The North Star Metric




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There’s something called the North Star Metric, which one can also refer to as a super metric or a super KPI (key performance indicator).

I found it to be best described in this one sentence, pulled from this post:

The North Star Metric is the single metric that best captures the core value that your product delivers to customers.

I think the best place to discover your North Star Metric is to focus on the final best outcome your product provides to the customer and to quantify and measure that outcome.

For example, if the product is a weight loss supplement, then the outcome could be pounds lost while taking the supplement.

If the customer experiences pounds lost, then that may lead to repurchase, which you can track via repurchase rates, which leads to high customer lifetime value, which you can track (assuming you sell direct and have implemented systems to track this data).

High customer lifetime value means you have more efficient marketing because you are not spending to acquire a customer for every one you lose, which leads to higher profitability

So, in this example, if you can track how many pounds your customer’s lose from using your product, that could be The North Star metric.  If you can track on a weekly basis, then that can serve to align the entire business to keep this number up, because that leads to repeat purchasing…more efficient marketing…more profits.

But tracking the outcome may not be feasible.  It is not realistic for every customer to tell you on a weekly basis how much weight they lost taking your product.  So, move backwards from there to track earlier metrics in this process, like product repurchase rates or customer lifetime value. If I had to choose, I think these two metrics are probably the best North Star metrics for consumer product companies.

I think my best North Star Metric for my business is repeat purchasing rate, which averages 50% for me.

But I am uncomfortable just using this one metric because averages end up hiding real insight into my business and could be masking underlying problems.

What is better is to look at repeat purchasing rate by things like specific product, by cohort (for example, which channel I used to acquire a particular set of customers) or segment (for example, my VIP customers versus my regular customers).

Another possible North Star Metric is customer lifetime value, which for me averages $260 across my entire customer base.

But again, the averages could mask underlying problems.  I am most concerned with raising this number among my VIP customers, so for me, tracking customer lifetime value for my VIP customers is a better North Starmetric.

So, in sum the North Star Metric is potentially useful to align the entire company, but probably should not be relied upon on its own because averages can mask problems.

2017-07-18T18:10:01+00:00 By |Categories: Finance|Tags: , , |0 Comments

About the Author:

I am a startup and growth company expert: sold 1, built 5, and crashed 2. I develop, launch and grow consumer products through uncommon methods that can lead to more sales – faster – and can make a company and its products more appealing to consumers and resellers, with less risk. More about me here.

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I structure my website around my Growth Stack approach to growing consumer product companies

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