The North Star Metric concept is one of the most important aspects of growing a software company yet there is a lot of confusion and opinions surrounding it.
Here are a few common examples you may have heard of:
7 Friends in 10 Days Got Facebook to 1 Billion
"Get any individual to 7 friends in 10 days. That was our keystone... that helped ramp this product to a billion users."
Chamath Palihapitiya, Former VP of User Growth Facebook
2000 Messages Made Slack Sticky
"...after 2,000 messages, 93% of those customers are still using Slack today."
Stewart Butterfield, Founder Slack
What about you?
Do you knowyourNorth Star Metric?
What is the North Star Metric?
The North Star Metric tracks the tipping point in your product usage that guarantees growth.
When everyone in your company orients their work to this metric, your growth strategy will skyrocket.
The North Star Metric is the single metric that when accomplished by a user shows guaranteed success with your product by indicating an increased retention rate that is greater than your current retention rate of onboarded users.
At InnerTrends, however, we look at this metric as a customer-driven metric.
Traditionally the North Star Metric was simply a metric chosen by executives that seemed to be the core driver of growth for a company. However, this concept is based on assumptions and not data.
With InnerTrends we are able to drive the definition of the North Star Metric through customer data.
Let’s show you how.
How to find your North Star Metric
You can find your North Star Metric using any analytics tool you use by following these guiding principles. However, for this example, we will be using our own tool, InnerTrends, to show you how.
Step 1: Define your Core Metric
Every product has something we consider to be your Core Metric. This is the single metric that defines what your product does at its core. For example, Calendly’s core metric is scheduling meetings.
Every product has a core metric. It can be surprisingly difficult to define with some products, but it is there and should be defined and agreed upon with your team. This core metric should define the event that occurs when you deliver on the promise of your business.
With this Core Metric we will begin to breakdown and discover the North Star Metric.
Step 2: Define Onboarded
Once you have your Core Metric defined you will want to get all users to experience it.
“Onboarded” is defined as the first time a user experiences your core metric, or the promise of your business.
This process of User Onboarding is vital to the success of your product and this is also why defining what “Onboarded” is becomes very important as a team.
You may ask, buy what if the first time someone accomplishes this is a test?
This is ok, they have still experienced the initial value of the product. Onboarded does not equal upgraded to paid. We need to understand the first time someone experiences this so we can begin to then understand how many times it takes for them to do this on an ongoing basis for someone to begin to see value.
In our example with Calendly. A new user may schedule a test meeting for the first time. This is still what we define as “Onboarded” for Calendly.
However, next our core metric turns into an ongoing metric in which we need to begin to understand how many times it must be accomplished to show higher engagement and begin to increase retention.
Step 3: Determine How Long it Takes to Become “Onboarded”
In order to begin to further explore how to find your North Star Metric we need to now understand how long it takes for new users to become “Onboarded” based on your definition above.
This is important because we will need to later analyze common conversion activities of new users after being onboarded to see what drives higher engagement.
There are many ways you can find this in different product analytics tools. Within InnerTrends we have a specific report that just takes a click to show you exactly how long it takes users to onboard on average.
Step 4: Find Common Conversion Activity
Common Conversion Activities are the actions that define the behavior of accounts that make users return to your product, or become sticky, that have a medium to a high positive impact on retention.
Here Claudiu Murariu, CEO of InnerTrends, with a basic explanation of common conversion activity, which is technically another way to say North Star Metric, however, in this article I will separate the two in order to explain things a bit clearer.
As you can see the actions that occur soon after becoming onboarded will determine how sticky your product truly is and how engaged your users will become.
Let's break this down a bit further and in a bit more detail.
To analyze this we need to look at accounts with activity within the first X days after finishing onboarding but also returning back to the product after Y days after finishing onboarding.
X will represent the shortest number of days with a relevant amount of data to analyze after finishing onboarding since we want to always understand what has the greatest impact on retention as soon as possible after becoming onboarded.
Y will represent the cohort we want to analyze within a specific time period. This best relates to your customer acquisition strategy and expected time period it takes for new accounts to upgrade to paid. So if you have a 14 day free trial, this would most likely be 14 days.
For an example let's make X = 1 day and Y = 14 days.
So, we will analyze all common conversion activity within 1 day after onboarding of users that returned to the product more than 14 days after onboarding.
Just to add further clarity, if you remember we defined in Step 3 the average time it takes to become “Onboarded”, and in this report we are looking at days after onboarding. Therefore if on average it takes 2 days to become onboarded then we are technically adding 2 days to this analysis.
So, another way of saying this would be that we are analyzing common conversion activity within 1 day after onboarding of users (or within 3 days after creating an account on average) that returned to the product more than 14 days after onboarding (or more than 16 days after creating an account on average).
In InnerTrends we have another one-click report for this that is called What are the differences in actions between onboarded accounts that return and those that churn?
In this report you will find specific actions that have a high impact on retention that relate to returning accounts, or those that came back within our 14-day period of analysis.
This is important because we will want to leverage the top 3 common conversion activities that have a high impact on retention to determine our potential North Star Metric.
Step 5: Determine your North Star Metric
With the information above we now have the ability to determine a data-backed metric that will guarantee to increase our retention and, in turn, helps the company grow in all aspects, such as increased LTV (Customer Lifetime Value), reduced churn, ability for more expansion revenue etc.
So how do we define it?
It is really your Core Metric + Common Conversion Activity + Time Frame (we have also called this the Common Core Metric Activity). Note that the time frame is extremely important as you must analyze this metric cohort-based to be effective.
So for Calendly an example could breakdown like this:
Core Metric = Schedule Meeting
Onboarded = Scheduled 1st Meeting
Average Time it Takes to be Onboarded = 7 days
Common Conversion Activity = Sent Follow Up Emails within 1 day after onboarding
Overall North Star Metric = Schedule 1st Meeting and Sent Follow Up Emails within 1 day after onboarding
So what’s next?
North Star Metric Optimization
So now that you have your North Star Metric defined, you're done, right? Nope, the fun is just starting.
There could just as easily be multiple candidates as your North Star Metrics. We suggest picking the top 3 to always analyze and optimize. The top performer always being your current North Star Metric.
Running continued growth experiments around these top 3 North Star Metric candidates will give your product team an excellent focus on how to grow your product and build better user experiences for your users.
Want to find your customer-driven North Star Metric?
Schedule a Demo and see with your own eyes just how powerful InnerTrends can be.