North Star Metric

North Star Metric – An Ultimate Guide10 min read

Ashkar Gomez
11min read

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Understanding on North Star Metric (NSM) helps companies reach its full growth potential by unifying their employees towards a single goal. It helps companies move past aiming for short-term growth and instead aiming for long-term growth. 

In this article, let’s take a complete look at what a North Star Metric is and how you find your NSM that gives your company a new focus and energy for growth.

What Is a North Star metric (NSM)?

A North Star Metric (NSM) reflects a brand’s core values. It captures the value a product or service delivers to the customers.

It is one of the crucial elements of a data-driven organization. It allows the brand to focus on one goal that reflects the success or failure of a product. 

It allows brands to go beyond momentary, surface-level growth and aim for long-term growth. Optimizing the business team’s efforts according to this metric will help drive substantial growth and retain customers.  

An NSM is one of the KPIs (Key Performance Indicators) in growth marketing. It helps businesses gauge the progress of a business and guide them to focus on what’s important for the growth of the business. 

To be the “North Star” for a business, the metric should have the following qualities:

  • Result in revenue
  • Reflect customer value
  • Evaluate progress

Why Is North Star Metric Important?

The main concept behind North Star Metric is that if the brand provides more value to the customers, they will stay advocate with the brand, and thus the growth of the company skyrockets. 

With so much accumulated data, it can be difficult for teams to focus on a single goal. They might clash against each other instead of working together if teams have different goals. An NSM gives the team a singular goal to focus on in their work. 

It mainly serves three essential purposes in the growth of a company:

Clarity & alignment: It gives the company a clear idea of what they should focus on (a central goal) for growth. Different teams have different sub-metrics to work on. But having a singular NSM helps create alignment across the entire organization.

Impact & progress: A NSM allows the teams to have a clear idea of the impact of their product. This allows teams to assess the areas of improvement and work on them.

Customer-centric: The NSM reflects the values a product or service adds to the customers. This helps brands focus on areas that need to be improved for a better customer experience.

Can a Business Have More Than One North Star Metric?

In general, the point of having a North Star Metric is to have a singular goal that the company can focus on for its growth. Theoretically, it should be only one.

But in practice, it can be difficult to follow, especially in big organizations. It is not uncommon for big companies to have more than one NSM. In these cases, each department chooses its own NSM that collectively supports the company’s wide NSM. 

Most big organizations aim to have no more than 3 North Star Metrics. Having more than 3 NSMs can deter the companies from what actually matters for their growth.

North Star Metric Examples

Over the years, North Star Metrics have been a major cause for the success and failure of various companies and organizations. Below are examples of NSMs based on the business models.

Business Model

NSM

Examples

E-commerce

Average Order Value (AOV), basket size

Amazon, Flipkart, eBay

User Generated Content + Ads

Monthly Average Users (MAU), Time on Site (ToS)

Facebook, Instagram, YouTube, Quora

Freemium

Monthly Active Users (MAU), percentage of people upgraded to paid service

Spotify, Tinder, Mobile games, Netflix

Enterprise SaaS

Monthly Active Users (MAU), percentage of people upgraded to paid service

Slack, Asana

Here are the North Star Metrics of some reputed organizations.

Brands

North Star Metrics

Facebook

Monthly Active Users (MAU)

Amazon

Number of purchases per month

LinkedIn

Monthly Active Users (MAU)

WhatsApp

Messages sent

Quora

Number of answers to questions

Uber

Rides per week

Slack

Daily Active Users (DAU)

Spotify 

Time spent listening

Common North Star Metric Mistakes That Most Brand Does?

North Star Metric is a great way to measure the growth of a business and evaluate a product’s value for the customers. But there are some places where a brand can go wrong while choosing its NSM. 

Choosing revenue as a North Star Metric

Some brands make the mistake of choosing the revenue generated as their North Star Metric. Revenue is the amount/price the customer pays for a product. The North Star Metric is the value the customer gets in return for the price paid.

Revenue or other similar metrics like Monthly billing or Gross Merchandise Sales is not a suitable North Star Metric for the following reasons.

  • It does not represent the customer value. Revenue is the value brands receive from customers, and not the value customers receive from brands.
  • Revenue can be inconsistent. It does not give a clear picture of the brand’s growth. 
  • When brands focus on revenue, they focus on extracting as much revenue as possible from customers. They don’t focus on building products that add value to the customers. 
  • An NSM should be a leading indicator that shows how a brand can grow in the future. Revenue only shows what happened in the past.

Sticking rigidly to a North Star Metric

Brands should know that a North Star Metric will change as the company grows. Let’s take a startup, for example. 

During the initial stages, it will be fine for the NSM to be the Monthly Active users of their products or services.

But as the company grows and the industry evolves with new competitors on the rise, the startup needs to update their NSM for further growth. Here the brand’s NSM changes from Monthly Active Users to Daily Active Users.

Forgoing other metrics in favor of NSM

Some brands make the mistake of focusing too much on their NSM and leaving other measurements.

North Star Metric is important for the growth of a business. But it is not the only metric that helps with its growth.

An NSM aligns all the teams under a singular goal that best reflects the brand’s success. It does not mean that other sub-metrics, such as the team or individual metrics, do not help the brand grow. All these metrics add up and have a direct impact on its NSM.

North Star Metric (NSM) vs. One Metric That Matters (OMTM)

There are many brands or marketers who confuse North Star Metrics (NSM) with One Metric That Matters (OMTM). While they might seem similar, they are slightly different from each other.

NSM

OMTM

The entire company focuses on a single goal.

Each team focuses on a particular goal.

It focuses on long-term growth and is used to grow a business over the coming years.

It focuses on achieving rapid, short-term growth. 

An NSM never changes unless the brand changes direction regarding its mission/vision, i.e., the value it adds to the customers. 

OMTM changes based on what needs the most attention at a given time. A new OMTM is chosen once the previous one is improved.

From the above table, the difference between an NSM and OMTM is clear. In short, an NSM is an umbrella focus of a brand that lasts for a longer period. 

An OMTM differs for each team. It is improved so that it can contribute to the NSM. One Metric That Matters is a sub-focus (sub-metric) of the North Star Metric. 

How to find the NSM of your product?

If you are a startup looking to grow your business, you must identify the North Star Metric your company should focus on.

In most cases, finding your NSM is easy. You know what your core values are and how you influence your customers. But sometimes, choosing an NSM can be complicated.

You might find different directions you can move forward in and be unsure about which one to choose. You need to conduct multiple experiments focused on different goals to find the one that gives you the best results.

Here are some steps you can follow to choose the right NSM for your business. 

Choose the NSM that best suits your business

Different businesses have different North Star Metrics. While the overall idea of NSM is growing the business by boosting customer satisfaction, it can vary based on the business structure, type, or industry vertical.

Prioritize the metric that’s important for your business

When choosing the NSM for your business, you need to think deeper into what is truly essential for the growth of your business.

Revenue and subscriptions are indeed important for your business, but they are not your ideal NSMs.

Your NSM should be something that drives revenue and subscriptions.

Use the Job To Be Done (JTBD) Framework to know what your customers want

As seen earlier, an NSM should reflect the value your business adds to your customers. The JBTD Framework helps you recognize why your customers buy your products. 

Once you understand what “job” the customers want to be done with your products, you can choose your NSM accordingly. 

Check if your NSM meets the below criteria

A North Star Metric should meet the following criteria to be chosen as a good NSM for your brand. Ask these questions before you choose the NSM for your brand.

Does your NSM reflect the brand’s core value? The main objective of NSM is to reflect the brand’s core values to the customers.

A good NSM should be able to garner customer satisfaction for the products.

Is your NSM measurable? A good NSM should be able to measure the progress of the brand. 

Is your NSM the same as the client’s “success” moment? In most cases, the NSM of a brand is close to the moment the customer gets the intended result from a product or service. 

Does the NSM provide an objective view of your company’s performance? The NSM of your company is directly proportional to the number of people who choose to use your product or service.

As the NSM grows, the performance of your company grows as well.

Does your NSM generate revenue? A good NSM reflects the values your products add to your customers.

So, naturally, the NSM chosen should be able to generate revenue.

Is your NSM time-bound? An NSM is measured better when constricted to a certain time frame.

Take Swiggy, for example; having an NSM of the number of orders placed in a day/week is easier than having an NSM of the number of orders placed. 

Does your NSM change frequently? Choose an NSM that your company can focus on for a longer period. Don’t change your NSM unless the value your products give to your customers changes.

Conclusion:

  • A North Star Metric is crucial Growth marketing component that helps business grow.
  • It aligns teams on a singular goal, focuses on customer satisfaction, and measures the company’s growth.
  • So make sure you choose the right North Star Metric for your business that drives it towards success and growth.
  • Take a step back and think carefully while choosing your NSM, lest you go around chasing the wrong NSM.

Frequently Asked Questions

Can companies aim for more than one North Star Metric?

Most brands usually have only one NSM. However, for big companies with multiple core products that have different core values, having a single NSM can limit their growth. In these cases, it is normal for these companies to have more than one NSM.

Is revenue a good example of North Star Metric?

No, revenue is not a good North Star Metric. Companies should understand that an NSM reflects the values their products add to the customers and not the price the customers pay for the products.

Does North Star Metric change?

A North Star Metric focuses on a company’s long-term growth and stays the same for a longer period. But, yes, the NSM can change as the company grows and its core values change.

Ashkar Gomez

Ashkar Gomez

Ashkar Gomez is the Founder of 7 Eagles (a Growth Marketing & SEO Company). Ashkar started his career as a Sales Rep in 2013 and later shifted his career to SEO in 2014. He is one of the leading SEO experts in the industry with 8+ years of experience. He has worked on 200+ projects across 20+ industries in the United States, Canada, the United Kingdom, UAE, Australia, South Africa, and India. Besides SEO and Digital Marketing, he is passionate about Data Analytics, Personal Financial Planning, and Content Writing.

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