Growth Hacking

5 steps to find your “North Star Metric”

As previously explained, finding your North Star Metric can help you and your startup find the right focus and goal to stay on track. It’s also the key to long term growth. But how do you find your North Star Metric? Here are five steps to help you out.

1. Your NSM is the succes of the customer

Pleasing the customer is key for this metric. Your product or software is helping your client with a certain problem, and you want to measure how good of a job you’re doing. Airbnb want their clients easily book a night. Spotify ables its users to listen to the biggest collection of online music. Your NSM will be somewhere in this core mission.

2. Your NSM expresses the value for the customers

With a good North Star Metric, you still have to keep an eye on the other metrics as well. Don’t forget retention and referrals, but don’t just focus on your marketing KPI’s as well. The answer is somewhere in the middle. “placed orders” for example, is way too marketing-specific, and says nothing about client satisfaction. Your client might not like the order, so focussing on this one metric might lead you down the wrong path. A good NSM would be “delivered packages without complaints”. This metric is perfectly balanced between customer satisfaction that is still measurable.

3. The NSM is measurable

Talking about measurable: “satisfaction” is not something you can measure. Make sure your NSM is something you can see: number of times an order is placed, amount of minutes someone used your service.

4. The NSM is timebound and within your control.

Don’t choose an all-time metric. “Total subscriptions” will give you a false idea of growth, and the realisation that the ship is sinking will come too late. Choose a number that updates frequently, not even yearly. It’s also about you and the customer, so pick a number that’s not a subject to external factors. “amount of booked holidays/month” for a travel organization would be a bad idea, as you can’t control the weather, delays, locals, …

5. The NSM is a direct reflection of your growth.

This might be the most important rule, which makes the NSM a metric to worship. Make it undeniable, make it absolute. If the number is going down, so is your startup. Make sure you have no excuses. It should be impossible to say “yes, but…”. 

If you choose “amount of time my software is downloaded” as your NSM, you might be happy with the results. But what if people keep downloading it, because the download just keeps failing? You have no way to track this whatsoever, so it makes for a pretty shitty North Star Metric.

Hopefully these steps help you to find your North Start Metric. Once you have it figured out, you can prove your growth to employees and investors. Time to grow!

Growth Hacking

Introduction to the “North Star Metric”

The North Star Metric is a powerful, and often misunderstood product strategy framework. Growth hackers can lose themselves in their mission to grow as fast as possible. Ofcourse, rapid growth can be rewarding, but it’s not always equal to maximal growth. If you want to utilize your maximal growth potential as a startup, you will need a North Star Metric. Let me tell you why this relatively unknown term should be the center of your growth strategy.

What is the North Star Metric?

The North Star Metric (NSM) is the key measure of success and growth for the product team in your startup. It defines the relationship between the problems of the customer that the product team is trying to solve, and the revenue that your business aims to generate by doing so. It also gives direction to the growth of your startup in the long term. 

Some examples of the NSM:

  • Spotify: time spent listening.
  • Airbnb: nights booked.
  • WhatsApp: Number of messages a user sends.

The idea behind the NSM is this: if your company brings more value to your customers, it is growing. Your customers, in return to the added value, will stay with you longer and buy more. Needless to say they will refer their friends and colleagues to your product. The NSM will help you understand your customers, and build a long term relationship with them.

How the NSM will influence your startup

If you ask Buckley Barlow, the reason Myspace failed and Facebook succeeded has mostly to do with the North Star Metric they were focussing on. Facebook was quick to realize they had to focus on Monthly Active Users as their NSM. Meanwhile, Myspace was still focussed on Registered Users – a vanity metric. Now, Registered Users is not an unimportant number. It just doesn’t tell the whole story. If the customer doesn’t receive enough value from the product, he won’t continue to use the platform. By tracking Monthly Active Users, Facebook could easily monitor the changes in user numbers and see which users found value from using their platform.

The NSM will clearly help your startup in a lot of different ways. First, it creates a main focus. Every team will focus on different numbers, but the endgame is crystal clear. The NSM also makes the growth of your company easily trackable. With just this one metric, everyone can see how well the company is doing. Lastly, it puts the customer in a key position. By focussing on the NSM, you’re automatically bringing value to your customers. Results: your startup is more focussed, efficient, and ready for long term growth.

The following weeks I’ll be digging deeper into this subject, providing tools to find your own North Star Metric, and some useful do’s and don’ts to stay on track.