North Star Metric was first coined by GrowthHackers CEO and founder Sean Ellis, who was the first marketer at Uproar, LogMeIn, and Dropbox.
The North Star Metric is the single metric that best captures the core value that your product delivers to customers.
To put it simply: North Star Metric is a metric that reflects best if your business is moving in the right direction.
Why a North Star Metric?
This sounds a trivial question but different members in your team will have different ideas about the goals of your project. Some might be looking only at user retention, others only at conversions, while some others might only be looking at the number of leads generated, regardless of what happens next.
The process of creating a North Star Metric provides an opportunity to build consensus about where you're headed.
To put it simply: It's a great way to align all your team efforts across all your organization.
Is it for me?
Every company can profit from establishing a North Star metric. North Star Metrics is not specific to SaaS, eCommerce or mobile. Here are a few example of (hypothetical) North Star Metrics for some well-known companies across different industries.
- Uber: Number of rides completed
- Whatsapp: Number of messages sent per user
- Netflix: Number of users who watched a movie
- AirBnB: number of nights booked
- Medium: total time spent reading
- Quora: number of questions answered
- Intercom: number of customer interactions
- Facebook: monthly active users
- You: ______________ (fill in the blank)
How to find your own North Star Metric?
Since we're looking for a good metric that gives us a measurement of how well the core value is delivered to our customers. The first logical thing to do is to identify what is the core value of our business.
Core value = Connecting people who need a place with people who can host
North Star metric = # of nights booked
Core value = Online shopping made easy
North Star Metric = Sales
Core Value = Where people share ideas and stories
North Star metric = Total Time Reading
As you can see, North Star metric is always a bi-product of your core value.
What the North Star Metric is not
1. It is (usually) not about money
As Sean Ellis puts it: Anytime a metric can be trending positive without a corresponding improvement in overall value delivered to customers, it is probably not a good North Star Metric. Here are a few examples to illustrate why.
- You run an Uber-like business: You could raise your prices by 15% which would probably result in an increase in revenue on the short term even if daily rides are actually decreasing
- You run a SaaS business: A user can be still paying money, but already gave up on using the product
- You run a Mobile application: There is nothing more common than people spending money for paid Apps or In-App purchases but not using the app much because of lack of interest
2. Don't use it alone
While North Star Metric is at the top of your metrics pyramid, there are always multiple path leading to it. As you can see in the example below, if we want to increase our sales by 30%, we could do it by taking different paths. Each path and strategy needs us to look at different metrics.
As Brian Balfour mentioned in his article above: You can’t focus exclusively on output metrics because they’re too big, too broad, and not actionable - they are a scoreboard. To win the game you need to focus on the individual plays that drive the score. Monitor output metrics to know how you’re doing, but build experiments around the input metrics you can directly influence.
In other words: While North Star Metric provides a scoreboard that reflects how your team is doing, it's also important to look at the underlying contributing metrics to understand where you need to improve.
3. Don't expect it to be the same forever
As your business grows, it might be useful to reevaluate what your North Star Metric is. Remember: Overtime, always reevaluate your goals and readapt. Analytics is an ever-going process, not a one-time event.