By focusing on this single metric, your business can attain a faster growth track.

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In the world of marketing, growth is the ultimate goal. To achieve growth, businesses need to measure their progress and understand which marketing strategies are working and which ones are not. This is where North Star Metrics come in. North Star Metrics are the key performance indicators (KPIs) that measure the growth of a business.

But what makes North Star Metrics so special? Why are they called the “one metric that matters”?

Here are four reasons why:

1. Specificity: North Star Metrics are unique to each business and are tailored to its specific goals and objectives. This means that they are more meaningful and relevant than generic KPIs that don’t take into account the nuances of the business.

2. Focus: By focusing on a single metric, businesses can align their efforts and prioritize their resources towards achieving their growth goals. This helps to avoid the common pitfall of spreading resources too thin across multiple objectives.

3. Leading indicators: North Star Metrics are leading indicators of growth. This means that they reflect the impact of a company’s marketing efforts on its business outcomes. By focusing on a leading indicator, businesses can predict and adjust their strategies before the impact of their marketing efforts is fully realized.

4. Simplicity: North Star Metrics are simple to understand and communicate. This helps to ensure that everyone in the organization is aligned towards the same goal, making it easier to make decisions and measure progress.

Why are North Star Metrics named like that?

In our growth marketing journey North Star Metrics plays a key role as they played in the journey of every sailors.

The name comes from the guiding star that helped sailors navigate the seas. Similarly, North Star Metrics help businesses navigate the complex world of marketing by providing a clear and focused direction towards growth.

A real life Success Story using North Star Metric

The company provides an online HR management software, and their North Star Metric is Monthly Recurring Revenue (MRR) per user. To achieve their growth goals, the company needs to focus on user acquisition and increase the number of users signing up for their software.

To measure the success of their user acquisition efforts, we used several key metrics such as:

1. Website traffic: This metric measured the number of visitors to the company’s website. We used Google Analytics to track website traffic.

2. Conversion rate: This metric measures the percentage of website visitors who sign up for the software. For example, the company got 1,000 visitors to their website and 100 of them signed up, their conversion rate was 10%.

3. Customer Acquisition Cost (CAC): This metric measures the cost of acquiring each new customer. To calculate CAC, we need to divide their total sales and marketing expenses by the number of new customers acquired during that period. For example, the company spend $10,000 on sales and marketing and acquires 100 new customers, their CAC was $100.

Using these metrics, we optimized their user acquisition strategy.

Here’s an example of how the North Star Metrics principle was applied:

1. Set a goal for MRR per user: Let’s say the company’s goal is to achieve an MRR of $50 per user.

(In most cases, MRR is a static metric that is determined by the subscription amount of the SaaS product.

2. Determined the number of users needed to achieve the MRR goal: The company’s current MRR per user is $40, they need to acquire an additional 1,250 users to achieve their MRR goal ($50,000 / $40).

However, in this cases, we were planning to increase their MRR per user from $40 to $50 through diversified means, such as cross-selling additional products or services or upgrading users to higher-priced plans. The focus on acquiring 1,250 new users is aimed at achieving this higher MRR per user goal, while also optimizing the user acquisition strategy to achieve the desired conversion rate.

3. Calculated the CAC for acquiring the additional users: Let’s say the company’s CAC is $100. To acquire 1,250 new users, the company would need to spend $125,000 ($100 x 1,250).

4. Determined the conversion rate needed to achieve the user acquisition goal: To acquire 1,250 new users, the company needs to have a conversion rate of 5% (1,250 / 25,000 website visitors).

5. Optimized the user acquisition strategy to achieve the conversion rate: We optimized the website design(UX), messaging, and marketing channels to achieve a 5% conversion rate.

Growth Hacks Used:

1. Upselling and cross-selling: Encouraged users to upgrade to higher-priced subscription plans or purchase additional modules or services that can be added to their subscription.

2. Referral programs: Offered incentives to current users to refer new customers to the company. Executed referral programs that reward current users for successful referrals, such as discounts on subscription fees or access to exclusive features.

3. Product bundling: Offered bundles of products or services at a discounted price. For example, we bundled the HR management software with an employee training module and offer the bundle at a discounted price compared to purchasing the products separately.

4. Pricing experiments: Tested different pricing models and subscription plans to see which ones resonate best with the company’s target market. This was done through A/B testing and by offering limited-time pricing promotions to gauge customer interest.

5. Personalization: Used data and analytics to personalize the user experience and offer personalized recommendations based on user behavior and preferences.

Final Thoughts

In conclusion, North Star Metrics are essential for growth marketing. They provide a clear and meaningful measure of progress towards a business’s growth goals, help to align resources, and predict the impact of marketing strategies. By focusing on a single metric, businesses can simplify decision-making and optimize their approach towards achieving growth.

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About the author:

Sojy is a versatile growth marketing manager with a proven track record of success in content marketing, SEO, PPC advertising, and social media marketing. Their strategic and data-driven approach drives remarkable outcomes, optimizing campaigns for increased brand visibility, engagement, and business growth.

Disclaimer: This article has been reproduced with the author’s consent. The Enterprise does not warrant, endorse, guarantee or assume responsibility for the accuracy or reliability of the information offered within the article.