Drive Product Growth With A Metric That Guides You to Success.

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As China continues to crack down on how companies handle user data, it’s time for the business community to think about what exactly they collect and measure. The country’s strict data privacy laws make it harder to store and manage Chinese consumer data, but it could also have wider ramifications if other countries decide to adopt similar regulations (much like EU General Data Protection Regulation). This will lead to a new digital marketing landscape when it comes to data and measurement.

Not so long ago, marketing and growth teams relied on a handful of metrics to analyze campaigns and measure business performance: revenue, expenses, and profit. Then the internet exploded, bringing everyone into the information age. The rapid proliferation of technology, product development and data collection methods has created something of a feeding frenzy.

Marketers and product teams started capturing and measuring everything they could get their hands on. Their intentions were good: they believed that if they collected all the available data, then here, these measurements would reveal what worked and didn’t work in their products. In practice, however, they simply created a game of “finding the needle in the haystack”. And unfortunately, there is no victory in this game.

When it comes to revenue growth metrics, more is not always better. Having too many metrics is as bad as having none at all. You only have to look at the amount of data people generate to see why. Research estimates that humans will collectively create over 180 zettabytes of data by 2025. To put that into perspective, that equates to storing 2,587 iPhone 13 Pro per second (1 terabyte model).

Imagine the resources and time it would take to track that much data. In addition, some information may be old or outdated. Other measures may be readily available but ultimately lack relevance and practicality. Ultimately, you’re data-rich but information-poor – that’s not a good position.

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Why do you need a North Star metric?

Rather than looking for a metric that seems remotely related to your product, consider centering your product growth strategy around a single guiding metric. Just as sailors used the North Star located directly above Earth’s North Celestial Pole to navigate the oceans, you can use a North Star metric to align your team around the primary goal of growing the product.

Of course, sales, engineering, product, and marketing teams can always have their own sub-goals and metrics. But having that bright North Star overhead keeps everyone moving in the same general direction. Because a North Star metric is focused on overall product growth, there is a built-in level of transparency and team-wide camaraderie not found in other company-specific initiatives. ‘crew.

However, what makes a North Star metric such an effective measure of success is its intrinsic relationship with users. By definition, a North Star metric is the number that best reflects the value your product provides to users. Therefore, your teams will always be aligned and working together to develop your product.

Related: Customer experience will determine the success of your business

What constitutes a North Star metric?

So what is a North Star metric? It is important to note that revenue is not a North Star measure. When you track your product revenue, you are tracking how much money you have earned at the end of the month, quarter, or year. Although this is a good indicator of success, it is not user specific. For example, revenue alone cannot tell you how much the average user spends on your products and how long they stay loyal.

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In general, there are five categories of North Star metrics:

  1. Customer growth: North Star metrics focused on customer growth include market share and number of paying users, among others.
  2. Consumption growth: Consumption goes beyond simple site visits. Instead, think of this category through the lens of product usage, such as messages sent or courses taken.
  3. Engagement Growth: If your product is an app, you can use engagement metrics, such as monthly or daily active users, to track the number of unique users during a specific time period.
  4. Growth efficiency: When comparing the value of a new user against the cost of acquiring one, you can use metrics regarding lifetime value and customer acquisition costs as North Star.
  5. User experience: User experience metrics, such as Net Promoter Score, provide data that helps you measure user satisfaction and product experience.

Related: 4 Reasons Why Sharing Performance Metrics Will Accelerate Your Business

What is your pole star?

Your North Star metric should be the one that best predicts the lasting success of your product and how users leverage the product. Therefore, it will vary depending on your industry, audience, offer, etc. For example, a fintech product may coalesce around total assets under its management or daily active users. In contrast, streaming company Netflix uses total streaming hours as a North Star metric.

Of course, the metric you choose should be regularly measurable. It must also meet two other criteria to be considered a North Star metric: help drive revenue and reflect customer value.

1. Help generate income

A metric that doesn’t measure progress toward goals in a way that informs your next steps won’t be helpful at all. So make sure you can tie your North Star metric directly to product growth. Airbnb’s North Star metric, for example, is the number of nights booked. This reveals the growth of the platform and correlates with the value that guests and hosts receive from good experiences.

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Remember that it is important to balance this criterion with the other two. For example, if you hang your hat on a money-centric metric at the expense of customer satisfaction, you will end up driving users away. On the other hand, you can’t prioritize customer satisfaction at all costs or you’ll end up bankrupt.

2. Reflect customer value

Your North Star metric should encompass what users find valuable about your product. If you fail to understand what they value, you will end up measuring the wrong thing. For example, users didn’t like having to log in to Meta’s VR headset with a Facebook account. Meta was too focused on boosting its social media platform to realize that its audience wanted more flexibility and anonymity.

To define your North Star metric, bring together key stakeholders to describe your business needs and the value your product adds to users’ lives. Determine if a metric helps users achieve the results you want from your offer. Consider external factors that may impact your North Star metric, as well as internal factors within your control.

Related: How to keep leaders focused on a company’s most important metrics

Long ago, sailors looked to the sky to determine where they were going and what adventures awaited them. Similarly, you can use your North Star metric to inform your product growth strategy no matter what the future holds.


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