3.8. North Star Metric

Since ancient times stars were of great importance to human beings: in times of difficulties people looked to the sky believing that God will use stars to show them what to do; when it was dark, stars lighted up the sky giving people light; sailors and travellers used stars to guide them and show the right direction. Nowadays, the world of business also uses a star to lighten the way to success and prosperity and that specific star goes by the name of the North Star Metric.

What Is a North Star Metric?

North Star Metric is an indicator that best reflects the real value of the product for the customer. Used in business, growth and marketing, it is a measurable metric that provides a clear picture of how your business is doing as well as directs towards the right future decisions. In order to find one’s North Star Metric, it is necessary to determine the focus of your company, i. e. what brings true value to the customers, generates profit, and determines progress. But how to do that? Actually, it’s not that difficult!

Business Model: Which Team Are You Playing for?

The first stage of finding your North Star Metric requires to determine the key value of your product, the one which solves the user’s problem and relieves one’s pain, brings profit and determines progress. The following can be achieved with the help of the model of interaction with the client, i. e. the choice of a team that you can play for:

Attention team. The focus of the attention team is, as the title of the team suggests, on how to get and keep the customers’ attention for as long as possible. The attention team strives to deliver value through the amount of time users spend with your product. It is obvious that users won’t spend their valuable time for nothing; thus, the following products must provide interesting information, enjoyable entertainment or soothing pleasure. Facebook, Google, YouTube and Spotify play for this team. For example, Facebook’s North Star Metric is the total time spent engaging with the content. When users spend a lot of time scrolling, watching, commenting, and/or sharing on Facebook, shareholders’ level of happiness increases because users are exposed to a lot of ads, which means a higher revenue for them. Accordingly, Google focuses on users who spend more than 5 minutes per day searching online — googling — for something they need. With YouTube it’s the daily time spend on watching, with Spotify — on listening.

Transaction team. The focus of the transactions team is on the desire to have as many users as possible engaged in transactions. The importance here is no longer in the time spend, but in the number of users who do regular payments through your platforms. Players of this team include Uber, Amazon, and Airbnb. For example, as users, we don’t usually use Uber on a daily basis, we don’t open the app to scroll or check for some information every 5 minutes. If we do need to use the app (twice a day or once in 5 days) — we open it, book a ride, and close it. Consequently, the North Star Metric of Uber is the number of rides booked. The same with Amazon. As a user you can spend millions of hours on the website searching for the thing you need and make only 1 purchase. For Amazon it’s the number of prime subscribers, who are regular buyers and make regular payments. The North Star Metric of Airbnb is the number of night booked, which covers everything: if a night is booked that means there is a flat, there is a user, there is money, there is value. A night is booked — the whole ecosystem works. Accordingly, time is obsolete for this team, the number of transactions is what really matters.

The last, but not the least is the Productivity team. The focus of this team is to provide the user with a quick and efficient solution to one’s problems. Products or services of this team are designed to increase the level of productivity and make a difficult task simple and quick, thus making user feel as professionals. Some of the players of this team are Slack, Microsoft, and Miro. Slack is a good illustration of playing for the productivity team. The aim of Slack is to make your communication easier. How does Slack understand that it reached its aim? By seeing the amount of messages sent. i.e. the more messages you sent, the easier your communication is, the more users are going to get involved in using the service, the higher the revenue is going to be. The North Star Metric for Miro is the same — the number of active [u]shared[/b] boards. Miro is not that interested in how many boards you have, but in how many shared boards there are, meaning that at first single users are attracted, they invite their colleagues/friends/relatives to use, work and share the same product.

North Star Metric to Increase Growth

When you have understood your North Star Metric, the next step is understanding the components that help this metric grow. Accordingly, in order to increase your North Star Metric it is necessary to multiple its four components: breadth, depth, frequency, and efficiency, where breadth stands for the number of active/returning users taking the action; depth is the depth of the users’ engagement; frequency is the frequency of users’ engagement; and efficiency is the speed of users’ success. The following division helps product team see what needs to be done to increase indicators of the North Star Metric.

Having identified the components, it is necessary to build a roadmap and identify some inbound metrics that will help you increase your company’s growth. With breadth, for example, it can be new signups, express sub trials, or trial conversions. Depth might be improved by introducing recommendation, shopping lists, or discount coupons. Frequency can be influenced by organizing flash sales, sending notifications, or carrying out stock management. Efficiency, finally, can be improved by conducting analyses, ML algorithms, or simply by customer chats.

Summing Up

North Star is a metric that best shows the value that your product provides to the customer. It is a metric that helps to navigate your business and understand whether you are moving in the right direction. After you determine the type of your product — what you and your product are fighting for – you can calculate and understand your North Star Metric, which will help you achieve stable and sustainable growth for a long time to come.