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What North Star Metric Is Leading Your Product Growth?

Photo of a Night Sky | What North Star Metric Is Leading Your Business Growth? | Teknicks

The North Star was critical to historic navigators who didn’t have GPS and other modern tools to guide them across land and sea. For those in the northern hemisphere, Polaris — commonly called the North Star — was an important night-sky fixture. They could count on it to point north and provide some context for determining a proper course. 

What does any of this have to do with growing your product? Turns out modern growth marketers and intrepid sailors of centuries past have something in common: the requirement for a North Star. The ideas found in this article have been popularized by the brilliant folks over at Reforge. If you’re looking for a cohort-based solution, developed by top leaders in tech, to unlock your company’s growth potential — look no further than Reforge. If you’re looking for an agency partner to do the heavy lifting for you – get in touch to schedule your free Product Growth Strategy Meeting today!

What Is a North Star Metric and Why Do You Need One?

Bar Graph with Trendline | Why Do You Need North Star Metric? | Teknicks

A North Star metric is the one key metric that shines amid all others to help guide your growth path. It’s the data point you can rely on in order to best reflect whether your product is growing and at what rate.

Isn’t Revenue Every Product’s North Star Metric?

Bar Graph of Revenue Streams | Isn't Revenue Every Product’s North Star Metric? | Teknicks

Obviously, revenue is an important business goal. But it’s not a good North Star metric, at least not in and of itself. Your North Star metric should align more with the value you provide to your users and the activities that ultimately drive business-facing metrics like revenue.

To help you understand how to properly choose your own North Star metric, let’s take a look at a few examples.

Examples of North Star Metrics

Person Making Online Purchase | Examples of North Star Metrics | Teknicks

1. Netflix

You might think Netflix’s North Star metric is its number of users, but it’s actually the number of hours that users stream. Here’s why that’s a good North Star metric:

  • It’s measurable. Netflix can automate the collection of this metric and review it for various periods, such as hours streamed per day, week or month.
  • It’s directly related to success. More people watching more often leads to increased subscriber numbers and better circulation for ad revenue.
  • It supports analytics. Netflix can apply this metric at lower scales to find out how successful its shows are by looking at total hours streamed per program, or binge-watching behavior.

2. Walmart

Walmart’s ecommerce site has a North Star metric of purchases per customer session. Obviously, Walmart measures other metrics, including number of site visitors. But ultimately, as an online retailer, it’s only successful if it can convince customers on the site to make a purchase and maximize those purchases.

3. Airbnb

Airbnb’s North Star metric is the number of nights booked. As a metric, how many nights are booked and paid for is more important than how many users come to the site or how many hosts sign up. That’s because other metrics likely increase as the “number of nights booked” metric increases.

4. Shopify

The Shopify NSM is the number of active merchants on the platform. Active merchants are selling, which means Shopify is better positioned to get its cut.

We’ve compiled a list of examples of North Star metrics for reference, from revenue-based metrics like ARR to NPS and other user experience indicators. Reviewing North Star metric examples can help you think about your own NSM.

Your Constellation of Metrics

Person Watching Netflix | Constellation of North Star Metrics | Teknicks

Sailors of yesteryear couldn’t rely solely on Polaris to guide them. While the North Star was easy to find in the night sky and could provide a good bit of directional guidance, the difference between landing in modern-day Florida versus modern-day Georgia required help from entire groups of stars — or constellations. 

Most companies actually have a constellation of metrics that help guide them to success. The North Star metric may be the biggest and brightest — the easiest to see, measure and report on and a number that easily factors into growth. But you should also consider other relevant key performance metrics, including revenue.

Imagine if Netflix only relied on hours streamed as their sole north metric and didn’t have a constellation of metrics. In doing so, they would have missed the fact that users were sharing logins, inflating their North Star metric of hours streamed, but decreasing user growth at the same time. 

The North Star metric is the one you focus on to achieve long-term growth. The constellation of metrics surrounding it provides extra analytical capability and better informs decisions for your product as you chart a path to success.

Benefits of a North Star Metric

Group of Hands Making a Huddle | Benefits of a North Star Metric  | Teknicks

Defining a North Star metric provides focus. Everyone in your organization — all departments and teams — align on goals that back the North Star metric. The right North Star metric can also provide instant high-level clarity on how you’re doing with growth. Defining the right North Star metric can be a marketing strategy for family businesses. If this metric suffers, your growth may be suffering too.

Since the best North Star metrics are aligned with user value, you tend to automatically work on efforts that improve user experience and retention when you work to improve the metric. That increases your growth potential.

North Star Metric Categories

Person Taking a Satisfaction Survey | North Star Metric Categories | Teknicks

Most North Star metrics fall into one of six categories:

  • Growth in revenue. Metrics in this category are concerned with money being generated and might be appropriate North Star metrics for organizations highly reliant on sales structures or investments.
  • Growth in user numbers. Examples include paid users, subscribers or market share. These metrics are concerned with how many people are paying for or using the product.
  • Growth in consumption numbers. These types of metrics are concerned with how often people are using a product. Examples include number of minutes spent playing a game, number of messages sent on a chat service or number of appointments booked.
  • Growth in engagement. This is slightly different from consumption metrics as it’s more concerned with how many people are actively using a product and not how much they are consuming. Facebook, for example, may measure daily active users. Weekly or monthly active users are other common engagement metrics.
  • Growth in efficiency. These types of metrics look at how efficiently an organization spends money versus making it. This is a less common focus, though metrics in this category may be applicable to investment products. 
  • Growth in user experience. Also a less common focus for most companies, these metrics measure how satisfied users are with a product. NPS is one of the most common methods of tracking this metric.

Choosing Your North Star Metric

Phone and Laptop Making Web Purchases | Choosing Your North Star Metric | Teknicks

Once you understand the categories of North Star metrics, you may start to get an idea of what is right for your organization or product. You should also ask yourself and your team some questions:

What Is Your User’s Desired End-Result?

Many times, your North Star metric aligns with or is very close to the end result for your user. For example, a Netflix user wants to watch enjoyable programming. Hours spent streaming literally measures the amount of time a user is engaging in that desired end result.

Does the North Star Metric Apply to All Users?

Your North Star metric must be a big-picture growth metric and not one tied only to a specific group of users or a specific department. Consider Walmart’s North Star metric of “number of purchases per customer session.”

This metric considers every user on the page, which means it’s not linked only to SEO or marketing efforts. It doesn’t look at dollar amounts, such as average amount of order, so it’s not favoring a subset of the market with higher income. 

Instead, it simply asks: How often does a customer on the page actually make a purchase? It applies to all customers and all departments and efforts must work together to impact the metric.

Is the Metric Measurable and Bound by Time?

Photo of a Clock | Is the Metric Measurable and Bound by Time? | Teknicks

It must align with actual numbers. “User satisfaction” is a worthy goal, but if you don’t have a consistent numerical way to measure it, it’s not your North Star.

Good North Star metrics are also measured within a certain period of time. The number of daily active users is a great example, but you can measure any metric within a time period. Netflix, for example, might measure total hours streamed every day or get an average weekly or monthly number. Any of these options lets the organization see how the product has grown over time.

Is the Metric in Your Control?

The value of a North Star metric is that you grow your product by positively impacting the guiding metric. If you can’t impact the metric or it can be drastically impacted by things out of your control, such as the weather, it’s not a good North Star.

North Star Metrics Align With the Job You Must Do

Booking a Hotel on a Tablet | North Star Metrics Align With the Job You Must Do | Teknicks

If you’re still struggling to find your North Star metric, ask yourself this: What is the task users are paying you for?

Users pay Netflix to deliver hours of entertainment content so they can stream it. They pay Uber so they can get a ride somewhere. They pay Airbnb so they have somewhere to spend the night.

You can see how these basic answers translate into North Star metrics:

  • Hours spent streaming 
  • Number of rides paid for
  • Number of nights booked

Align on Your North Star Metric as a Guide for Growth

Two People Shaking Hands Over Paperwork | Align on Your North Star Metric as a Guide for Growth | Teknicks

The sooner you find your North Star metric, the sooner you can start aligning your product journey with growth. Your North Star metric can evolve with your product or business, so don’t be afraid of locking yourself into one until it requires adjustment. Choose the best metric for now and start sailing toward product growth today.

About the Author

Nick Chasinov is the founder of Teknicks, a growth agency that helps companies acquire and retain customers. Trusted for 20 years.

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