Quickly increasing sales is not the hardest task. But retaining customers and ensuring long-term company growth is much more challenging. It's literally a "task with a star"—like in school. And there is a North Star metric that successfully helps solve this task.

What is the North Star Metric

In short, it is the main product metric that measures its key value for customers and users. Companies use this metric as a reference point for long-term growth. The idea is as follows: if the product solves the customer's problems, provides value for them, the customer not only continues to use this product themselves but also possibly encourages their friends to do the same. The North Star metric grows, and so does your business.

The Nord Star Metric (NSM) always includes three parameters:

• value for the user, what they can get for their money;
• profitability;
• measurability.

The value of the product to the user comes first. If the customer feels value in purchasing your product, they will continue to use it in the future. And this, in turn, will lead to the company's revenue growth.

Why NSM is needed

The North Star metric helps solve the most important company problems. Firstly, it helps understand what needs to be done to improve NSM indicators. The metric also allows assessing the company's progress. Moreover, the North Star metric provides an opportunity to see the results of the work done.

Each company has its own North Star metric. For example, for marketplaces, it's the number of users making their first order per week, purchase value.

For online services, the North Star metric determines the number of trial accounts, user retention percentage. For media, it's the daily number of active users, number of views, and reading duration. If the area is related to "person-to-person" interaction, analysis is conducted not on the total number of clients, such as in a hair salon or taxi service, but on the number of services rendered over a certain period.

The North Star metric is calculated for a long period. However, if there's an understanding that results cannot be achieved, the North Star metric can be changed. Moreover, if the company is large and the product is very complex, one North Star metric may not be enough. And then one or two more indicators can be highlighted.

What the North Star Metric should be

There are several criteria by which you can choose the North Star metric.

• The metric is focused on the product idea, not on marketing

At the core - understanding what actions provide value for the client's product or service. This means that the client should derive satisfaction from a purchase. If they are happy, they will make another purchase. If not, they will leave.

• The North Star Metric is always measurable

Metrics such as the number of clients over a certain period or the number of sales can be measured.

• The North Star Metric is oriented on equal time periods

Indicators should be evaluated, for example, on a weekly or monthly basis. At the same time, the indicators of the previous period are compared. Note that a year is too long a period, and regularity is important for the North Star metric.

• Only clients should influence the metric

The North Star Metric reflects the relationship between the company and clients and should not depend on external factors. However, each employee involved in the process can.

How to find and use the North Star Metric

Before applying the North Star metric, several steps must be completed.

1 Find the global goal

When choosing the right North Star metric, you need to determine which goal is most important to you:

• attraction, that is, how much time users spend in the product;
• transactions, that is, how many payments users make;
• productivity, or how many tasks users can solve with your product.

Of course, all three goals are equal, but focusing on one of them is important for the North Star metric and, therefore, maximally beneficial for the company.

Let's give examples. Platforms such as Facebook* and Netflix use attraction as their goal, but their hypothetical North Star metrics are different. In the first case, it is the number of views by subscribers and the amount of content viewed per month, and in the second case - the time spent in the stream.

Amazon and Walmart aim for transactions. For Amazon, the North Star is the total number of purchases by each subscriber, while for Walmart - the number of purchases per user session.

Salesforce focuses on the volume of data that users store in their accounts. Adobe Creative Cloud is more concerned with the growth of engaged subscribers and their continuous subscription.

2 Choose input and output metric

The North Star Metric is always an output metric, that is, one that reflects the result of the work done, not the actions performed.

After choosing a goal, you should select input metrics (or KPIs) - actions that will ultimately affect the output metrics. This can be the number of views, registrations, switches to paid subscriptions over a certain period. Input metrics help decide on long-term goals.

Then you need to choose the output metric, which will encompass these KPIs.

Let's give an example. The main value of the Yandex.Music service for users is listening to music tracks. For the service itself, the main (output) metric will be the time users spend at this activity. Input metrics - increase user session time and user return to the app. However, these input metrics can be broken down into more specific actions. For example, send mailings with recommendations or notify about new album releases, new artists. Each session's time increases due to creating playlists, finding new songs, following recommendations, and so on.

3 Build the North Star Metric pyramid

The North Star metric has four dimensions: depth, width, frequency, and efficiency.

Suppose a delivery company has chosen the number of orders delivered on time monthly as its output metric.

Depth will be measured by the number of items in an order, achieved through discount coupons, recommendations, promo codes, notifications.

Width is measured by the number of new and returning users.

Frequency - the number of orders per month. Here, sales, notifications, reminders, discounts will be effective.

Efficiency is measured by the percentage of on-time delivered orders. This depends on logistics, automatic substitutions, order notifications, and client support.

The North Star Metric is needed to measure product value. Choosing its indicators entirely depends on what exactly the company considers a measure of success and what goals it sets. When a company's goals change or a new product is launched, the metric can change as well. In any case, the main thing is to focus on the product value for the user, and this will bring profit to the company now and in the future.

• The social network is recognized as extremist and banned in Russia.