siu-eric
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When people talk about analytics solutions, they are often referring to Google Analytics. It’s simple to use, flexible, and best of all, it can help you make the right decisions.

There are quite a few analytics solutions available, so which one is the best? Which one helps you make actionable decisions that will increase your bottom line?

KISSmetrics & Crazy Egg co-founder Neil Patel joins us in this interview to give us his thoughts on the current state of analytics.

Eric Siu: Aside from Google Analytics, there seem to be a variety of tools that are effective at gathering actionable data, can you go over some of the best tools in the market and their benefits?

neil-patelNeil Patel: Sadly there aren’t a lot of tools that provide actionable insights, which is why we built our own product... KISSmetrics. Most analytics solution like to focus on metrics like bounce rates, time on site, and even pageviews.

Unless you are an ad network, pageviews typically won’t tell you much as well as the other metrics I mentioned above. People need to focus on metrics that affect their revenue such as conversion rate, marketing attribution, life-time value of your customers, churn, etc.

ES: A lot of people talk about "actionable data." How do you go about finding this and avoiding so called "vanity metrics"? What are vanity metrics anyway?

NP: First you need to figure out what affects your revenue and profit. There typically are a few variables that affect it for almost any website:

  • Traffic sources: What sites, campaigns, ads… are driving your traffic.
  • Conversions: What traffic sources are converting.
  • Conversion rate: What is your overall conversion rate as well your conversion rate per traffic channel.
  • Life-time value: What is each of your customers worth. Not just in the short run, but also in the long run.

The list can of course continue depending on the type of website you have, such as “churn” for subscription and SaaS based businesses. But you can take the metrics above and focus on those metrics and avoid the rest.

For example, instead of measuring your traffic and hoping that it goes up, start measuring your converting traffic. If your overall traffic decreases, but your traffic from the sources that are causing you revenue goes up, that’s all the matters (assuming you don’t have a publishing based business).

Find the 5 or 10 metrics that affect your bottom line and focus on improving them on a daily, weekly and monthly basis. As for the rest of the metrics, you can look at them, but it would be a waste of your time to spend much time on those “vanity” metrics.

ES: With so much data to look at, analytics can get overwhelming. What's the best way to use analytics tools without getting too caught up in the ocean of data?

NP: A lot of companies like having hundreds of reports that allow them to dig into all of their data. The issue is you don’t have enough time to improve all of them and the reality is, most of those reports/data points won’t affect your bottom line.

Instead you should make a list of all of the actionable metrics that affect your bottom line. Then order them in a list, in which number one would the metric that you feel can have the biggest impact.

After you do that, go through that list and make a note of all the metrics that would be easy for you to improve upon. After you’ve done that you should then start focusing on the metrics that will have the biggest impact on your revenue and are the easiest for you to control.

Once you improve that one metric you can either continue to work on it, or you can move onto the next one. By doing this you will continually focus your efforts on improving your revenue versus boosting numbers like pageviews that may not have an impact on your revenue.

ES: A lot of people use Google Analytics today because it's a pretty effective free tool, can you tell us what some of the major flaws are with Analytics?

NP: I also use Google Analytics because it covers a lot of basic analytical data points that most companies should track. But there are a few flaws with it:

  1. There are too many reports. So many that it drowns people and they aren’t sure what to do.
  2. In your Google Analytics dashboard they highlight a lot of metrics by default such as pageviews. Although you can adjust your dashboard, a lot of people feel these metrics are important so they focus on them.
  3. Google Analytics doesn’t force users to track things like goals and conversions. That’s one feature that they should focus more on as if you don’t track your conversions you won’t know which traffic sources are making you money and which ones aren’t.
  4. In Google experiments (their A/B testing) they focus on conversion rates instead of having people optimize for revenue. You can have a lower conversion rate and make more money potentially by doing things like decreasing price points.
  5. Google Analytics funnel report only works with future data after you setup the funnel. You can’t use it to analyze your old data.
  6. Google Analytics can’t help you fine tune your revenue because it doesn’t track your backend metrics. It works in tracking your front end website, but what about your backend… such as upsells, repeat buyers, life-time value… etc.

ES: In one sentence please explain how KISSmetrics is different than Google Analytics?

NP: KISSmetrics helps you maximize your revenue by giving you actionable insights on your customers.

Key Takeaways

  • Focus on the metrics that matter most for your business.
  • Order the metrics by importance and then focus on them.
  • Forget making hundreds of reports and instead focus on the key metrics, figure out a plan, and take action.
  • Google Analytics is useful, but it does have its limitations (such as backend tracking).

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