August 4, 2023

The North Star Metric: Prevent Business Drift to Achieve Success

Michel Gagnon
Michel Gagnon
CEO of Stun&Awe

I just got back from Cádiz, Spain—a beautiful ancient port city on the Atlantic coast with an interesting history. Christopher Columbus set sail for the New World from this port on his second and fourth voyages.

I was standing at the top of the Cathedral's bell tower and couldn't stop thinking about how crazy these expeditions were. How do you stay on course when you set sail across the ocean?

Columbus relied on Polaris, the dependable and unblinking star (although not as precise as a GPS) to find his way to the Americas. 

While launching and growing a business is generally not as life-threatening as crossing the ocean in the late 15th century, there are parallels we can draw and lessons to learn from these expeditions.

Between marketing campaigns, hiring, product development, or onboarding a new client, it is easy to lose focus and get lost. That's where the North Star Metric (NSM) comes into play. That’s one notion that you must know to understand what Growth Marketing is.

Think of your NSM as your business compass. It's that one key thing that should be at the center of all your decisions, helping you navigate through thick and thin.

Let's figure out how to find this guiding metric, look at some real-life examples of NSMs done right, and avoid common blunders.

Breaking Down the North Star Metric

The North Star Metric (NSM) is the golden factor you can use to measure if your business is thriving and growing. 

It mirrors the core value you're delivering to customers, which fuels user interaction and loyalty. The NSM helps all teams across an organization row their boats in unison toward a common destination: sustainable growth.

The NSM is like that wise old owl perched up high and watching over your business journey. It's telling companies, "Hey there, cool your jets and don't go chasing a bazillion smaller goals. Just focus on that one key metric and give it your all."

How to Define Your North Star Metric

Unfortunately, there’s no perfect NSM, no "one size fits all." It differs from company to company, even amongst straight-up rivals.

To zero in on your unique North Star Metric, spot what fuels the heart of your business and acts as a reliable growth barometer.

You’ll need to consider these key pointers:

It Leads to Revenue

A powerful NSM should have a direct impact on how much dough rolls into your business. Basically, if this metric is doing well, then so should your revenue.

Since growth is the main reason for chasing an NSM, there needs to be a strong bond between this data and money-making. By concentrating on a metric that’s tight with revenue generation, you can comfortably pour resources and time into it without second guessing whether it’s worth the effort.

Think of Meta who makes most of its money from advertising. Daily Active Users (DAU) is a useful NSM since advertising revenues flow from having a big and engaged audience to target.

Facebook DAU. Source: Statista
Meta Revenues and Net Income. Source: Statista

It Mirrors Customer Value

Your NSM should personify the core value customers get from using what you’re selling. It must hold hands tightly with customer needs, satisfaction level, and loyalty.

The NSM’s customer-focused facet ensures your business keeps its eyes firmly set on delivering top-notch customer service while nurturing strong ties for long-term success.

If you're wondering how best to select such a metric, think about which elements turn customers into happy campers who keep coming back for more. This could be:

  • How often they use what they bought
  • Their level of engagement
  • Whether they’d recommend you to others

Working to improve your NSM will help deliver better value which in turn drives growth.

If we come back to our Meta example, the DAU can help track new and returning users. Returning users are happy users. 

It Tracks Progress

Finally, the perfect NSM serves as an accurate yardstick showing just how far along your company has come in terms of progress and expansion. 

It must be measurable. For example, Customer Lifetime Value and Daily Active Users can both be easily tracked and show progress. In general, metrics that include a ratio or a time period will help you understand if you’re getting better or not. 

Examples of North Star Metric in Action

To make things a bit more tangible, let's break down three North Star Metric examples across different industries:

Customer Lifetime Value

E-commerce businesses thrive when they can build long-term customer relationships.  One sale is great. Repeat sales are better. One potential NSM here could be the Customer Lifetime Value (CLV) – basically, how much cash a customer brings in over their journey with your company.

Focusing on CLV nudges you to put resources into keeping customers happy, personalizing their experiences, aiming for repeat purchases and/or higher order value. By growing your average CLV, you're ensuring each customer is worth their weight in gold, leading to steady revenue growth and thicker profit margins.

Daily Active Users

SaaS companies often find the secret sauce to success is an expanding loyal user base. Here, an appropriate NSM might be active users – those who regularly engage with and use your software solution.

By zeroing in on boosting active users, it’s clear you’re dedicated to delivering value for clients that meets their needs while constantly upping the user experience game of your product through:

  • Smooth sailing onboarding
  • Top-notch customer support
  • Continual product improvements 

As more people use your services regularly, your SaaS company can bank on stable revenues, paving the way for enduring success.

Watch Time or Monthly Active Users

Online media platforms, like video streaming sites or social networks, feed off user engagement and content consumption. In this scenario, an NSM such as Monthly Active Users or Watch Time can hit home.

There are different ways how you can nudge the NSM in the right direction. You can revamp content offerings, tailor-make user experiences, or spruce up your UI/UX for effortless content discovery.

By putting user engagement first and foremost, you can rake in ad dollars and spur users to create even more engaging content to fuel lasting growth.

If you’re a digital creator, YouTuber, allround influencers, Monthly Active Users or Watch Time are the types of NSM that you may want to use as well. 

Pitfalls to Avoid When Defining Your North Start Metric

While a North Star Metric (NSM) can turbocharge your business growth and success, there are some pretty deep potholes to sidestep. Dodging these common blunders ensures that your chosen metric stays a reliable gauge of how well your company's doing.

The Vanity Traps

A common trap when picking an NSM is getting ensnared by vanity metrics. I know. We all want to be famous. But tracking the wrong metric can turn you into a drunk-driving, drag-racing Justin Bieber in no time. 

Vanity metrics might look all shiny on the surface but don't really add any juice to the growth or triumph of your business. For instance:

  • Social media likes
  • Website page views
  • Number of app downloads

Sure, these stats might up your visibility or reputation game, but they don’t necessarily convert into more cash in the bank or happier customers.

To steer clear of being hoodwinked by vanity metrics, go back to our three points above. Make sure that your North Star Metric leads to revenue, embodies customer value, and measures progress.

Twisted Data Tales

Data can be like a guiding star for making business decisions – but only if you're reading it right! Misinterpreted data can lead you down dead ends, with wasted resources littering the path.

Invest in tools that make sense of data visually. Get team members comfortable with parsing through numbers, charts, and trends. One easy way to do this is to review a simple scorecard everytime you start your weekly team meeting. We baked that into our High-Productivity Meeting Agenda Template. It generates good questions, raises issues, and foster open conversations across different teams.

Out-of-date Info

Unlike our celestial North Star, which never budges from its spot, sometimes you need to switch direction based on changing times.

A metric that seemed relevant once upon a time may lose relevance as business expands, customer tastes change, business models evolve, or industry trends take new turns. To avoid basing strategies on yesterday’s news, keep reassessing whether your NSM still hits home run regarding current objectives.

In some cases, you may need to focus your team on a specific metric for a certain period of time without having to change your North Star. This is where the One Metric That Matters (OMTM) comes in handy. It’s a way to provide temporary focus to move the needle on one of the growth levers. I explain how you can use the OMTM to get results and how it fits with the North Star metric in our Growth Marketing Course. Check it out. 

Why Should You Care About a North Star Metric

A North Star Metric (NSM) can be your trusty compass, keeping your business trek on track. Which customer should you go after? What marketing tactic should you try next? What project should you launch? Like Christopher Columbus on the Atlantic, you can easily lost your way.

Here's how this guiding metric helps you from straying off course:

Plotting the Course

Just as a compass guides sailors through stormy seas, a North Star Metric lays out the route for your business. With one solid indicator of success in place, you can build a hierarchy of metrics with your NSM at the top. All team members will then be able to see how they (or their team) can contribute. 

Let’s come back to our Meta North Star example To growth Daily Active Users, each team can contribute:

  • Marketing needs to grow new users from their campaigns
  • Product works on a smooth onboarding and engaging features to keep users coming back
  • DevOps can optimize the infrastructure to make sure users have a smooth experience and that the company can scale.

With a well-crafted NSM at hand, every team member knows where they're headed. It’s like giving them their own personal map to contribute meaningfully towards reaching that shared destination.

Tracking Progress

As mentioned already, a wisely chosen NSM lets you effectively monitor progress and evaluate how well your strategies are working. 

No matter if you work in a startup or a bigger company, your goal should not to do stuff. You goal should be to do stuff that moves the needle. 

Keeping tabs on this key metric gives valuable insights into what's fueling success or what areas need some TLC.

That’s why you need to keep an eye on your NSM. Add it to your scorecard, review it in strategy meetings or quarterly offsites. Bake it into your management habits. It will help you make smart decisions; tweak strategies; single out what’s hitting home runs and what’s striking out. 

Unifying Efforts

An NSM unifies efforts for everyone in the organization, from bigwigs down to individual contributors. This shared yardstick makes sure all teams – no matter their roles – rally together toward driving growth.

In other words, it’s a great tool to get rid (or at least minimize) territorial fights and disconnects. 

It smashes walls between departments boosting cross-department collaboration as all hands work toward this common goal. This joint focus nurtures accountability, fosters a target-driven culture, and amps up productivity.

Get Going with Your North Star Metric

A North Star Metric can work wonders for businesses. It's like a laser beam, honing in on what really counts: sustained growth. No more chasing rainbows!

If you fell overwhelmed and lost at see, we've got this snazzy marketing course that's just itching to expand your know-how and get you across the Atlantic. It will help you run and grow your business without the confusion, despair, and stress.

We’ll teach you the exact system that drove the shocking growth of companies like Dropbox, Twitter, and Hubspot. It will help you: 

  • Generate more revenues using the Pirate Metrics
  • Create, analyze and optimize your marketing funnels
  • Generate and prioritize growth ideas using the ICE model
  • Build a solid plan to win and keep more customers with a variety of growth strategies
  • Develop a growth mindset that doesn’t involve tricking people into buying

In this all-in-one program, we've got insights coming atcha left and right. Plus, we've packed it with handy tools and actionable tips.

Sign up for our comprehensive marketing program, and let’s steer your business toward prolonged victory.