Tracking data is key if you want to successfully grow your business. But with so much data, identifying the right ones can often feel overwhelming.
Here, we’ll be introducing you to lagging indicators—a powerful metric that can help you gauge your progress and make more informed decisions.
What Is a Lagging Indicator?
A lagging indicator is an observable or measurable factor that uses past data to describe past performance. These indicators don’t predict future trends or events—rather, they show whether you’re achieving desired results.
To give an example, let’s look at a common lagging indicator: revenue.
Revenue increases whenever a sale is made—it lags behind the event it’s describing. Revenue (like all lagging indicators) isn’t used to make predictions about future success. It’s used to assess outcomes and determine whether your business is performing as well as it should be.
This example helps highlights the two core characteristics of lagging indicators:
- They are retrospective. They tell you about what’s already happened, meaning they can’t directly predict future performance.
- They describe results. Lagging indicators focus on outcomes, not on the processes or activities that lead to those outcomes. Revenue is an outcome of your business practices that can’t be influenced directly.
Lagging Indicators vs. Leading Indicators
Now that we’ve covered what lagging indicators are, it’s worth contrasting them with their close cousins: leading indicators.
Leading indicators are those that use current and future data to predict future performance. They’re the opposite of lagging indicators in nearly every way:
- They are prospective. Leading indicators give you visibility into what’s happening right now, and what’s likely to happen in the future.
- They influence results. Leading indicators focus on a current activity, meaning they can be used to influence outcomes. For example, increasing user guide downloads (leading indicator) increasing customer satisfaction (lagging indicator).
Examples of Lagging Indicators
There are many different lagging indicators out there, and the specific ones you use will depend on your business goals.
Here are a few common examples:
- Sales Volume
- Customer Satisfaction
- Employee Turnover
- Website Traffic
- Social Media Engagement
- Email Open Rates
- Sales Cycle Duration
- Average Order Value
Today, many tools are available to automatically track these metrics, such as Stripe (for revenue-based metrics), Google Analytics (for website traffic), and many analytics tools for email and social media. If you are running an online business, you need to use these platforms to grow successfully.
How to Use Lagging Indicators
Lagging indicators can be used in a number of ways.
Here are a few examples:
- Comparing current results to past results (e.g., Is revenue up or down from last month?).
- Identifying trends and patterns (e.g., Is customer satisfaction increasing or decreasing over time?).
- Benchmarking performance against industry norms or standards (e.g., How does our website traffic compare to our competitors?).
- Setting goals and targets (e.g., We want to increase revenue by 10% this quarter).
Lagging indicators are a valuable tool for any business owner or manager. By understanding what they are, how they work, and how to use them, you can make data-driven decisions that will help your business grow and thrive.
Expand Your Analytics Skill Set
Lagging indicators are just one piece of the analytics puzzle. To take your data analysis skills to the next level, why not book a lesson with one of our expert mentors?
Growth Mentor can connect you with a personal mentor or coach who can help you master everything from conversion rate optimization to data visualization. With a little help, you can take your business to new heights.