Chapter 7 · Data Analyst
Business metrics and KPIs
~5 min read
Analysts do not just compute numbers; they choose which numbers matter. A metric that is precise but irrelevant wastes everyone's time. This short chapter gives you the vocabulary and judgment to define KPIs that actually drive decisions, which is a common interview theme and a daily reality.
7.1 What makes a metric good#
A useful metric is tied to a decision, has a clearly defined numerator and denominator, and can be segmented. The fastest way to sound like an amateur is to quote a rate without saying of what, out of what, over what window.
7.2 Vanity versus actionable metrics#
A vanity metric rises, looks impressive, and informs no decision: cumulative registered users, total pageviews, raw downloads. An actionable metric ties to a lever you can pull. Replacing total users with weekly retained users in the new cohort turns a feel-good number into something a team can act on.
7.3 Common business metrics#
| Metric | Definition | Where it matters |
|---|---|---|
| Conversion rate | Share completing a step, with a clear base | Every funnel |
| Retention / churn | Share who stay or leave in a period | Subscriptions, apps |
| Average order value | Revenue divided by orders | E-commerce |
| CAC and LTV | Cost to acquire versus lifetime value | Growth, marketing |
| Gross margin | Revenue minus cost of goods, as a share | Profitability decisions |
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