Are You Setting Your Sights on the Right North Star Metric?
Are You Setting Your Sights on the Right North Star Metric?
A North Star Metric is commonly described as the one metric that matters most to a company. It reflects the core value an organization delivers to its customers, which should align with the company’s growth strategy. Yet, determining which metric makes most sense for your organization is easier said than done. Recently, we sat down with The DRG’s President & CEO, Lanie Johnson, and our VP of Research Services, Shelley Ahrens, to talk about what to consider when selecting the right North Star Metric (NSM).
What qualities would you say make for a good North Star Metric? How do you know when you’ve identified the right one for your organization?
Lanie Johnson: To be most effective, a company’s NSM should be one that helps them focus and coordinate company-wide efforts around their most important strategic growth objective. A good NSM does that by quantifying and monitoring progress against that high-level strategy and sharing that information across the organization. Your North Star should not only be something that measures your movement, but also unifies the company and its employees. Individuals in every area of the company should understand how their role influences performance against the NSM, so when you make progress, every employee feels they had a stake in that growth.
What’s the difference between a North Star Metric and Key Performance Indicators (KPIs)?
Lanie Johnson: A NSM is the overarching metric tied to a company’s overall strategy and growth objective, while key performance indicators are the more specific metrics, or inputs if you will, that ladder up to, and impact your NSM.
Shelley Ahrens: Building on that, KPIs should influence and be tied to the NSM. For example, thinking about our own CX survey here at The DRG, our North Star is to deliver an exceptional client experience. There are a number of KPIs that drive overall client experience and satisfaction like interactions with our Account Managers and Project Managers, knowledge of our client’s business, high-quality standards, and other tactical metrics that influence our NSM. While we consider customer satisfaction our North Star, we also understand that it takes a lot to move that high-level metric. Measuring both our NSM and KPIs gives us a well-rounded view of our overall performance.
Once a company identifies their North Star Metric, how can marketing research help them understand what actions they need to take to impact meaningful growth and improvement – beyond simply tracking movement on the NSM itself?
Shelley Ahrens: That’s where monitoring your KPIs comes in to play. You’re likely to see movement in your KPIs before you do at the NSM level, since multiple KPIs are influencing it. Typically, meaningful increases in an organization’s NSM are achieved incrementally, over time, based on the cumulative effect of individual KPI improvements. Therefore, monitoring your KPIs is critical in order to better understand what aspects of your product and service offerings are having the most influence on your NSM. With that knowledge you can develop strategic initiatives designed to enhance the customer experiences your KPIs address.
It’s also important to look at different segments of your customers to understand why some might be happier with you, or more likely to buy from you, than others. Looking beyond just the common factors like demographics or firmographics is critical. Instead, look for differences that may be linked to key attitudes or behaviors. By gaining a better understanding of the underlying factors that influence shifts in your NSM, you’ll be well-informed as you develop effective strategies for improving it. Another important step in the process of operationalizing research findings is to link the data to key business metrics such as churn, attrition, and revenue. When an organization can see patterns begin to emerge that demonstrate the connection between shifts in your NSM and specific business outcomes, the company will be even better informed as they set their agenda for growth initiatives.
How do you determine which single metric is of highest importance overall?
Shelley Ahrens: I think you have to right size, and right time, your NSM based on what your corporate strategy is. The two need to be in tandem with each other. For instance, a newer company may initially determine their priority focuses on new customer acquisition, so they’ll select a NSM in support of that. As the company matures, the strategy may shift to retention with a North Star focusing on providing an excellent customer experience.
Lanie Johnson: I agree. It comes down to tying your North Star to your overall growth strategy. The goal is to find a metric that measures the desired customer behavior that will ultimately contribute to meeting your business objectives. Here, it’s helpful to conduct linkage analyses that connect your survey data to internal financial or retention data. Doing so will help ensure that your NSM truly represents the customer behavior that has the greatest potential impact on achieving your business objectives. In an ideal world, when selected appropriately, your NSM will be the core of your strategic growth tactics.
What advice would you offer a client who is in the process of critically evaluating their North Star Metric?
Shelley Ahrens: Going back to what I mentioned earlier about KPIs and their impact on NSM, a company should be thinking about their NSM in any market research they conduct, and try to tie the latest information they learn back to it. It’s so important to make that connection between drivers and overall metric performance, because everything that a company is doing should ladder up to their NSM.
Lanie Johnson: There are three pieces of advice I like to share when working with clients who are defining a NSM and building research objectives around it. One, find a metric that makes sense given your overall strategy as a business. Two, make sure it’s something that the entire company can not only influence, but also unite and rally around. If it’s too specific, you’re going to have employees that don’t feel they can help move that metric and be a part of the company’s success. The third is to make sure the metric can be linked to customer behavior. When your strategies influence that behavior in a positive way, your NSM will improve, and your company will grow.