The Intriguing Psychology Behind Supporting Metrics of North Star Metric

In my recent article [What is North Star Metric] have discussed the basics of North Star Metric in detail. A North Star metric is a key performance indicator that provides the clearest and most actionable insight into whether your company is achieving its overarching mission.

In this article, we will deep dive into the nature of supporting metrics that help to decide the North Star Metric and how to use it to drive your long-term product strategy and growth. We will cover:

• How do you choose a North Star metric?

• What are some important Level-2 success metrics for NSM?

• What are some examples of good north star metrics?

Let’s start with what exactly your product does and work from there.

How do you choose a North Star metric?

There's no perfect answer, but it's important to select a metric that is closely aligned with your company's core values and business goals. You also want to make sure that the metric is something you can actually influence and improve.

A north star metric always should include a statement of your product vision and a metric that serves as a key measure of your current product strategy.

What are some examples of good north star metrics?

We all know Metrics are fundamental for business decisions, for process and for financial reporting. Actually, there is no good or bad metrics in terms of validity or relevance. With the use of appropriate metrics, we can find out best and worse performing products/processes that we have in our company. More importantly, North Star Metrics shows us the true solid concept that how to grow a sustainable company and make it thrive by focusing on important decisions of what products to make and how they are going to be supported.

By the category of the product below are some good NSM and supporting metrics to it:

1. North Star Metrics for SaaS

Customer Retention

Customer Retention Rate

Customer Retention Rate = (Customers at the End of the Period) - (New Customers Acquired) / Customers at the Start of the Period

Customer Churn

Annual Churn Rate = (Number of Customers at Start of Year - Number of Customers at End of Year) / Number of Customers at Start of Year

Revenue Churn

Monthly Revenue Churn Rate = [(MRR at Start of Month - MRR at End of Month) - MRR in Upgrades during Month] / MRR at Start of Month

Existing Customer Growth Rate

Monthly Revenue Growth Rate = (MRR at the End of Month - MRR at the Start of Month) / MRR at the Start of Month

Repeat Purchase Ratio

Repeat Purchase Ratio = Number of Returning Customers / Number of Total Customers

Product Return Rate

Product Return Rate = Number of Units Sold That Were Later Returned / Total Number of Units Sold

Days Sales Outstanding

Net Promoter Score (NPS)

Net Promoter Score = % of Promoters - % of Detractors

Time Between Purchases

Time Between Purchases = Sum of Individual Purchase Rates / Number of Repeat Customers

Loyal Customer Rate

Loyal Customer Rate = Number of Repeat Customers / Total Customers

Customer Lifetime Value

Customer Lifetime Value = Customer Value * Average Customer Lifespan

where Customer Value = Average Purchase Value * Average Number of Purchases

Customer Interactions

Number of Paid Users

2. North Star Metrics for E-commerce

Customer Lifetime Value (CLV)

Percentage of Repeat Purchases

Number of Order Completion Per Month

3. North Star Metrics for Tech products

Number of Actions Taken Per User

Daily Active Users (DAUs)

Monthly Active Users (MAUs)

4. Media North Star Metrics

Total Hours Streamed

Average Revenue Per User (ARPU)

Time Spent Listening

Here is a list of some great companies NSMs which have helped them to reach immense levels of growth.

Most companies fail because they don't have a clear purpose or mission. Great companies fail because they lose sight of their original purpose or mission.

What makes businesses/products sustainable is their ability to constantly evolve and adapt to the ever-changing landscape.

How to decide your NSM? By constantly asking yourself "why" and "how" your business/product can serve better to its customers.

Takeaways

• NSM should be decided with reliable data, product vision, and keeping product strategy in alignment.

• From a single North Star metric, you can create an entire business strategy that causes an explosion of growth for years to come.

• North Star Metric is the only metric that can be used to measure progress against goals and assess whether a company is making progress in the right direction.

• North Star Metric is the key metric for evaluating whether a company's strategic initiatives are working as intended and determining whether a company is on track to achieve its objectives.

Would love to discuss more ...

By keeping a fair track of supporting metrics, the wonder of North Star Metric can be leveraged for the long term sustainability and growth.

Don't forget to leave a comment if you liked it, or want to suggest or discuss it further... You can drop a message/mail or schedule a call to discuss more on products and productization processes.