How to select the Right Metrics for Different Business Models & Objectives?
Choosing the right metrics for various business models and objectives entails aligning metrics with the company's core value proposition and the strategic goals it aims to achieve.
Let's understand with a few examples:
Business Model Example:
A SaaS company with a business model focused on long-term subscriptions, may prioritize metrics like 'Monthly Recurring Revenue' (MRR) and 'Customer Churn Rate' that reflect sustainable growth and customer retention.
On the other hand, an e-commerce platform might focus on 'Average Order Value' and 'Cart Conversion Rate' to reflect their transaction-based model.
Both sets of metrics are directly tied to the respective business's objectives: the SaaS company's objective of maintaining a steady subscriber base and the e-commerce platform's goal of maximizing sales per visit.
Business Objective Example:
Metrics should be tailored not just to the business model but also to its objectives.
For example, if a business aims to expand market share, 'New Customer Acquisition Rate' might be a key metric. Conversely, if the focus is on profitability, 'Gross Margin' might take precedence.
This alignment ensures that the metrics tracked are meaningful and actionable for the specific context of the business.
We will cover selecting the right metrics for different functions & business models in "Analytical Skills for Growth".