Defining your North Star Metric
Hi, I’m Markus, and welcome to a 🔒 subscriber-only edition 🔒 of my newsletter. I help you to deliver, grow, and monetize customer value to improve your performance, accelerate your career, and build a profitable SaaS business.
Customer value matters more than ever.
As money is no longer free, customers can’t afford to spend money on convenience and nice-to-haves anymore.
Delivering, growing, and monetizing value is the ONLY way to build a fast-growing and sustainable SaaS business.
In last week’s episode, I showed you how to decode customer value.
Today, I’ll take you to the next stage - taking customer value to a company-wide level with the North Star Metric.
1. What is the North Star Metric?
I don’t seek to reinvent the wheel so I was running a good old Google search to find a compelling definition.
“The North Star Metric (NSM) is a metric that a company uses as a focus for its growth. This number best reflects the amount of value that your company brings to your customers. In addition, the North Star Metric gives direction to your company’s long-term growth versus short-term growth.”
A lot of SaaS companies are struggling to find this number.
Instead, they are relying on proxy metrics like NPS, CSAT, or CES.
But they are highly inaccurate for several reasons:
There are no standards for giving the scores
Customers have no obligation to give accurate ratings
The people responding to the surveys are not necessarily the people paying for the product
They can be manipulated
Customers with high NPS or CSAT scores churn frequently.
Whereas churn should be ZERO in your top segment.
The only exception is customers leaving for external reasons that are not under your control (going out of business or getting acquired).
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