Choosing your north star metric: The guiding light to your digital product development
By Hans Lambert Pedersen
Looking to define your north star metric? Whether you’re a SaaS brand or a traditional business, we have the insights and guidance to enhance your digital product strategy.
Finding a single guiding light within a starry sky of metrics can be the difference between success and failure for your business or digital product.
So much so that the sales executive platform, Outreach, grew a 50,000 active user metric to 10 million while netting a revenue of 140% with a North Metric Approach.
But what is a North Star Metric, and how do you align it with your business goals and user value?
In this piece, we break down the definition and share examples to guide you towards a successful strategy underpinned by one concrete objective.
What is a north star metric?
A North Star Metric is a single metric that encapsulates the central value that your digital product delivers to your users. It concerns every aspect of your project and involves all personnel involved in its design, development, and launch.
Your North Star Metric serves as the guiding beacon for your business or digital product, offering a measure of success that tightly aligns your business goals with your users' needs.
In this sense, your North Star Metric becomes more than just a measure. We view it as a strategic tool to align, motivate, and inspire every department in your company to create more value for your customers and scale your business results sustainably. Improving your North Star Metric should mirror the success your customers' experience with your product, which is why it's an incredibly powerful incentive mechanism for your team.
Establishing your North Star Metric is a nuanced process because each digital product is unique and offers diverse value to its target market. Key elements of this process include developing accurate value propositions, defining customer profiles, implementing detailed product analytics, and comprehending the precise needs of customers as reflected in your product's design and UX/UI.
Your North Star Metric could be a singular metric or an aggregation of several metrics into a single score, such as (A + B + C) / D = NSM.
Identifying your North Star Metric is typically more complex than merely considering time spent in the app or revenue. This complexity is why combining different metrics into a single score can be an effective strategy for defining your North Star Metric.
This holistic understanding allows you to start quantifying your product's value for your consumers as you observe their interactions and behaviors when using it. However, too much data and information can blur your picture. Therefore, defining a North Star Metric helps zero-in on the essential value determining consumer satisfaction and business success.
How to define your north star metric?
So, now we know what a North Star Metric is, alongside its significance to your project, how do we make sure we identify the correct metric to track?
That takes some honest self-analysis of your digital product or business.
At Stoked, we take the following approach:
- Defining the core reason why the product exists.
- Locating the precise moment where the customer receives the all-important value.
- Aligning every team in the organisation to take the necessary steps in increasing customer value.
Establishing the core reason why your digital product or business exists requires asking one question:
As Simon Sinek famously said in a Ted Talk over ten years ago when communicating his ‘Golden Circle’ theory, “Start with Why”. The same rule applies when defining your north star metric.
- Why does your digital product exist?
- Why should people invest in it?
- Why does it improve the lives of people every day?
Hopefully, in answering these questions, you can quickly find the universal value and a message to communicate your North Star Metric to your workers. Then, you need to find the precise moment at which your user receives the value to create a tangible metric to measure and collect information.
north star metric examples
To help you visualise a North Star Metric, here are 6 examples from other successful businesses and digital products on the market:
- Spotify – Listening time.
- Airbnb – Number of nights booked.
- Netflix – Watch time.
- Amazon – Number of monthly purchases.
- Facebook/Instagram/etc. – Monthly/daily active users.
- Duolingo – Badges earned by language users.
All of these examples are zeroed-in on the precise moment the user receives the value the product was created to deliver. For Netflix, it's watch time. For Airbnb, it's when a night is successfully booked.
North Star Metrics for more complex SaaS platforms can alter dramatically. Here are a few examples you can expect to see depending on the platform’s purpose:
- The number of user interactions.
- Gross merchandise volume (GMV).
- The number of weekly active teams.
- The number of messages sent.
- Average records created in accounts.
- The number of weekly hosted meetings.
North Star Metrics can range from simple to complex, with some brands having more than one North Star Metric for different objectives e.g. retention or acquisition. But regardless of your intentions and industry, we always recommend you try and keep your North Star Metric as clear and simple to follow as possible.
Remember, it’s easier to guide your efforts towards one common, easy-to-understand objective over a confusing mesh of goals.
A north star metric framework
After identifying your one essential North Star Metric, it comes down to applying the necessary framework to give it structure and functionality.
While this can seem simple on the surface, sometimes it requires combining more than one metric to give you a single North Star Metric.
For example, “daily active users” on an app may require you to:
- Take the total number of users.
- Divide it by days in the month.
If you have 2,000 unique monthly sessions in June, divide it by 30, and you have around 67 daily active users. Therefore, your North Star Metric required a framework of two combined metrics.
Next, ensure you understand all your metrics key to measuring your success and that contribute to the overall user and business needs. These various metrics might include displaying the user value and representing your product’s vision, mission, and strategy. If necessary, you may wish to provide an actionable incentive for improvement.
Speak to a north star metric specialist in digital product design
At Stoked, we take a calculated approach to helping brands focus on the essential value they offer their user before we provide the ideal methods for measuring, evaluation, and action.
By taking this approach, you can guarantee consistency for your user and align your business and digital product with the usability, trust, and reliability it deserves.
Get in touch to learn more about how we can guide your business with a bright north star metric approach.