What a North Star Metric is and How to Set One
Your north star metric guides your whole team towards your company goals, but it isn't the same as your company goals. It's a behavioural metric that tells you how your users would behave if they loved your product.
Focus on a single customer behaviour
A well-chosen north star metric will drive growth by focussing everyone in the company on a single customer behaviour
I’ve seen these same problems come up again and again, in my own startup and in startups I work with today:
- Slow growth/slowing growth
- Lack of alignment
- In-effective feature prioritisation
A north star metric isn’t going to solve all of your problems in one go, but without one it will be far harder to get the growth, alignment and decision making you need to succeed.
A well-chosen north star metric will drive growth by focussing everyone in the company on a single customer behaviour that you want to influence.
It will align teams behind a single definition of success.
It will allow teams to prioritise their work by focussing on the features and tactics that are most likely to drive the behaviour you want from your customer.
Here’s a template to find your north star
Your north star is how your users would behave if they loved your product
To find your north star metric, follow these tips.
Step #1: Get the right people in the room
First, get your co-founders, head of product, head of growth/sales/marketing together.
Step #2: Get clear on your business goals
As a start-up, you’re trying to achieve your business goals (think revenue, margin, CAC:LTV, etc) but they are not your north star. Your north star points you towards your business goals.
Step #3: How would users behave if they loved your product?
Your north star is about your users receiving value from your product - not about you receiving value from your users. Your north star is how your users would behave if they loved your product. It is always a metric that can be directly influenced by your product.
Step #4: Make it memorable and personal
Choose a metric that is memorable and accessible to everyone in your organisation. Avoid generic metrics like MAUs and avoid financial metrics like NRR at all costs. These are the outcomes you are trying to drive - everyone wants MAUs and retained revenue - your north star needs to tell a specific story about the value that your product creates for its users.
Good examples of startup north star metrics?
Active Power Users is a powerful north star that focuses your team on delivering features that your most active users love. This is a great metric for products that leverage network effects (e.g. communities, social, sharing, many finance and crypto) because it focuses attention on the white-hot centre of the network. But many products are not networked and not all have power users, so this metric is not for everyone.
Monthly Returning Customers is a great north star for eCommerce. It needs a tight definition of returning (e.g. visited last month; visited last 6 months, etc) and customer (e.g. bought; didn’t cancel; etc).
Successfully Activated Customers is a great north star for pre-product market fit SaaS companies, so long as you truly know what your activation point is.
Good examples of big-tech’s north star metrics?
Spotify’s north star metric is time spent listening. This would be a great north star for a media app that delivers value via deep, regular engagement.
AirBnB’s north star metric is the number of nights booked. This is a typical market-place north star that ties value creation for buyer and seller into one metric.
Facebook’s north star metric was the number of users adding 10 contacts in 7 days. This is a great example of focussing on the next big milestone, which was activation for Facebook. This is a wonderful example of hyper-focus. There is nothing wrong with focussing on a 6 or 12-month horizon for your north star if you’re a pre-PMF startup, or an enterprise trying to make big changes.
Today Facebook’s north star metric is monthly active users because their goal is revenue growth (vs engagement or activation). Personally, I think this is a week north star and I doubt any of the Facebook product team actually spends any time thinking about MAU - they will be 99% focused on the levers that drive MAUs.
Netflix’s north star metric is retention, which is a pure measure of product quality. This is a beautiful north star metric if you have a subscription model. Its a laggy indicator so you must choose some strong proxy metrics.
Good examples of B2B north star metrics?
B2B is no different to B2C when it comes to north-star metrics. Ask yourself how would my customers behave if they loved my product.
Hubspot’s north star metric is weekly active teams
Amplitude’s north star is the number of weekly users who whom amplitude answered at least one question
Zoom’s north star is number of weekly hosted meetings
Each of these metrics clearly answers the question, how would my users behave if they loved my product.
Good examples of sales-led B2B north star metrics?
Sales-led (vs product-led) B2B is characterised by awareness and activation being driven by sales and marketing efforts vs product engagement.
For sales-led companies it can be useful to think of a north star metric as the highest-level product quality metric, answering the question how do we know when we’re delivering value to our customers.
Creating a second high-level sales or growth metric that addresses activation can help build alignment between sales and product teams. This is a bit counter-intuitive, but it works.
Is NPS a good north star metric?
Most likely it is not. NPS as a behaviour is easily gameable - if you focus your whole organisation only on NPS they’ll find all kinds of ways to move it that don’t deliver value to your customer.
NPS can be really useful as a product proxy metric that predicts user engagement.
What are some bad examples of north star metrics?
Your north star metric measures value delivery to your customer - not to your company
Revenue is generally a bad north star metric because it is not a measure of customer delight. Revenue doesn’t tell you if your customer loves your product. What’s more, unless you are a mature company, you don’t yet know how your product will influence your revenue.
Market share is also a bad north star metric. Market share is something that you gain if you deliver a product that users love, that has a strong competitive advantage and if you execute your go-to-market well. As a north star, it is too abstract to be useful.
MAU is usually a bad north star metric. Whilst it is influenceable by the product, for most products the number of monthly users is not an indication of value delivery to the customer.
What happens if you have a lagging north star?
If your north star is a retention based metric, say 30-day retention, it will take many months to see how changes to your product impact retention. As the pace of learning is a key determinant of the success of a startup, waiting 90 days to see if an experiment has worked is not an option.
For this reason, we use a proxy metric - a leading indicator of a customer behaviour that we believe will impact our north star. The goal of the product team is then to validate that a particular proxy metric does or does not drive the north star, and then optimise for it.
I will come back to proxy metrics in a later article.
Can you help me define my north star?
I help startups find their north star and align their teams behind a high-growth product strategy. You can book a call to find out more.
Photo by Clarisse Meyer on Unsplash