Tracking ‘One Metric That Matters’ (OMTM)
Ever looked at your analytics dashboard and wondered “what am I going to do with this torrent of data thrown at me? How will I make sense of and act on all these numbers popping out daily?” Well, we tend to track everything from cradle to grave and it is absolutely impossible to work on every metric simultaneously. Moreover, it’s not even necessary to do so.
Why track just the OMTM?
Say you started with an eCommerce company. You may be tracking a myriad of things like for acquisitions — Cost of Acquisition (CAC), acquisition campaigns, traffic, conversions; for virality — number of social media share, referrals; for engagement — number of product searches and comparisons, reviews and ratings, actions like adding to wishlist or save; for retention and stickiness — the MAU, DAU, average session time, churn, number of repeat users/transactions; for revenue — Customer Lifetime Value (CLV), average cart size and abandonment rate.
But in the first three months of your company/product’s lifecycle, should you be really worried about the average cart size or any other revenue metrics? NO! This is the time when you focus on acquiring as many customers as possible at the lowest of costs. This is the time when you attract your target audience with some ingenious campaigns and a compelling value proposition. Fast forward five years, your eCommerce product has a strong base of loyal customers, this is the time when your primary focus should be to get the most out them — to increase their spending, reduce the abandonment i.e the revenue metrics.
However, it should be noted that it is still essential to track revenue at the start to understand the growth and also track acquisition at a mature stage to make sure that the signup flow has no impediment. But they should not be the linchpin — the metrics that your organization would focus on at that stage of the product lifecycle.
The concept of One Metric that Matters (OMTM) states that any organization should focus on optimizing only one metric that matters at that particular stage of the product’s lifecycle. The OMTM keeps changing as the product progresses through various stages and maturity levels.
3 Advantages of tracking OMTM
- Helps the entire company to focus
When you are tracking just one metric or at the max two most important metrics, it aligns everyone in the team as it gives them a clear vision and a goal to aim at. A cleaner daily/weekly tracker on mail and a clutter-free web dashboard or TV screen highlighting just the key metric would have a larger impact (in a positive way) on the team’s performance. - Promotes the culture of experimentation
Successful products are built meticulously piece by tiny piece, experimenting at every point, failing small and iterating. The culture of experimentation is of prime importance to companies of every size but it is sustainable only when your experiment targets a single metric. More the metrics more is the confusion — success or failure — you would never be able to figure out what actually led to it. - It forces you to set a target
Once you have decided on the metric to focus on, you also need to set a target that defines success, a number — ratio or percentage that clearly tells that your experiment to improve that one metric has failed or clicked. If you hit the target, shift focus to another metric i.e replace the OMTM.
Assume that your eCommerce business has grown to a stage wherein your OMTM is ‘average cart size’. Setting targets is not easy but there are two standard approaches
(i) Refer to your business model and figure out what is desired number to sustain and grow. So if an average cart value of $10 ensures you hit the business targets then that is what you are after.
(ii) Referring to industry standards. Easiest approach is to take a look at what is normally the target number as per industry benchmarks. In our case, it would be the average cart value of other successful eCommerce sites.
OMTM example — Instagram
Well, let us end it with an example. Assume that it is 2010 and we are planning to release a photo and video sharing app named Instagram — wish I had actually founded it :)
October 2010
We release the app on Android and iOS.
OMTM for the first 3 months
The number of new signups per day. As we need a lot of users on board quickly for it to truly social.
Here you may also track a secondary metric like new signups per day per acquisition campaign.
Target
We want at least 1 Million users to signup in the first 3 months for the app to achieve a ‘social app’ status.
October 2011
With over 10M customers (Fig.1) in one year, we now shift our focus to engagement.
OMTM for the next one year
Content creation percentage — The percentage of users who interact with the content in some way, either by creating it or liking or commenting on it.
Target
Setting an initial target of 40% and improving from there on to about 55–60%.
Once we hit the above target, we pivot to another OMTM to track engagement and that would be the percentage of users who post a status and in another 6 months, we pivot to the percentage of users using the messenger.
October 2013
We have a loyal user base, posting, updating status and engaging at the desired frequency. Now the focus shifts to revenue and making the most out of these loyal customers. We start displaying promoted posts to the users based on their interests. The money earned here is through the number of impressions and click-throughs ( Install Now, Know More, Buy Now buttons)
OMTM for 3 years
Monthly Recurring revenue
It is critical that we keep a close eye on churn as well — displaying ads is tricky and should not irritate users resulting in churn.
Target
Setting a target of $30M in the first year and growing up to $70M by October 2016)
Fast Forward to Current Day
September 2019
The company is almost 9 years old now, we focus on stickiness and deeper engagement consequently improving the revenue.
OMTM for next 2 years
Average session time. Every team makes its contribution towards this — editorial team ensures interesting push notification, engineering team ensures relevant recommendations, better streaming and image loading, cool filters, the design team works on better UX and so on.
Target
5 minutes. It is currently 3.07 minutes (www.statista.com)
I am in no way related to Instagram. The above example is a very abstract way of conveying what OMTM actually means and how it changes with the product’s growth. Keep in mind that it may not be always possible to track just one metric, especially for mature products with an extensive feature-set and a lot going around. Even in such cases, you should try keeping it down to a max of two or three at a given point in time.
You can read in detail about OMTM in the book Lean Analytics.
