SKU’d Thoughts 4: Do vanity metrics exist in CPG startups?

Tableau defines vanity metrics as “metrics that make you look good to others but do not help you understand your own performance in a way that informs future strategies.” These metrics are non-actionable metrics that are easily manipulated like downloads, Instagram followers, and pageviews. They’re most widely used by tech startups. The tech industry has multiple business models (ad-based, subscription, freemium, etc.) that drive founders to track any and all metrics to show growth in hopes of validating their business idea and attracting funding as they figure out the right business model.

CPG companies mainly make money one way: by selling their products. This simple and standard business model means that CPG startups don’t have the luxury of reporting vanity metrics as a validation of business. The number of pageviews or Instagram followers that Meal-Rep, a fictitious meal-replacement bar startup (check out SKU’d Thoughts 3 for more on that), does not necessarily translate into units sold.

Social media followers become a non-vanity metric when there is a true engagement, which in CPG takes the form of people buying your product and posting it on social media. In this case, the business model of “I make, you buy” was realized and then amplified to “I make, you buy and you share”. The “you share” piece is essentially an NPS score which signals brand loyalty, an important factor in the success of CPG startups.

CPG startups may be tempted to highlight vanity metrics but the nature of the industry does not reward any metrics that have no effect on the health of the business. Tech startups have the leeway of launching, experimenting, and monetizing at a later day. Since revenue is the ultimate validation of a CPG business, all metrics tracked and disclosed to potential investors need to directly correlate to the business’s top-line.

Cross-posted on Medium