A well-defined North Star metric is important for every business because it helps you focus on what matters most. It’s your North Star, the single thing that is most important to your business. When you base all your marketing efforts on your North Star, your business will grow.

This article will give you helpful advice on how to create your own North Star metric so you can start focussing your efforts on what matters most to your business.

What Is a North Star Metric?

A North Star metric is a single metric that you can use to measure the success of your business. It’s a number that you focus on and optimize, and it allows you to track your progress and make sure you’re moving in the right direction. Just like a compass points north, your North Star will point in the direction of success for your company.

For example, if you focus on growing the number of customers, the customer acquisition rate (CAC) could be a great North Star metric for your business. To qualify as a “North Star”, a metric must do the following things:  

  1. Be a leading indicator of revenue. 
  2. Be actionable and trackable. 
  3. Be relevant to your business.

Why B2B Brands Need a North Star Metric?

In B2B organizations, there are a lot of metrics that are important to measure. These metrics include sales numbers, conversion rates, customer satisfaction scores, website traffic, social media engagement, and more. However, all of these metrics are just numbers on a page. They don’t mean anything unless you know how they relate to your company’s ultimate goal or mission (the North Star).

For example, if you have a goal of increasing the number of leads your company generates by 20% by the end of the year, then you’ll want to know how your website traffic, conversion rates, and lead generation numbers relate to that goal.

North Star Metric examples

Your North Start metric can be as simple as the number of new customers acquired per month or quarter. By focusing on increasing this amount, your business will thrive. However, there are better examples of great North Star metrics.

Customer Acquisition Cost (CAC)

Customer Acquisition Cost is calculated as the Total Amount Spent On Marketing divided by the Total Number Of Customers Acquired During The Period. 

This metric helps companies understand how much it costs them to acquire a new customer. 

For example, if your company spends $5,000 on marketing in January and acquires 100 customers during that month then your CAC would be $5 ($5k / 100). If you spend $10,000 in September and acquire 200 customers during that month then your CAC would be $5 ($10k/200). 

Customer Lifetime Value (CLV)

Customer Lifetime Value is calculated as Average Revenue Per Customer divided by the Cost Of Customer Acquisition. 

This metric helps companies understand how much profit they can make from each customer over the lifetime of their relationship with them. 

For example, if an average customer purchases products from you for $500 per year for 10 years with a cost of acquisition at $100 then their CLV would be calculated as follows: CLV = ($500 x 10 years) / ($100 x 10 years) = $50k / $1k = 50 times. 

The 50x means that for every dollar you spend to acquire a customer, you will make $50 in profit from that customer over the next 10 years. 

This metric is useful for companies that have a large customer lifetime value but also have a high cost of acquisition. In this case, the company would benefit from improving its sales and marketing processes to lower the cost of acquiring new customers.

4 Steps to Finding Your North Star Metric

So how do you get started with your north star metric? Well, here are the four steps that we recommend:

1. Identify your primary goal

This is the most important step. All of your metrics should be designed to help you achieve this primary goal, so you must nail this down and make sure it’s very specific and measurable. For example, if your primary goal was “increase website traffic” then your north star metric would be something like “monthly visits” (as opposed to “increase social media presence” or “increase number of leads generated per month”). The more specific and measurable your north star metric is, the better!

2. Identify key metrics for achieving your primary goal

Next, you want to take a look at all of the different things that can affect the achievement of your primary goal and start asking yourself which ones are most important. 

For example, if increasing website traffic is your top priority then you would want to figure out which channels are most responsible for bringing in new visitors (social media, paid ads, organic search, etc.). 

Then you would come up with a list of key metrics for each channel that could potentially help you reach your primary goal (e.g. email subscribers for social media exposure). 

Finally, you should prioritize these metrics based on which ones could have the greatest impact on helping you reach your main objective (e.g. paid ads would be a much more powerful channel than organic search when it comes to getting new visitors).

3. Identify key metrics for each of your secondary goals

Next, you want to take a look at all of the different things that can affect the achievement of these secondary goals and start asking yourself which ones are most important. For example, if increasing email subscribers was my top priority then I would want to figure out which types of content are most likely to get people to click on an email sign-up form (topical articles, videos, etc.). Then I would come up with a list of key metrics for each type of content that could potentially help me reach my secondary goal (e.g. views and shares of videos). 

Finally, I would prioritize these metrics based on which ones could have the greatest impact on helping me reach my primary objective (e.g. video views could be very effective at driving subscribers while video shares might not be very useful in this instance).

4. Repeat this process until you’ve identified key metrics for every potential goal or step in your funnel

Once you’ve done this you should have an incredibly detailed breakdown of how your business works from top to bottom and everything in between! This will allow you to see exactly where your business is succeeding and where it’s falling short so that you can make changes accordingly. 

If you follow these simple steps it’s guaranteed that your business will become more organized, more profitable and more efficient than ever before.

Final thoughts

As a business, you need to focus on your customers. And the best way to do that is to track the metrics that matter most. When you select the right metrics and define the one metric that matters most as your North Star, you are more likely to succeed. The more you understand your customers, the better you can serve them. Use these tips to find your North Star metric and make sure you track the right metrics to drive results.

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