What is a north star metric? + how to find it
Learn what a north star metric is, how to find the perfect one for your business, and use it to steer your company towards long-term growth and customer satisfaction.
There’s a critical indicator that lets companies know if they’re going in the right direction or if they’re falling by the wayside.
That’s called a north star metric and finding it is the key to making sure your business is synonymous with great service and monetary success.
In this blog post, we’ll cover:
- What north star metrics are
- A quick glance at what makes a north star metric effective
- How to actually find your business’ north star metric
- Some real-life examples of north star metrics in different industries
- Some issues you might encounter and how to solve them
Let’s get started.
Understanding what north star metrics actually are
A north star metric is your product’s guiding light — it's the single most important number that shows how well your company is doing in the long run.
It's not just about measuring how much money you're making, but also about the core value your solution brings to your customers.
Now, you might be thinking:
"If making a company’s revenue grow is the goal of running a business in the first place, why not just use revenue as our north star metric?"
While revenue is important, it can be misleading. Imagine a fast-growing company that's raking in cash but has unhappy customers who churn quickly. That's not a sustainable business model.
Revenue might tell you how much people are paying for your solution, but it doesn't always reflect the true value they're getting from it.
Let's say you run a subscription-based meal kit service like HelloFresh. Your revenue might be high, but if customers keep canceling their subscriptions because they're not happy with the food quality, then you're missing the mark.
A more suitable north star metric might be customer retention rate or the number of renewed subscriptions. These metrics get closer to the heart of what your customers truly care about — scrumptious and easy-to-prepare meals that they'll want to order again and again.
What are the characteristics of an effective north star metric?
Choosing the right north star metric is like finding the perfect pair of shoes — it needs to fit your business just right. An effective north star metric should be:
- Both value-driven and customer-centric: This means your north star metric should be the single most important number that sums up the core value you’re providing for your customers. After all, there’s no business without satisfied, paying customers.
- Easy to measure: Forget about abstract concepts like "happiness" or "engagement." Your north star metric should be something you can easily track and quantify, like the number of active users, completed orders, or time spent using your product.
- A reflection of your company’s growth: Your north star metric should show whether your business is growing. If your chosen metric goes up, it should mean your business is thriving, not just temporarily inflated.
- Within your grasp: A good north star metric is something you have control over. External factors like the weather or economic trends shouldn't be able to sway it — at least not in a significant way.
- Holistic: A great north star metric impacts and is impacted by all areas of your business. When one team succeeds in improving it, it should benefit the entire company. This means that it should have a ripple effect on other key metrics of your business as well.
How to find your north star metric
Discovering your north star metric can feel a little daunting without proper guidance. Here are three key steps to help you uncover your north star metric:
Pinpoint your product's "aha! moment"
The "aha! moment" is the point when customers realize the true value of your product. It's the moment they go from casual users to enthusiastic advocates. Identifying this moment is crucial for finding your north star metric.
Think about what action or milestone within your product signals that a user is likely to stick around for the long haul. Once you've identified this moment, track it as a potential north star metric.
Then, If improving this metric leads to higher customer satisfaction and retention, it means you’re likely onto something and should consider it as your north star metric.
Analyze your customers’ behavioral data
Next, it's time to dive into the numbers. Examine how your customers use your product. What actions or behaviors do your most successful customers exhibit? Look for patterns in usage data that correlate with long-term satisfaction and retention.
For instance, if you notice that users who engage with a particular feature are more likely to renew their subscriptions, that feature could be a key driver of value for your customers.
By monitoring the usage of this feature, you can gain valuable insights into how to improve the customer experience and ultimately drive growth and revenue.
Look for a metric that aligns with your business goals
Yes, your north star metric should focus on customer value, but it's important to make sure it aligns with your overall business objectives and mission. After all, a successful company needs to be profitable and sustainable.
Ask yourself: "Does this metric contribute to our long-term goals?"
If your north star metric is focused on increasing user engagement, but your ultimate goal is to drive revenue growth, you might need to adjust your metric. Consider a metric like "number of users upgrading to premium plans" or "average revenue per user,” to name a few.
By aligning your north star metric with your business goals, you’re also being transparent and ensuring that everyone in your company is working towards the same overarching objectives, creating a unified sense of purpose and direction.
Examples of north star metrics in different industries
Let's explore how different industries leverage north star metrics to drive growth and measure success:
Tech platforms: Meta’s Facebook and monthly active users (MAUs)
Meta, one of the largest tech platforms globally, employs MAUs as its north star metric for Facebook. This makes sense given Facebook's vast and varied offerings — from connecting with friends and family to consuming news and entertainment.
By tracking MAUs, Facebook gauges how often users engage with the platform overall, providing a bird's-eye view of its success in retaining and attracting users.
E-commerce: Amazon and number of purchases per month
For e-commerce colossus Amazon, the north star metric is the number of purchases per month. This metric places a spotlight on transaction frequency, indicating how often customers are finding value in Amazon's product offerings and making purchases.
By monitoring this metric, Amazon can assess its effectiveness in driving sales and encouraging repeat business.
Service platforms: Airbnb and number of nights booked
Airbnb, the popular house/apartment rental platform, focuses on the number of nights booked as its north star metric. This choice is strategic because it aligns both guest and host usage.
For guests, it represents finding suitable accommodation and having a positive travel experience. For hosts, it means successful listings and generating income.
By optimizing this metric, Airbnb ensures it caters to the needs of both sides of its marketplace, ultimately driving the platform's growth and overall success.
How to implement your north star metric
Discovering your north star metric is just the beginning. Now, it's time to make it work for you. Follow these steps to effectively implement your chosen metric:
Make it everyone's business
Your north star metric isn't just for the executive team — it's everyone's responsibility. Hold workshops, create engaging presentations, and use clear, jargon-free language to explain the metric and its importance to every employee.
Make certain that each team understands how their work directly or indirectly contributes to the north star metric and set individual goals that align with it. If you cultivate a sense of shared ownership, you create a powerful, company-wide commitment to success.
Stay agile and data-driven
Just as your business landscape is constantly evolving, your north star metric shouldn't remain static. Regularly review and reassess its relevance. As your company grows and market dynamics shift, you might need to adapt your metric to reflect new priorities or opportunities.
Continuously monitor the data surrounding your metric and be ready to make adjustments to stay ahead of the curve. This adaptability helps you guarantee that your north star metric remains a reliable and effective guide for your company.
Build a data infrastructure
You can't manage what you can't measure. Invest in the right tools and infrastructure to track your north star metric with bullseye precision.
Consider implementing a robust analytics platform, integrating data sources, and establishing clear reporting mechanisms. By making data accessible and understandable to all teams, you create a data-driven culture where everyone can contribute to improving the north star metric.
Challenges you might encounter and how to overcome them
While north star metrics are a powerful tool, they come with their own set of challenges. Here are some common hurdles and how to overcome them:
Avoiding vanity metrics: It's easy to get caught up in metrics that look good on paper but don't actually drive value for your business. For instance, social media followers or website page views can be misleading if they don't translate into paying customers or user engagement.
- Solution: Focus on metrics that are directly tied to your business goals and customer value. Ask yourself, "Does this metric truly reflect what our customers care about and what drives our business forward?" If not, it might be a vanity metric.
Balancing metrics: Your north star metric is essential, but it shouldn't overshadow other important aspects of your business. You still need to keep an eye on operational metrics, financial performance, and customer satisfaction.
- Solution: Think of your north star metric as the tip of the iceberg. Develop a balanced scorecard that includes your north star metric alongside other key performance indicators (KPIs). This approach ensures you have a holistic view of your business's health and performance.
Evolving your metrics: As stated before, if your business grows and your customers' needs change, your north star metric might need to evolve too. What was once a crucial indicator might become less relevant over time.
- Solution: Regularly put your north star metric under scrutiny and assess its effectiveness. Be open to refining or even replacing it if it no longer aligns with your current business goals or customer value proposition. Staying adaptable ensures your metric remains a useful guide as your business progresses.
Next steps
Now that you've explored the world of north star metrics, you're equipped with the knowledge to choose the right metric for your business.
But the journey doesn't end there. Implementing and optimizing your north star metric requires a strategic approach and the right tools.
Using Eppo can save you time and effort.
Eppo is a comprehensive experimentation and feature management platform that empowers companies to understand the factors that drive their most crucial business metrics, including your north star metric.
With Eppo, you can:
- Measure metrics holistically: Go beyond just tracking your north star metric. Eppo enables you to monitor a range of metrics that contribute to overall business health, such as customer satisfaction, churn rates, and operational efficiency. This gives you a complete picture of your company's performance, not just a snapshot of a single metric.
- Identify hidden risks: As you focus on boosting your north star metric, Eppo helps you stay vigilant for potential downsides. If increasing user acquisition leads to a decline in user engagement, Eppo's diagnostic tools can alert you to this imbalance, allowing you to address it promptly.
- Experiment with confidence: Eppo allows you to test different strategies for improving your north star metric while simultaneously measuring their impact on other crucial metrics.
- Prioritize sustainable growth: By factoring in a range of metrics from the outset, you can design experiments and strategies that lead to balanced, sustainable growth, avoiding unintended negative consequences.
Learn what a north star metric is, how to find the perfect one for your business, and use it to steer your company towards long-term growth and customer satisfaction.
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