Metrics 3: From Metrics to Mandates - Setting and Communicating Targets

You've defined your North Star and meticulously mapped out the input metrics that drive it. You have a clear picture of what to measure. But a map without a destination is just a piece of paper. The next crucial step is to transform these metrics from passive indicators into active mandates for your team. This is where setting targets comes in.

Setting a target is an act of leadership. It declares, "This is where we are going, this is what success looks like, and this is the pace we need to maintain." Without clear targets, teams can drift, efforts become fragmented, and success remains an ambiguous concept. This module will equip you with the frameworks and methods to set targets that are not just numbers on a slide, but powerful catalysts for focus, alignment, and growth.

The Anatomy of an Effective Target

Good targets are not just numbers; they are well-defined objectives. Once you have defined your North Star Metric and its inputs, the targets you set for them should adhere to the SMART criteria:

Good targets, like good objectives, should generally adhere to the SMART criteria:

• Specific: Clearly defined, leaving no room for ambiguity.
• Measurable: Quantifiable, so progress can be tracked.
• Achievable: Realistic and attainable given available resources and market conditions.
• Relevant: Aligned with broader business goals and strategic priorities.
• Time-bound: Associated with a specific deadline.

Pro-Tip: Frame Targets as Key Results, Not KPIs

A target like 'Increase conversion to 9%' is a Key Result (KR). To make it motivating, pair it with an inspiring Objective (O) from the OKR framework. For example: Objective: Create a frictionless, world-class checkout experience. Key Result: Increase conversion from 7% to 9%. This connects the 'what' (the number) to the 'why' (the mission), making the target more meaningful for the team.

How to Calculate Your Targets: 5 Core Methods

Setting a target is a data-informed process, not a guess. It combines historical data, market reality, and strategic ambition. Here are five core methods to calculate your targets, moving from the tactical to the strategic.

1. Historical Performance (Trend-Based)

This is the most common starting point. You look at your metric's past performance and project it into the future.

• Method: Analyze past performance to identify trends and growth rates. Project these trends forward, potentially adding a "stretch factor" for ambition.
• When to Use: When you have reliable historical data and expect market conditions to remain relatively stable.
• The Calculation:
  1. Calculate Historical Rate: Determine your average growth rate over a relevant period.
  2. Set a Baseline: Use the current or most recent performance as your starting point.
  3. Apply a Stretch Factor: Add a reasonable, ambitious increase to your historical rate to create the target growth rate.
  4. Project the Target: Apply the new target growth rate to your baseline to get the absolute target number for the next period.
• Example (Grocery Delivery App - New Customer Signup Rate):
  • Context: Our "New Customer Signup Rate" has consistently grown by 5% month-over-month for the past 6 months. Last month (June), we acquired 10,000 new customers. We want to set a target for July.
  • Target: "Increase New Customer Signup Rate by 6% month-over-month for July."

Detailed Calculation Example: New Customer Signups

Let's break down how we arrive at the target of 10,600 new customers for July.

• Metric: New Customer Signups
• Current Performance (June): 10,000 new customers
• Historical Growth Rate: 5% month-over-month (MoM)
• Target Growth Rate (with stretch): 6% MoM
• Target Period: July

1. Identify Current Baseline:
   • Our starting point is the number of new customers acquired in June: 10,000.
2. Determine Target Growth Rate:
   • We've historically grown at 5% MoM. To be ambitious, we add a 1% stretch.
   • Target Growth Rate = Historical Growth Rate + Stretch Factor = 5% + 1% = 6%.
3. Calculate the Absolute Target for July:
   • Target for July = Current Performance (June) * (1 + Target Growth Rate)
   • Target for July = 10,000 * (1 + 0.06)
   • Target for July = 10,000 * 1.06
   • Target for July = 10,600 new customers

This calculation provides a clear, quantifiable goal for the team to aim for in the upcoming month, based on past performance and a deliberate push for improvement.

How to Define an "Ambitious" Stretch Factor

Defining the right stretch factor is a critical leadership decision that balances ambition with realism. An arbitrary number can feel unmotivating or impossible. Here are several techniques to ground your "stretch" in a more data-informed process:

• Connect to New Initiatives: The "stretch" should represent the expected impact of new activities that are not part of your historical baseline. Ask the team: "Our historical growth is 5% based on our usual operations. What new marketing channels, feature launches, or process improvements are we shipping this quarter? What is their projected impact?" The sum of the projected impact of these new initiatives becomes your data-informed stretch factor.

• Use the "Confidence Vote" Method: Frame the target as a question of confidence. A good stretch goal is one that the team feels is challenging but possible. A common rule of thumb is to aim for a target that the team has a 50-70% confidence in hitting.

  • If confidence is 95-100%, the target is too conservative.
  • If confidence is 10-20%, the target may be demoralizing and unrealistic.

• Work Backward from "What Would It Take?": Instead of starting with a number, start with a question. "What would it take to grow by 8% this month instead of our usual 5%?" This exercise forces the team to brainstorm the specific actions, resources, or trade-offs required to achieve a higher growth rate. The outcome is a more concrete and bought-in plan, rather than just a number.

• Factor in Market Tailwinds: Look outside your own data. Is your market growing? Are new technologies or trends creating opportunities? If the overall market is growing at 10% annually, and your historical growth is only 5%, your "stretch" might be to simply match the market's momentum.

By using these techniques, the stretch factor transforms from a guess into a well-reasoned, strategic decision that motivates the team and is grounded in a plan for success.

2. Competitive Benchmarking

This method grounds your targets in the reality of the market by looking at what competitors or best-in-class companies are achieving.

• Method: Compare your metric's performance against industry averages or direct competitors. Set targets to close the gap or surpass them.
• When to Use: When industry benchmarks are available and competitive positioning is a key strategic goal.
• The Calculation:
  1. Identify the Benchmark: Find a credible performance number for a competitor (e.g., Competitor A has a 10% conversion rate).
  2. Identify Your Current Performance: Measure your own metric (e.g., Our rate is 7%).
  3. Define the Gap: The gap is the difference (10% - 7% = 3%).
  4. Set a "Gap Closure" Target: Decide what percentage of the gap you can realistically close in the given timeframe. Aiming to close 100% of the gap immediately is often unrealistic.
• Example (Grocery Delivery App - Conversion Rate):
  • Context: A leading competitor achieves a 10% conversion rate from app download to first order. Our current rate is 7%, leaving a 3% gap.
  • Target: "Increase conversion rate from 7% to 9% in the next 6 months, closing two-thirds of the gap with our main competitor."

Detailed Calculation Example: Conversion Rate

Let's break down how we arrive at the target of a 9% conversion rate.

• Metric: Conversion Rate (App Download to First Order)
• Competitor Benchmark: 10%
• Current Performance: 7%
• Target Period: 6 months

1. Identify Benchmark and Current Performance:

   • We know the best-in-class rate is 10% and our current rate is 7%.

2. Calculate the Performance Gap:

   • Gap = Benchmark Rate - Current Rate = 10% - 7% = 3 percentage points.

3. Set a Realistic "Gap Closure" Goal:

   • Closing the entire 3-point gap might be too aggressive for one period. The team decides to aim for closing two-thirds (2/3) of the gap.
   • Gap Closure Amount = Gap Goal Percentage = 3% (2/3) = 2 percentage points.

4. Calculate the New Target Rate:

   • New Target Rate = Current Rate + Gap Closure Amount = 7% + 2% = 9%.

3. Market Potential (Top-Down)

This strategic approach starts with the total opportunity available and works backward to a target.

• Method: Estimate the Total Addressable Market (TAM) or a specific segment. Set targets based on capturing a desired percentage of that market over time.
• When to Use: For new products, entering new markets, or when significant growth opportunities exist.
• The Calculation:
  1. Define the Market Size: Estimate the total potential user base (e.g., 1 million households in our target cities).
  2. Set a Long-Term Market Share Goal: Determine a strategic, multi-year goal (e.g., capture 10% of the market in 2 years).
  3. Calculate the Total Goal: 1,000,000 households * 10% = 100,000 households.
  4. Break It Down: Subtract your current base (100,000 - 50,000 current = 50,000 needed). Prorate this goal over the timeframe to create shorter-term targets.
• Example (Grocery Delivery App - Unique Households):
  • Context: The TAM in our cities is 1 million households. We currently serve 50,000. Our strategic goal is to capture 10% market share (100,000 households) in 2 years.
  • Target: "Acquire 25,000 new unique households in the next 12 months, putting us on track to reach our 2-year goal of 100,000 total households."

Pro-Tip: Refine TAM to SAM and SOM

A huge Total Addressable Market (TAM) can be demotivating. To make top-down targets more realistic, break it down.

• First, identify your Serviceable Addressable Market (SAM)—the portion of the TAM you can realistically reach with your sales and marketing channels.
• Then, define your Serviceable Obtainable Market (SOM)—the portion of the SAM you can capture in the short term (e.g., 1-2 years).

Setting targets based on SOM is far more actionable.

Detailed Calculation Example: Market Penetration

Let's walk through the calculation for the 12-month acquisition target.

• Metric: Unique Households Served
• Total Addressable Market (TAM): 1,000,000 households
• Current Base: 50,000 households
• Long-Term Goal: 10% market share in 2 years (24 months)
• Target Period: 12 months

1. Calculate the Absolute Goal (Total Households):
   • Absolute Goal = TAM Target Market Share = 1,000,000
   • 10% = 100,000 households.
2. Calculate Total Households to Acquire:
   • Total Needed = Absolute Goal - Current Base = 100,000 - 50,000 = 50,000 new households.
   • This is the goal over the full 2-year period.
3. Prorate the Goal for the Target Period:
   • The total goal is for 24 months. We need to set a target for the first 12 months. Assuming linear growth for simplicity:
   • 12-Month Target = Total Needed / (Total Timeframe / Target Timeframe) = 50,000 / (24 months / 12 months) = 50,000 / 2 = 25,000 new households.

4. Resource-Based (Bottom-Up)

This is a pragmatic, reality-based approach that asks, "What can we achieve with the resources we have?"

• Method: Forecast the impact of planned initiatives (e.g., features, marketing campaigns) and sum them up to create a target.
• When to Use: For tactical, short-term targets, or when resource constraints are the primary limiting factor.
• The Calculation:
  1. List All Initiatives: Itemize every significant activity planned for the period (e.g., Campaign A, Feature B, SEO improvements).
  2. Estimate the Impact of Each: Using past data or models, project the outcome for each initiative (e.g., Campaign A will yield 5,000 signups).
  3. Sum the Projections: Add up the impacts of all initiatives to get a total projected number. This becomes your target.
• Example (Grocery Delivery App - New Signups):
  • Context: Our marketing team has the budget for three major campaigns next quarter. Based on past performance, each is projected to bring in 5,000 new signups.
  • Target: "Achieve 15,000 new signups next quarter, based on the combined projected impact of our planned marketing initiatives."

Detailed Calculation Example: Initiative-Based Forecast

This is a straightforward summation of projected outcomes.

• Metric: New Signups
• Target Period: Next Quarter
• Planned Initiatives: 3 major marketing campaigns

1. List All Initiatives and Estimate Their Impact:

   • Campaign A: Projected to yield 5,000 new signups (based on performance of a similar campaign last year).
   • Campaign B: Projected to yield 5,000 new signups (based on industry benchmarks for this channel).
   • Campaign C: Projected to yield 5,000 new signups (based on a pilot test).
   • Organic Growth: We'll assume organic growth is negligible or already factored into campaign projections for this example.

2. Sum the Projections:

   • Total Projected Signups = Impact(A) + Impact(B) + Impact(C)
   • Total Projected Signups = 5,000 + 5,000 + 5,000 = 15,000.

This bottom-up number becomes the team's target for the quarter.

5. Strategic Goals (OKRs/Company Objectives)

This method ensures direct alignment by deriving a product metric target from a higher-level business objective.

• Method: Deconstruct a high-level company objective (e.g., an OKR) into the contributing product metrics and set a target that directly supports it.
• When to Use: In any organization that uses a goal-setting framework like OKRs to ensure alignment.
• The Calculation:
  1. Start with the Company Objective: "Increase market share in key regions by 15% by EOY."
  2. Model the Relationship: Determine how your team's metric influences the company metric. This often requires a simple model (e.g., a 1% increase in Weekly Active Users (WAU) correlates with a 0.25% increase in market share).
  3. Work Backward: To contribute your share to the 15% goal, you might be responsible for a 4% market share increase. Based on your model (4% / 0.25%), you need to increase WAU by 16%.
  4. Add a Stretch: Add a buffer to be ambitious, setting the final target.
• Example (Grocery Delivery App - Weekly Active Users):
  • Context: The company-wide OKR is to "Increase market share in Region X by 15% by EOY." Our model shows a strong correlation between WAU and market share.
  • Target: "Increase weekly active users in Region X by 20% by Q3. This is our projected contribution to hitting the company's overall market share goal."

Detailed Calculation Example: OKR-Driven Target

This calculation works backward from a high-level goal.

• Metric: Weekly Active Users (WAU)
• Company Objective: Increase market share in Region X by 15% by EOY.
• Team's Contribution: Our product team is responsible for contributing a 4 percentage point increase to the overall 15% goal.
• Correlation Model: A 1% increase in WAU leads to a 0.25% increase in market share.

1. Identify the Required Outcome:

   • The team needs to generate a 4% market share increase.

2. Use the Model to Work Backward:

   • We need to find out how much WAU growth is needed to produce a 4% market share lift.
   • Required WAU Growth = Required Outcome / Model Correlation Factor
   • Required WAU Growth = 4% / 0.25% = 16%.

3. Add a Stretch Factor:

   • A 16% increase is the calculated minimum. To build in a buffer and be ambitious, the team adds a 4% stretch.
   • Final Target = Required Growth + Stretch Factor = 16% + 4% = 20% increase in WAU.

Pro-Tip: Triangulate Your Target

The most robust targets are not set using a single method. They are "triangulated" by using two or three. For example:

1. Start with a Resource-Based (Bottom-Up) calculation to see what's feasible.
2. Compare that to a Historical Performance (Trend-Based) projection to see if it's ambitious enough.
3. Finally, check it against a Market Potential (Top-Down) goal to ensure it's strategically meaningful.

If your bottom-up plan only gets you to 5% growth, but your historical trend is 8%, you know you need to rethink your initiatives. This triangulation creates a healthy tension that leads to better, more realistic targets.

Communicating Targets Effectively

Setting a target is only half the battle. How you communicate it determines whether it inspires action or creates confusion. Clear, consistent, and contextual communication is paramount.

• Transparency: Share the targets widely across the organization, explaining the "why" behind each number. Connect it back to the customer problem and the business opportunity.
• Context: Always present targets within the context of the North Star Metric and the overall product strategy. Show how individual team targets roll up to the larger goal.
• Regular Review: Establish a cadence for reviewing progress against targets (e.g., weekly, monthly, quarterly). Celebrate wins and, more importantly, analyze deviations to understand why targets were missed or exceeded. A missed target is a learning opportunity, not a failure.
• Adaptability: Targets are not set in stone. Be prepared to adjust them if market conditions change significantly, new information emerges, or initial assumptions prove incorrect. The goal is progress, not rigid adherence to an outdated number.

Pro-Tip: Run a "Red-Yellow-Green" Weekly Review

Don't wait for the end of the quarter to discuss targets. In your weekly team meeting, have a standing agenda item where each key metric is reviewed with a simple status: Green (on track), Yellow (at risk, needs attention), or Red (off track, needs intervention). This creates a culture of continuous accountability and proactive problem-solving, not last-minute firefighting.

Communication Dos and Don'ts

✅ Do	❌ Don't
Frame it as a shared goal. "Here's the mountain we'll climb together."	Present it as a top-down decree. "This is your number. Hit it."
Explain the 'why' behind the number. "We're aiming for 10% growth because it will allow us to invest in X."	Share the number in a vacuum. "The target is 10%."
Visualize the progress. Use dashboards and charts to make tracking intuitive.	Hide the data in spreadsheets. Make progress hard to see and understand.
Celebrate progress and learning. Acknowledge effort and insights, not just hitting the final number.	Punish failure to meet a target. This discourages risk-taking and honesty.

By combining rigorous methods with empathetic communication, product teams can set targets that are both ambitious and achievable, fostering a culture of data-driven decision-making and continuous improvement.

Key Takeaways

• Use SMART Criteria: Ensure every target is Specific, Measurable, Achievable, Relevant, and Time-bound. This eliminates ambiguity and creates a clear definition of success.
• Calculate, Don't Guess: Set targets using data-informed methods like historical trends, competitive benchmarks, or resource-based planning. Avoid pulling numbers out of thin air.
• Triangulate for Robustness: The most reliable targets are created by "triangulating" between multiple methods (e.g., a bottom-up plan checked against a top-down goal). This balances ambition with realism.
• Communicate the "Why," Not Just the "What": A number is meaningless without context. Frame targets within a larger strategic narrative to motivate your team and secure stakeholder buy-in.
• Establish a Review Cadence: Use a regular, transparent review process (like a weekly "Red-Yellow-Green" check-in) to track progress, create accountability, and solve problems proactively.

Remember This Even If You Forget Everything Else

A metric without a target is a passive observation; a target turns a metric into an active mandate. Setting a target is an act of leadership that declares, "This is where we are going, and this is what success looks like." The methods for calculating the number are important, but communicating the "why" behind it is what transforms a number on a slide into a shared mission for your team.