A North Star Metric is essential if you want to reach your maximum growth potential. To grow long term, you as a company will need to develop a long-term growth strategy.
“Growth Hacking” often consists of rapid growth spikes, while it is of course much more important that you know how to retain customers in the long term, get ambassadors and turn your marketing into a well-oiled machine.
Your ‘North Star Metric’ should be at the centre of your growth strategy.
I recently noticed during a Growth Strategy workshop for one of my clients that the term “North Star Metric” is still very unknown.
In this article, I explain what a North Star Metric is and how you can find a powerful North Star Metric for your company, with which you can give your entire company new focus and energy.
What is a North Star Metric?
The North Star Metric (NSM) is a metric that a company uses as a focus for their growth. This number best reflects the amount of value that your company brings to your customers. In addition, the North Star Metric gives direction to your company’s long-term growth versus short-term growth.
Well-known North Star Metric examples are:
- Spotify = ‘Time spent listening‘
- Airbnb = ‘Number of nights booked‘
- Facebook = ‘Monthly active users‘
- And below I’ve listed many more examples of North Star Metrics.
The idea behind the North Star Metric is that if your company brings more value to your customers, then the growth of your company has to go positive. The assumption is that if your customers receive a lot of value, they will stay longer, buy more and refer more friends to your company.
So your business grows in every respect if your North Star Metric also grows.
No, “Revenue” is a bad North Star Metric!
“Revenue” is a poor North Star Metric. Revenue is the price that your customers pay, while your North Star Metric is the value that your customers get back for that price.
The danger of turnover as NSM is that you are more concerned with extracting as much money as possible from your customers in the short term, while a customer who really feels the value will probably pay much more in the long term.
In a way is more revenue the result of a growing North Star Metric.
Benefits of the North Star Metric
A North Star Metric helps your company in a number of ways:
- Focus: Your entire company has the same focus. At the team level, you still focus on a different number, but ultimately everyone has the same goal. More about this in a moment.
- Clarity: Everyone can see at a glance how well the company is doing.
- Customer focus: The company is more concerned with adding value for the customer than depriving value, so you automatically make room to be busy with retention.
The end result will be that your business will grow much more efficiently, because you have more focus and that focus is also focused on long-term growth.
What is the difference between your North Star Metric versus One Metric That Matters (OMTM)?
These are the differences between the definition of North Star Metric and One Metric That Matters:
- North Star Metric (NSM) is the number on which your entire company focuses to achieve long-term growth during a period of several years to infinity.
- One Metric That Matters (OMTM) is the number on which one team focuses to achieve rapid growth for a period of 2 to 6 months.
So you see that there are four major differences between One Metric That Matters versus North Star Metric:
- Who: The North Star Metric is intended to be used by all departments, from customer service to development, as a number to keep improving. The One Metric That Matters is intended to be used by a single team of 3-6 employees as a number to improve in the short term.
- Timespan for result: The North Star Metric is intended for long-term growth and is used to grow your business over the coming decades. Your One Metric That Matters is meant to be project-based where you try to improve this number through fast experiments within a period of two to six months.
- Length of focus: The North You choose Star Metric when you are going to develop your growth strategy and you never actually change anymore, unless you adjust your offer to your customers. An NSM expresses the value to your customers and that only changes if your company changes direction in terms of mission/vision. However, your One Metric That Matters changes for a period of two to six months based on what you need the most attention for at that moment for your company. You choose a new OMTM again after you’ve significantly improved your previous OMTM.
- OMTM is supportive of your NSM: Which is not yet clear from the definitions of North Star Metric and One Metric That Matters is how these numbers relate to each other. In principle, an NSM is therefore your umbrella focus over a longer period and across multiple departments. Each team then chooses its own OMTM based on where they see that the NSM needs the most improvement and that the team can best contribute to the NSM. This team then focuses on this number until they see a different focus (OMTM) with which they can contribute more to the NSM.
Simply put, the One Metric That Matters is therefore a sub-focus of the North Star Metric.
8 Steps Checklist for a good North Star Metric
A good North Star Metric meets these eight criteria, because otherwise it can go wrong quickly:
- Your North Star Metric equals your client’s ‘success’ moments. If you do it right, your North Star Metric is close to the moment the customer gets its intended result from your product/service/software. For Instagram, that is the moment that someone feels heard (a like or comment on their own post) or that they are entertained (engaging with someone else’s posts). For Dropbox, for example, that is when someone can effortlessly use their documents online (edit a file, comment, share, etc.), or for Airbnb, that’s when you’ve easily booked a trip away or your apartment gets booked.
- Your North Star Metric expresses value to the customer. A good NSM guarantees that you also always keep an eye on all your different Pirate Metrics/AARRR, such as retention and referral, and not just on your marketing KPIs. For example, “the number of orders made” is far too much focused on your marketing work and not on customer satisfaction. The customer does not get any value from placing the order, so it is possible that your company is “leaked” when you focus on “the number of orders made” while customers are never satisfied with their order. A good NSM would, therefore, be “the number of packages delivered without complaints”. This is the perfect balance between measuring customer satisfaction and that it is still measurable for you. Amplitude, simply a software alternative to Google Analytics, has the number of questions answered for a user like North Star Metric.
- Your North Star Metric is measurable, so ‘satisfaction’ or ‘degree of unburdening’ is not measurable. What can be measured is, for example, the number of times a certain action is carried out, the number of times a certain part is visible or the time you have saved people (if you make an assumption about how long it would normally take).
- Your North Star Metric is time-bound. You measure a good North Star Metric based on a certain period, such as hour, day, week or month. You want to see clearly that you grow over time, which is not clear if you for example “number of people helped ever” or “total number of planted trees” would take. Now you can compare this month, with the previous month and the same month a year ago. In addition, I would advise against taking a year as a period, because you want to see how fast you grow regularly.
- Your North Star Metric is within your control. Your NSM must be a number that is not really being influenced by other external factors besides your customers, because it should only reflect the bond between you and your customers. For example, “the number of 5-star journeys per month” for a travel organization is not very good, because as a travel organization you have little influence on external factors such as weather, flight delays or the mood of the local people.
- Your North Star Metric is a direct reflection of your growth. However you look at it, if your North Star Metric grows, it means that your business grows as well. It should therefore not be a ‘vanity metric’ / false figure. If your number has grown, but you can still say “Yes, but … *insert excuse*(we have lost a lot of customers / customers are very unhappy / turnover has fallen drastically)”, then you have not taken a good metric (or you have just bad luck 🤷♂️). For example, “the number of reports downloaded per week” is a dangerous North Star Metric, because there is a chance that a customer had to download ten reports because the first nine reports had gone wrong. In this case, “the number of successful reports per week” would be a more appropriate NSM, where you take into account that someone only downloads a report once and doesn’t have to come back for it.
- Your North Star Metric has mutual effect on the entire Pirate Funnel. A good North Star Metric is a number that everyone in your company can influence, no matter what phase of the Pirate Funnel they are working on. Everyone must feel involved in this growth goal. On the other hand, growth of the North Star Metric must also have an effect on the individual components in order to be a good NSM. If one of your AAARRR metrics goes up, your NSM should also rise. For example: If you have “the number of packages delivered” as a North Star Metric delivery service, then that NSM should increase if you gain more brand awareness or if your Referral percentage goes up.
- Your North Star Metric is growing with some frequency to get instant feedback. If your North Star Metric consists of a promotion that each customer only performs once a year, it will take too long before you know whether you are on the right track. Ideally, your NSM grows every day or week, so it must be an action that each customer must perform about four times a month
Good examples of North Star Metrics
I would like to make it easy for you to get started quickly with the information I share here. That’s why I want to share a few examples below that might inspire you to choose your North Star Metric.
What are some North Star Metrics examples of large, well-known companies?
Facebook’s North Star Metric
Facebook’s North Star Metric is often confused. Right from the start, Mark Zuckerberg has used “Monthly Active Users” (MAU) as a North Star Metric. The reason for this is that Facebook is such a versatile platform that it was very difficult for them to be more specific about their North Star Metric.
People are often mistaken about this: Facebook’s North Star Metric is not “7 friends in 10 days”: that’s their “Aha!-moment”. This is the moment when a user sees the added value of a platform (“Aha, now I understand why this is useful!”) and the chance is therefore very high that someone will remain a customer for a long time. Here is a nice article about this confusion.
Spotify’s North Star Metric
Spotify’s North Star Metric is “Time spent listening”, according to Spotify’s Head of Growth, Mayur Gupta.
What’s so good about Spotify’s NSM?
- It measures the value that customers get from the platform,
- If any Pirate Metric increases, the NSM will also increase,
- There are few external variables. (They also tackle the problem of people listening on speaker by not wanting to measure with how many people they are listening. This is outside their sphere of influence.)
GO-JEK’s North Star Metric
GO-JEK is a scooter sharing platform in Indonesia. The North Star Metric from GO-JEK is “the number of journeys started” because that perfectly includes the value that the platform offers to the user: always a scooter at your disposal.
In this article, the GO-JEK growth team explains how they approach growth hacking.
LinkedIn’s North Star Metric
The North Star Metric from LinkedIn was for a long time “Number of endorsements given“, since it proved that the users build relationships with each other, that users would be less likely to cancel their profile (since it carried so much value) and that recruiters were given more insight from the platform.
Unfortunately, it soon became apparent that the endorsements were falsified and that this NSM would not help with a daily active platform. After the takeover by Microsoft, LinkedIn chose to use Facebook’s NSM as an example and choose ‘Monthly Active Users‘.
Amazon’s North Star Metric
Amazon has “Number of purchases per month” as their North Star Metric. This is a logical example for an eCommerce North Star Metric.
AirBnB’s North Star Metric
AirBnB’s North Star Metric is “Number of nights booked“, because it perfectly combines the value of the booker and the lessor, so a good North Star Metric for a platform.
Slack’s North Star Metric
The North Star Metric from Slack is “Number of messages send” or “Daily Active Users (DAU)“, but online sources do not provide a definitive answer.
Personally, I would say that “Daily Active Users” would be more suitable for a messaging software since the goal is not necessarily that people send a lot of messages, but especially as effectively as possible. Which may mean that you send few messages.
Quora’s North Star Metric
As a North Star Metric, Quora has “Number of questions answered“, which fits perfectly with their mission to offer a global platform for knowledge sharing. As you see in this example, your NSM can also be a good translation of your mission/vision as a company.
Uber’s North Star Metric
Hubspot’s North Star Metric
During a podcast interview with Intercom, Kieran Flanagan, VP of Growth at Hubspot said that Hubspot’s North Star Metric is “the number of weekly active teams“, since they are more focused at a team level than a personal level.
Whatsapp’s North Star Metric
The North Star Metric from Whatsapp is “Number of messages send“, which in addition to the number of active users also offers the floor directly according to use.
Need help with finding your NSM?
My name is Ward van Gasteren and as one of the first growth hackers in Europe, I help companies from startups to corporates to grow to the next step. I help you to see where you need to grow, how you should approach it and what is stopping your growth.
Please contact me here!
Feel free to ask your questions and I will gladly help you. 😃
FAQ on the North Star Metric
The North Star Metric (NSM) is a number that a company uses as a focus for their growth. This number is the best reflection of the amount of value that your company brings to your customers. In addition, the North Star Metric provides direction to your company’s long-term growth versus short-term growth.
A North Star Metric helps your company in a number of ways:
1) Focus: Your entire company has the same focus. At the team level, you still focus on a different number, but ultimately everyone has the same goal. More about this in this chapter.
2) Clarity: Everyone can see at a glance how well the company is doing.
3) Customer focus: The company is more concerned with adding value for the customer than depriving value, so you automatically make room to be involved with retention.
Read more here.
There are four major differences between North Star Metric and One Metric That Matters: 1) For whom it is intended, 2) The purpose for which you use each metric, 3) The duration that you use this metric and 4) The ratio between the two metrics. I explain these points step-by-step here.
“Revenue” is the worst example of a North Star Metric. Revenue is the price that your customers pay, while your North Star Metric is the value that your customers get back for that price.
The danger of revenue as NSM is that you are more concerned with extracting as much money as possible from your customers in the short term, while a customer who feels the value is likely to pay much more in the long term. More sales is then just the result of a growing North Star Metric.
In this blog, I also mention North Star Metric examples of Facebook, Spotify, Uber and many more well-known companies.
Here are some North Star Metrics examples:
– Facebook: Monthly Active Users (MAU)
– Spotify: Time spent listening
– Amazon: Number of purchases per month
– AirBnB: Booked nights
– LinkedIn: Monthly Active Users (MAU)
– Whatsapp: Messages send
– Quora: Number of answers to questions
– Uber: Rides per week
– Hubspot: Weekly active teams
– Slack: Daily Active Users (DAU)
– GO-JEK: Number of rides started
There are 8 steps to define your North Star Metric. The first step is to determine the ‘success’ moment of your customer; What is the moment when the customer achieves his goal? Your North Star Metric is an expression of the amount of value you deliver. Here you can read all the steps for choosing your North Star Metric.
In principle, as a company, you only have one North Star Metric. The point is that you have a focus for all teams within your company. The exception to the rule is when you offer several drastically different products / services that each offer a completely different end result to your customer. Please contact me if you have any questions about this.
No, unless you as a company also offer a different kind of value to your customers, so your NSM only changes if your company changes. (Source)
A North Star strategy is a way of working in which your full company is focused on the North Star Metric in all its strategic planning. The North Star Metric is a strategic metric quantifying the value you bring to your customers. This helps to align all teams within a company, as well as stakeholders and the use of strategic assets.
Good luck! 👋