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What is a North Star Metric and should you set one?
Have you ever heard of a North Star metric? It’s a term that has become popular in the business world, but what exactly does it mean? A North Star metric is a key performance indicator that helps frame up a company’s goals and objectives.
Your North Star serves as an anchor for decision-making and helps companies to focus on the most important aspects of their business – often their customers.
In this article, we will explore what defines a North Star metric, why they are a useful tool for businesses, and how to go about selecting one. Read on to learn more!
What is a North Star Metric?
A North Star Metric is a key metric that reflects the overall health and success of your business. This metric should be closely watched and monitored, as it can give you valuable insights into how your business is performing.
There are a few things to keep in mind when choosing a North Star Metric:
- The metric should be aligned with your mission, vision and business goals.
- The metric should be understandable, so that everyone in your organization can easily grasp its significance.
- The metric should be actionable, meaning that you can take steps to improve it.
- The metric should be meaningful, so that it provides valuable insights into the health of your business.
The North Star Metric for a company will vary depending on the type of business and what success looks like for that particular company. However, some examples of North Star Metrics include customer satisfaction scores, and retention rates. We’ve more examples coming up in a moment for you.
How do you choose a North Star Metric?
There are a few key things to keep in mind when choosing a North Star Metric:
- What business goals do you want to achieve?
- What are your customers' key needs and how do they interact with your product?
- What data do you have available to measure progress?
- How easy is it to collect and track the data for this metric?
- How granular should the metric be?
- How often will you need to measure progress against this metric? Daily, weekly, monthly, or something else?
- What thresholds should you set for this metric? For example, is there a specific level of engagement that indicates success?
What are some examples of North Star Metrics?
There are a few different types of North Star Metrics, but some common examples include customer satisfaction scores, Net Promoter Scores®, customer lifetime value, and retention rate.
- Customer satisfaction scores measure how happy customers are with your product or service on a scale of 1-10.
- Net Promoter Scores® measure how likely customers are to recommend your product or service to others on a scale of 0-10.
- Customer lifetime value is the estimated total amount of money that a customer will spend with your company over the course of their relationship with you.
- Retention rate is the percentage of customers who continue using your product or service after their free trial or initial purchase period has ended.
While there are many different types of North Star Metrics, these are just a few examples to get you started thinking about what metric could be mean that you are satisfying your reason for being, which is usually to satisfy your customers more successfully than your competitors.
Wrapping up on North Star Metrics
So in conclusion, a North Star Metric is an important tool for business owners to track their progress and measure the success of their strategies.
By understanding what your North Star Metric is, you can have clarity on how to allocate resources and focus on activities that will move the needle in terms of growth. Ultimately, having a clear direction about where you want the company to go gives everyone involved more purpose and allows for better decision-making.
