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When you invest in a platform to track your marketing performance through multiple channels, it’s easy to fall into the trap of vanity metrics. After all, these platforms are often packed with a bunch of metrics that boost your confidence every time there’s a small sign of improvement. Followers, click rates, impressions, website visits, and likes can be appealing metrics to track when you’re focused on using as many new marketing channels as possible. But more information isn’t the same as better information.
In this article, we’ll go over why fixating on vanity metrics can be detrimental to your business goals and revenue metrics for your dispensary that will help you be back on track.
What Are Vanity Metrics?
Vanity metrics are metrics that give you a false feeling of achievement but aren’t directly related to the completion of your business goals. They’re called vanity metrics as they make it seem as if you’re improving toward something, but, in reality, they’re misleading and lack substance. Some examples of common vanity metrics are:
- Social media followers
- Social media likes
- Impressions
- Click rates
- Website visits
- Total purchases
It’s important to clarify that any metric can be a vanity metric if it doesn’t relate to your dispensary goals.
What Are Revenue Metrics?
Revenue metrics are metrics that give you information about the monetary results of your business. These metrics accurately show the full picture of how your dispensary is doing, which can lead to informed decisions so you can take action toward your revenue business goals. Some examples of revenue metrics are:
- Attributed sales
- Customer lifetime value
- Product performance by category
These revenue metrics can also be called actionable metrics because, again, you can use them as information to make important decisions.
Vanity vs Revenue Metrics: What’s the Difference?
The difference between vanity and revenue metrics lies in what your dispensary’s business goals are. Picture this:
You’re falling behind in your revenue goals for this last quarter of the year and you have edible products that will expire soon. In hopes of not losing your initial investment in these products, you promote them even more via social media. As a result, you get 1,000 more followers, and the pageviews for the category of edibles increase by 35%.
At first glance, it may seem as if you’re making progress toward selling these products. After all, they’re getting a lot of attention, right?
The thing is, when you review your category sales, you’re surprised to see the performance of edibles hasn't changed. Meaning, all those new followers and page views are just vanity metrics. On the other hand, with the category sales metric, it was clear you weren’t getting any results, which makes it a revenue metric.
But not everything is lost. You can draw some conclusions from this brief experiment:
- The creativity for this social media campaign was on point as it got you 1,000 extra followers
- The segment you were targeting for this campaign engaged with your brand. They even started browsing your edibles menu
- You need to focus on improving the conversion rate of your website. Why didn't all those pageviews convert?
- Testing your online buying experience is going to be essential to create more targeted campaigns and make your audience convert
Vanity metrics are good indicators of channel performance. Getting more followers and likes means the tactics you use are increasing your audience engagement. But despite that, these metrics don't paint a clear picture of your business outcomes.
Revenue metrics focus on revenue business goals, give the full picture, and help you reproduce results.
How to Identify Revenue Metrics?
Before asking yourself what your revenue metrics are, you have to know what your business goals are. Here are some questions that will help you identify your revenue metrics:
- Is this metric accurately showing the current situation of your dispensary?
- Can you comfortably make a decision with this metric?
- Are these metrics associated with your revenue goals?
- Are these metrics helping you understand where sales come from?
- Is this metric accurately showing the current situation of your dispensary?
3 Revenue Metrics Every Marketer Should Track for Their Dispensary
Here are the three revenue metrics you should care about to set up an effective system for sales data tracking.
#1. Attributed Sales
Sales attribution is a great metric to measure the effectiveness of a marketing channel based solely on the revenue it generates. There are multiple models you can use to attribute value to your different marketing channels. But as small cannabis dispensaries have a limited marketing budget, it’s better to use a last-touch attribution approach.
Last-touch attribution is a model that attributes sales to the last piece of content in a marketing channel that your customer saw before converting. And it can be measured by using UTM codes in Google Analytics or, sometimes, it can be directly measured by the software you use for your marketing campaigns.
#2. Customer Lifetime Value (CLV)
The customer lifetime value is a metric that measures the value of your customer during the entire relationship with your business. This metric identifies the milestones of your relationship where your customer generates value (makes a purchase) and keeps a record of it. To measure CLV, you need the following data:
- Average Purchase Value: average of money spent on purchases during a time span
- Average Number of Purchases: average of the number of purchases made by customers during a time span
- Customer Value: results from multiplying the Average Purchase Value by the Average Number of Purchases
- Average Customer Lifespan: the average time span in which a customer keeps buying from you
Now, this is the formula to calculate CLV:
CLV = Customer Value x Average Customer Lifespan
This metric is especially powerful when you want to know if you’re spending too much money on customer acquisition. Investing in retention is always a priority before acquisition, which is why your CLV should be higher than your customer acquisition cost (CAC). If your CAC is higher than your CLV, you're not generating any revenue, you’re losing money.
#3. Product Performance by Category
This metric is essential to identify which products are top performers and which ones don’t make the mark. Product Performance can help you test new products added to your menu or category and see if they’re profitable, or if you should stop ordering them from your provider. The Product Performance metric can be easily measured with software for your dispensary like a point-of-sale system. But to effectively measure this metric, you should focus on the revenue this product brings to your dispensary.
Remember that Product Performance can also be measured by the number of times you sell a certain product. And that doesn’t tell the entire story. For example: you may have products that sell at high volume, but are low cost, meaning they contribute little to the revenue. There’s nothing wrong with being proud of having lots of followers and likes. But it’s important to track the performance of your marketing channels based on what your business goals are.
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