Article

Janki Sharma
Janki Sharma 19 November 2021

The North Star Metric for Your Demand Gen Program

The North Star Metric (NSM) is a metric that a business utilizes to drive growth. The more aligned your NSM is with your company’s core values, the higher your chances of achieving your goals. Your NSM must also reflect your customer’s journey and evaluate if it’s successful. Try to keep the number of your NSM to a bare minimum, no more than three.

You set the direction of your business. From business analysis to product development to marketing campaigns and sales goals, you call the shots.

But what about your North Star Metric?

Though you may not know it by that name, every successful business has one — the ultimate litmus test — the measurement that determines the success of your demand generation program.

Sometimes effective B2B SaaS companies get a bad rap for being businesses that do everything except what they *should* be doing. A B2B company’s North Star Metric must be an indicator of core product value or a core growth metric. 

The more aligned your North Star Metric is with your company’s core values, the higher your chances of growing your B2B business.

So, let’s help you figure out the right ‘star’ for your demand generation program. But first:

What is a North Star Metric? 

A North Star Metric or NSM measures customer interest and activity (demand) and tells you whether or not you're on track to achieve any of your revenue goals. 

Because long-term success is inextricably linked to customer satisfaction, any indicator that adds value is a good North Star Metric. For example, for some businesses, it is Social Media Content Moderation

Image source: Amplitude

The following are the North Star Metrics of a few popular companies:

  • Facebook: Monthly Active Users (MAU)

  • Spotify: Time spent listening

  • Slack: Daily Active Users (DAU)

  • Hubspot: Weekly active teams

  • Amazon: Number of purchases per month

  • Quora; Number of rides per week

  • Airbnb: Number of booked nights

  • Solitaire Bliss: Number of solitaire games played

  • Im-a-puzzle: Number of jigsaw puzzles shared

Understanding a North Star Metric

Divide your North Star Metric into smaller, bite-sized metrics. These smaller metrics will give you a clear understanding of how to approach your bigger project, and they can help you take accountability for your work.

For example, a retailer would want to grow the number of new customers each week. A merchandise buyer could contribute by increasing sales in their category, whereas a web developer would contribute by reducing page load time.

Your NSM must also reflect the customer’s journey and whether users’ journeys are successful. In the retailer example, measuring purchases indicates that buyers have completed their journey, and improving each step along the way speeds up customers and drives more revenue. This is what you measure to see if your site is effective.

Other examples by industry:

  • B2B SaaS

    • Number of trial accounts in the first week

    • Percentage year-two retention

    • Monthly-recurring revenue (MRR)
       

  • Ecommerce

    • Number of weekly customers completing their first order

    • Value of daily purchases

    • Customer lifetime value (CLV)
       

  • Media

    • Signups and retention

    • Number of daily active visitors

    • Total read time

    • Total watch time
       

  • Fintech

    • Total assets under management

    • Number of daily active users

What are the Benefits of a North Star Metric? 

A North Star Metric helps your company boost your marketing plan in a number of ways. It provides clarity and focuses for the entire company. An NSM ensures that every employee is headed in the right direction. 

For example, if you are trying to book as many nights as possible, every strategic decision should be made with this goal in mind. Of course, there are different ways to reach this goal, but everyone should be working toward the same goal.

  • You may lower the prices.

  • Or create a higher supply.

  • Or plan to improve the interface.

  • Or add more value-added activities.

  • Or try any combination of the above. 

There are many ways to succeed in business, but the most important thing is to make sure everyone is on the same page.

A North Star Metric can help create alignment between your product organizations and other parts of the company, enable better prioritization, and focus on what matters. It holds the company's product accountable for producing an outcome customers will pay for.

How to Calculate the Perfect North Star Metric for Your Business

You can figure out your NSM using any analytics tool with the following guidelines:

  • Identify your core performance metric: You need to decide which performance metric is most important for your business. After all, your business isn’t only based on sales. It’s based on how performance metrics are affecting your bottom line. Fundamentally, this core metric will allow you to act quickly to your customers’ needs.

  • Figure out your definition of 'onboarded': Onboarding can be thought of as the introduction of your user to your product; the onboarding experience should act as a catalyst for creating an emotional attachment to your product. 

What happens with onboarding is an opportunity for you to teach new users why they should come back. This is one of the most critical stages in your funnel. If you do it right, users will learn about the “magic” of your product, increase their engagement with it, and more likely convert to being a paying user.

  • Calculate how long it takes to onboard a user: If you are in the marketing space, you know the importance of being able to capture, nurture, and convert new leads. 

Therefore, it is necessary to understand how long it takes for new users to onboard. If you don't, you won't have enough data to analyze the common conversion activities driving higher engagement. 

  • Figure out a common conversion activity: Common conversion activities are the actions your customers take that drive them to return and stick around. These activities have a medium to a high positive impact on retention and ROAS, and they’re always trying to find new ways to help you grow.

How do you figure out what these activities are? One way is to analyze whether people return to your product within the first X days after the onboarding process. Then you need to track whether they come back to your product after Y days of finishing onboarding. 

For instance, let's assume X = 1 day and Y = 14 days. So, you need to analyze all the common conversion activities that fall between the first day of onboarding and why users returned to your product beyond 14 days after onboarding.

All-in-all, it will help you figure out why some accounts stick while others leave your app and get you another step closer to determining your North Star Metric. 

  • Finally, determine your North Star Metric: So, when you decide what your most critical metric is for your business, that's your North Star Metric — you can identify strategies to improve it. 

However, if you are a large business, you may find not one but several North Star Metric. Try to keep the number of metrics to a bare minimum, no more than three. 

You can also add the following questions to your demand generation program for more clarity on your NSM. 

Image Source: Growwithward

Some Additional Tips to Keep in Mind

Your North Star metric should be something that all of your employees can use. For example, your design team can use the metric to create a more user-friendly product. Your development team can use it as a guide to create an app that loads faster. And your marketing team can use it for creating better ads and campaigns.

It’s not just about how much you grow but also how much you are improving over time. After all, your time is the most important resource for running your business. Choose a time-bound metric. 

If you say, “I want to grow revenues,” but your company’s top line is shrinking, then your growth metric isn’t working. That’s why you need a clear North Star Metric that leads to real, measurable growth and strategic goal achievement.

Your North Star Metric can Drive Massive Success

Sometimes, it’s the little things in your business that turn out to be the most important. Nailing a North Star Metric will help you drive massive, quantifiable success for your company. 

As an entrepreneur in the beginning stages of your company, it’s difficult to keep perspective. We understand this. There are so many things to do, so many things you want to change, so many people who rely on you, but what matters in the beginning? You must be laser-focused on determining an accurate North Star Metric for your business.

Your NSM must be flexible. As your company changes, so does your NSM. And because the world of marketing is constantly shifting, you’ll have to adapt or risk being left behind.

Is there anything else that we skipped? Please let us know in the comment section below.

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