North Star Metric: What Is It And How to Find Yours [+10 B2B and B2C examples]

North Star Metric: What Is It And How to Find Yours [+10 B2B and B2C examples]

Is the “North Star Metric” just another bit of SaaS jargon somebody has coined to rename something everybody already knows about?

And should you, as a product manager care about it?

What other SaaS companies use the North Star Metric and how can you find yours? What difference does it make if your product is B2B or B2C?

If you’re looking for answers to the above and more, you’re in the right place. In this article, I’ll go over what the North Star is, why this metric matters, and how to find yours.

TL;DR

  • A company’s North Star Metric measures actual value delivered to customers as a predictor of sustainable growth
  • North Star Metrics align teams to work towards the same goal of creating and satisfying loyal customers and to make the success of a growth strategy transparent
  • Most companies should only have one North Star Metric (although they will have more than one “One Metric That Matters” for each team that’s derived from the main metric)
  • Using data and customer success stories, you’ll need to identify your Aha moments, Activation points, and ways of optimizing engagement to promote retention that will lead you to identify your North Star metric in four steps
  • We take a look at the North Star Metrics used by Miro, Amplitude, Airtable, Dropbox, and Jira on the B2B side, and Facebook, YouTube, Netflix, Spotify, and Instagram for B2C – and consider the differences between them
  • To improve your North Star metrics, you need to monitor in-app activity and drive engagement towards the relevant parts of your app using in-app communication. Userpilot can help

What is a North Star Metric?

A North Star Metric (NSM) is one measurable indicator that’s able to stand for a product’s long-term growth. It must be something that points to growing revenue, profit, and customer realization of value.

Why customer value?

  • Because the customer success is one of the best signals that they’ll stay as users and keep paying
  • Revenue is a good indicator of where you are now, but customer success gives you a picture of future revenue and success

That is, the North Star Metric is a leading indicator rather than a lagging one.

Why is a North Star Metric important?

Your North Star Metric captures the effects of all the things your team is doing today that lead to sustained growth. It doesn’t just measure progress, it drives insightful and dynamic thinking.

By putting it at the heart of all your activities, a North Star Metric promotes the behaviors and culture that also drive progress:

  • Alignment: The right North Star Metric gives the entire company a singular focus
  • Focus on Impact: It helps teams prioritize customer experience, which leads to improved acquisition and retention
  • Prioritization: It tells you which activities, features, experiences, etc matter most, and which don’t – helping define your product roadmap
  • Transparency: It makes it clear at a glance how the company is faring
  • Accountability: It enables teams to be held properly accountable for the outcomes they achieve

Should a company only have one product North Star Metric?

Usually, yes.

North Star Metric-based thinking puts one key metric that is known to drive growth out in front, to align teams around it.

Of course, the product team still has product-specific KPIs, just like the development team, the marketing team, the accounts payable team, the sales team, etc.

The North Star Metric sits at the top of a hierarchy of those KPIs, which all feed into driving it forwards. It ties day-to-day priorities together and ensures that teams pull in the same direction so that growth happens faster.

north star metric and one metric that matters
North Star Metric’s relationship to One Metric That Matters

It’s useful to distinguish North Star Metrics from the “One Metric That Matters” (OMTM):

  • OMTMs: Specific to particular teams; usually the overriding priority for limited periods
  • North Star Metrics: Long-term, companywide

OMTMs should be chosen on the basis of how best this team can contribute towards the North Star Metric at this time.

Companies should only have more than one NSM is when they have multiple different product offerings, providing totally different solutions and value to users.

How to identify and define your North Star Metric

A North Star Metric must:

North Star Checklist
  • Be one single indicator that shows progress towards long-run success
  • Be easy to track, measure, and communicate
  • Be something you have control over, not at the mercy of external factors
  • Not be a vanity metric
  • Reflect user realization of your product’s core value across the Customer Journey
  • Reflect customers’ depth and breadth of adoption and engagement, activity levels, and the extent of results achieved
  • Connect these other factors up with revenue, profit, and shareholder value

Don’t worry about perfection at the start. If the guiding metric you choose is steering your company strategy in broadly the right direction, it can be refined.

What is a good framework to use when creating a good North Star Metric for SaaS?

Working out what customer success looks like in detail is the most important step in creating an NSM for any SaaS company.

Follow our four steps for North Star Metric success!

Step #1: Start with the Aha moment

A North Star Metric focuses everyone in your business on sustainable, long-term growth. That means you must align:

  • What your product solves
  • Problems your users are looking to solve

The “Aha! moment” occurs when users grasp this alignment on the product’s core value. That’s the critical point when many decide “yes, I’m going to use this product”.

Identify your “Aha! moment”:

  1. By using your analytics tools to study the in-app behavior of your most successful customers (eg longest-serving, highest spending, those who have referred most new customers, etc). These people have all experienced the Aha moment – so what do they have in common?
  2. By talking to successful users as well. Their narratives will complement the quantitative picture the data gives you.

As the first step to customer value, the Aha moment forms the keystone of your North Star Metric. Understanding what drives value will help you decide on the relevant north star metric for your business.

Step #2: Define your Activation point

But customers don’t experience your product’s value at the Aha moment. They only recognize it. So before setting your North Star metric to focus on vanity metrics, you must take into account the Activation point too.

From Aha to activation point and adoption

The moment the user experiences the value your product provides it’s called the Activation point.

At Userpilot our Aha moment is when a user has installed the Chrome extension, created an experience, and previewed it

But our Activation point comes only when they’ve installed our code snippet on a website and they see the experience in action.

The Activation point is key to NSMs because it’s a vital leading indicator of customer success. A user that activates is likely to become a successful customer, and successful customers are likely to become profitable customers.

Define your Activation point by:

  1. Creating a User Journey Map which spells out step-by-step every action users must take to realize the value they recognized at the Aha moment
  2. Considering the different Jobs To Be Done by different customer segments – and create a map for each user persona

For some businesses, the Activation Rate is their North Star Metric.

Instacart, for example, uses “weekly number of new users completing their first order” (ie getting to the Activation point).

But that omits Customer Retention – and in SaaS, where customers usually pay monthly or annually, activated users who don’t stick around don’t deliver long-term growth.

So let’s move on to step 3 and dig deeper for your North Star.

Step #3: Determine engagement frequency

Sustainable growth requires high customer retention, so this should be part of a good North Star Metric too.

Activation rate feeds into retention rate, but other factors affect it as well. Engagement is one of the most important.

You need to determine how often does a user needs to engage with your product and perform the core actions that lead them to adopt your product in order to determine what’s the one metric that should determine your growth.

In other words, define what brings more value to users and makes your product sticky.

For example, for a social media scheduling tool, this might be how often does the user needs to schedule or post something using the tool, and in which time frame in order to move them past the activation stage on the user adoption flywheel.

Activation is just one step to long-term Retention

How do you actually do it?

Start by segmenting your users and look at product usage analytics for accounts that reached the activation point and check how they engaged with your product in the first days.

Here you can check the 1st day, the 1st week, and extend the period as necessary depending on your product’s complexity. You will need to exclude users who reached the activation point but didn’t return to your product in X number of days since they might turn your attention in the wrong direction.

For Saas, you can consider extending the period you look into to be the length of your trial since it’s not really worth looking into accounts that didn’t convert.

That’s a different problem that you should look into when understanding why users don’t convert from the free trials.

Once you determine what makes your product sticky you’re one step away from choosing a relevant North Star metric.

Step #4: Define your North Star based on the data

Now you have a clear picture of what customer success takes. How do you turn all of that data into “one thing” that will be your North Star Metric?

Simply put together the core action your users take in your product and add the necessary engagement to it.

Let’s look at an example to make it easier to understand.

Amplitude defines their North Star as the number of Weekly learning users (WLUs) that consume and share more than three charts.

Since Amplitude is an analytics platform, it’s important that their users actually use the tool to analyze data and after looking at their engagement, they are more likely to retain user that looks at three charts in a week.

That’s the engagement they need in order for their product to be sticky.

Amplitude’s North Star Metric example

With all the data you’ve collected in the first three steps, you should now be able to identify your own NSM.

What are some examples of North Star Metrics from top B2B and B2C SaaS companies?

Here are some of the most known brands and their North Star metric.

It’s important to notice that the focus of the metrics shifts when we talk about B2B or B2C brands. So next, we’ll look into the main differences.

40 North Star Metrics – Lenny Rachitsky

Lenny Rachitsky shows how other KPIs can be nested into overall company strategy. He identifies 6 business models and corresponding usual North Star Metrics:

  1. Marketplaces (eg Uber) – consumption growth
  2. Paid growth-led businesses – growth efficiency (ie LTV/CAC ratio)
  3. Freemium collaborative B2B products (eg Slack, Asana) – engagement and/or customer growth
  4. UGC-led subscription products (eg tools, such as Loom) – consumption
  5. Ad-driven businesses (eg social networks) – engagement
  6. Consumer subscription products (eg Duolingo) – engagement and/or customer growth

We’ll use this framework in looking at our ten examples.

B2B North Star Metric example

Consider a B2B SaaS tool: an app that lets users do something they couldn’t do before (model 4). Let’s say creating and sharing presentation designs.

A good North Star Metric for them might be the Number of users sharing more than two designs in week 1. That reflects:

  • Value – they’ve successfully created designs and passed them on
  • Engagement – they’re coming back enough
  • Velocity – they’re getting that far within a week

And analytics data will validate that this formula is correlated with long-term retention.

Miro’s North Star Metric

“Number of collaborative boards within a business” – Miro’s core value is the benefit accruing from multiple users working together on design projects.

When collaborative boards are created, it shows that multiple people in that business are getting the value.

Plus, it’s harder to get rid of tools that are widely used in a business – more collaboration, greater stickiness for Miro.

Amplitude’s North Star Metric

“Weekly Querying Users running and sharing more than three charts” – As we showed before, as a leading indicator of users who are getting value from the product, WQUs is a good proxy for Amplitude’s ability to retain and grow customers.

Analysis of Amplitude’s data has shown that three times per week is the “sticky” point.

Airtable’s North Star Metric

“Weekly paid users”- Like Miro, Airtable becomes more useful (and stickier) the more users can collaborate on bases – so Airtable thinks in terms of optimizing team size accessing the same data.

Weekly paid users are a good indicator of how product usage on paid plans is spreading within organizations.

Dropbox’s North Star Metric

“Teams using Dropbox Business” – When teams are regularly using Dropbox to share files, they are getting the core value the product offers – and paying for it.

When it was in rapid growth mode, attempting to capture the market for large file sharing, Dropbox targeted monthly active users.

Now, their goal is to monetize those people who have got into the Dropbox habit s their main focus is on business accounts rather than freemium users.

Jira’s North Star Metric

“Weekly active paid users”- In contrast to Airtable, Jira aims to optimize active WPUs, a key metric for them.

As a customer support management tool, Jira is only providing value when it is used – unlike a database product, which may provide value by simply existing.

If customers stop using Jira, they’re likely to churn.

B2C North Star Metric example

B2C brands’ North Star Metrics tend to be global rates across entire audiences. That’s because they tend to be free to users (ad-driven businesses) or to charge relatively small sums per user (subscriptions).

They retain customers by making products sticky.

All of the following examples reflect this interest in the aggregate realization of the core value.

Facebook’s North Star Metric

Daily active usersFacebook’s Aha moment comes when a user adds 7 friends within 10 days of joining. That’s when they grasp the benefit.

Today, their goal is maximizing engagement, so their NSM is daily active users. Revenue comes from engagement (with ads – Model 5), so the more people who regularly use Facebook, the more revenue the company expects to generate.

Facebook Daily Active Users to 2019

YouTube’s North Star Metric

Minutes watchedYouTube doesn’t publicize an NSM, but Sean Ellis’ Growth Hacking book claims that it’s “minutes watched”.

As another business that makes money from ads (Model 5), that makes sense. YouTube has two ways to serve more ads:

  • Get more users
  • Get users spending more time on the app

Driving minutes watched upwards is, therefore, a good way of promoting future revenue growth.

Netflix’s North Star Metric

Median view hours per month: As a consumer subscription service (Model 6), Netflix’s data has shown that there is a certain number of hours per month watching at which it’s clear that the service is sticky – and the user is unlikely to cancel it.

By tracking the median number of hours rather than the mean, Netflix can better keep an eye on users crossing that threshold without distortion by the heaviest users.

Spotify’s North Star Metric

Time spent listeningSpotify’s NSM focuses on value and stickiness for customers – and that’s critical to revenue retention for a subscription business (Model 6).

If Spotify were focusing directly on revenue rather than customer value (eg putting prices up), the company would be likely to make decisions that cost them users in the long run.

Spotify’s North Star – Source: Reforge

Instagram’s North Star Metric

Daily active usersJust like its parent company Facebook, Instagram thrives on engagement – and so it too prioritizes daily active users.

Instagram makes money by running ads (Model 5 again). The more people use it every day, the bigger audiences for ads, and the more money Instagram can charge advertisers.

Conclusion

Some of the most successful Silicon Valley companies put North Star Metrics at the heart of their business model. And now you can too!

Just remember:

  • North Star Metrics are forward-looking, so should be based on leading indicators
  • They should provide a focus to guide everyone’s activities – not promote tunnel vision
  • Most importantly, they should be based on identifying and tracking customer value

Follow this framework, and you’ll have a guiding light that leads your SaaS towards more sales, more revenue, more active users, less churn, and long-term product growth.

Want to build product experience flows that drive engagement and directly impact your North Star Metric? Get a Userpilot Demo now and see how easy it is to get started.

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