Every business, department and worker should have a north star metric and goal, a high-level ambition to drive the company and its retail efforts forward, delivering through other metric-based targets.
What are North Star Metrics?
All firms, especially in ecommerce, are focused on data. Picking one as the companies or team’s north star goal might seem prescriptive, but it can help everyone focus on hitting a key goal.
Somewhere between your regular retail team goals and the company’s overall mission statement lies the North Star metric and a related objective. It represents a “what we want to achieve” or “where we want to be statement” beyond the short term, and below the hard strategy.
Basing these on your sales or business metrics is key to making them achievable, which is why most north stars have a quantitative aspect to them, but there is also room for qualitative goals. It should also create clarity across the business and have an impact that makes all the effort worthwhile.
What is the North Star Metric Concept
North star metrics and goals based around them help integrate and focus other targets and ambitions into one easily digestible summary. They help workers and managers coordinate their efforts, drive teams to meet their goals and define success.
For retailers, a north star goal is typically focused on one or a mix of :
- Value – such as a volume of sales or launch of new products in your store.
- Quality – A focus on selling higher-value products or attracting regular customers.
- Frequency – Improving repeat business or upping the tempo of sales offers.
Examples might be:
- Improve our customer lifetime value (CLV) by 25% in 2024.
- Increase the percentage of repeat sales by 200% by 4Q25.
- Add 500 new customers that make a purchase per month.
Each example has a specific goal, associated with a metric, and a timeframe that can typically be broken down into smaller goals for targets and appraisals. They apply to the team and individual level. Most importantly, delivering on them adds value to the business.
What is the Importance of North Star Metrics for Retailers?
Most online stores and retailers have sales goals driving the teams to improve sales and revenue. Behind those key numbers, improving the customer experience and running better marketing campaigns are all critical to delivering results.
With a north star metric, retail managers and business leaders can help focus those goals into one simple phrase, something that everyone understands without the need to refer to dense spreadsheets or dashboards.
All eyes will be on that metric as it moves toward the target, helping focus effort on achieving the goal. Therefore the north star metric should be the most critical to your business or your plans for success.
With all workers understanding the north star, and perhaps having their own north star goals as part of their yearly targets, everyone understands what they need to achieve. And with many e-tailers highly focused on analytics and data, having something in plain English helps make the business understandable.
Identifying Your North Star Metric for Retail
North star goals differ by market, the size of the retailer and their place in the landscape. A small scale-up can focus on “driving sales to beat their next rival up the chain.” Data-heavy sellers can focus on driving growth in transactions, value or cutting down on incomplete sales and unfulfilled baskets.
Retailers with a strong market presence can look to a north star that might involve marketing efforts with a celebrity or through influencer engagement. While traditional businesses moving online can focus on building up a social media profile to drive engagement and sales.
Whatever the metric, encapsulating in a north star goal is the best way to promote its value across your business. And if that metric is not connected to revenue or savings, then for most retailers, it might not be the right one.
What are the Criteria for Choosing the Right North Star Metric
Whatever your type and style of retail business, the north star metric and goal should be achievable, not overly ambitious. It must be communicated to everyone to ensure the team or business is working to the same goal.
If you only sell a single product or limited range, it should be easy to identify as something that generates the most revenue. For retailers with complex online stores and multiple footprints, the metric can be broader and encompass multiple departments, such as service, sales and marketing.
It should also be aimed solely at your business, not borrowed from one you read about in Forbes and in line with the company strategy, so not dragging effort in a different direction.
Ways to identify your North Star metric:
- Understand and list what is required for successful business operations.
- Identify the KPIs and indicators that drive your most important data points
- Put your most important metric at the top, your north star.
Aligning North Star Metrics with Business Goals and Metrics
The typical north star goals are focused on retail metrics. These can include revenue from sales or recurring revenue from subscriptions. High growth retailers can be more focused on the rise in customers (and marketing) to drive revenue growth, so numbers of repeat users or your market share may be key.
See 15 Best Customer Retention Strategies [Tested & Proven] for more detail on how to keep your customers.
Engagement and similar themes can be vital for some businesses, notably those in fashion retail, selling consumer technology or related services. North stars around these metrics might be softer, but offer outsize returns when aligned with a strong user experience that gets people talking.
And for highly competitive retailers, a focus on cost controls, product quality to avoid returns and refunds can also figure in the north star definition, especially in down markets when retaining customers is a key part of navigating tough markets.
Examples of North Star Metric Examples From Other Industries
Most firms lack a north star due to the demands on time and need to manage the business. Others lack insights into their data to understand how a north star could benefit them. To solve that problem, a decision intelligence platform like Kleene.ai can support growth and help identify north star metrics.
Figuring out your first north star metrics and goals can be tricky. First efforts are often overly simplistic and end up saying the same as your current targets or goals. The best way is to look beyond those targets, and take a little inspiration from other businesses and markets.
Nike has a long-term successful example, focused on sustainable product innovation, aimed at improving the percentage of recycled and sustainable materials. That makes Nike’s products more environmentally friendly, driving sales among its younger eco-conscious consumers.
IKEA is also undergoing constant evolution, focused on a goal of “reinventing IKEA for the future” around data, mobile apps and related metrics to achieve that goal. All while keeping the company the same entity that buyers know and love, and with no impact on the core product.
And in general terms, the restaurant/food business is turning to focus on customer lifetime value as its key north star metric. See What is Customer Lifetime Value for more information about this vital datapoint.
E-Commerce North Star Metrics
Starting at the top, Amazon’s north star metric is focused on the number of purchases per month, the core objective of everything Amazon does. With such a wide storefront, the value of sales can rise and fall, but as long as the number of sales rise, Amazon is globally headed in the right direction.
Another example is Airbnb who’s north star metric is the total number of bookings within a period. That’s not surprising and most company’s north star metric should not come as a shock, and if it does, questions should be asked about its relevance.
SaaS Startup North Star Metrics
Net Revenue Retention is the flavour of the year north star metric for SaaS firms. Focused on keeping customers and getting them to spend more, NRR can add greater value than focusing on acquiring new customers, especially in niche markets, and the heavy cost of acquiring them.
Using NRR as a north star metric focuses the business on keeping customers, with a NRR rate of 100%+ demonstrating growth. With NRR in focus, SaaS firms can also identify expansion growth through upselling, cross-sales or price increases to see how much more customers are spending.
Mobile App Startup North Star Metrics
App-based businesses are beholden to a few key metrics; downloads, usage, engagement and revenue. With most apps offering a limited set of features the key metric will be one that aligns to customer success, be it delivering a service or information, or linking to other services or monetisation opportunities.
Take WhatsApp’s north star metric of number of messages sent, the goal is to encourage users to take part in more conversations and have meaningful interactions. Your business should focus on a similar
Successful Retail North Star Metrics in Action
Whatever the size of your organisation, the likes of McKinsey recommend the use of north star metrics, “retailers should set a North Star to guide their aspirations for customer experience, with specific goals across five actions: double down on digital, inject innovation into omnichannel, transform store operations, reimagine the physical network, and embrace an agile operating model.”
Unlike a lot of business data points, many firms are happy to talk about their north stars, as both a marketing and recruiting tool to help investors or prospects understand how the business works. This makes successful examples easy to find and highlight, as mentioned above and detailed below.
You can take Waze’s (the navigation app) journey from a few thousand to 140 million users as one example of success. The use of powerful data network effects, and a guiding north star metric focused on the number of kilometers that customers travelled were vital to its success.
That metric told them when customers boomed but churn soared, and triggered efforts to fix the problems within their app. They fixed the product to deliver what users expected and the rest is history. But if Waze had focused on another metric, things could have turned out very differently.
Integrating North Star Metrics into Business Strategy
The Waze example highlights how important a north star is, identifying the right one and fitting into your operational routines to keep tracking it. As a business grows the north star may change, but the same set of best practices will apply to keeping your operation on track.
- If the north star does not align to overall goals, it is a problem of poor selection and must change. (Some teams choose vanity metrics to make them look good, not challenge the business)
- If teams and leaders forget the north star, it must be tracked and evolved better to deliver insights and drive results. (Make it a point of discussion in all key meetings)
- Focus on your customer journey and your value proposition to them to derive a useful north star metric.
- Don’t get bogged down in complex metrics with deep analytics that can be hard to follow.
- Ensure everyone in the retail team and across the organisation are working to deliver on the north star metric.
- When the north star goals are achieved, consider moving on to a new metric with greater relevance.
Using Kleene’s Decision Intelligence Platform
If you are having trouble understanding your retail numbers or business goals or the need for a north star, talk to us. At Kleene, we’re experts in helping convert your cold retail data into actionable insights and goals.
Business trends will come and go, but a north star metric can remain a fixed point in space, just like the real north star, to guide your team to stronger performance and growth.