North Star metrics in digital product development
The secret to creating a top quality digital product is data. By gathering and analyzing information in the form of project metrics, development teams can better understand user needs and drive business results, and deliver a product that will meet those needs. But which data, which metrics? The choice of potential metrics for your digital product’s development is almost endless. Which is where the idea of a North Star metric comes in. To find out what a North Star metric is, and how it can benefit your product, read on.
Table of contents
What is a North Star metric?
The more information you have, the more data you measure, the better the picture you have of your product, right? Well, yes and no. Sometimes, the more information you gather the more blurred the picture can be. Especially if you don’t know which metrics are really useful, and which are so-called “vanity metrics” (metrics that are nice to look at, but don’t bring any value or don’t help in decision making). When multiple metrics are involved, it can be difficult to know where to focus, to know which information is ‘important’.
A North Star metric is the success measure for your digital product or business. The North Star metric is the one that connects the user needs you aim to meet with the business needs the product must support. As the name suggests, a North Star metric is the guiding light of your project; it:
- provides clarity,
- connects the development team with other departments, such as sales and marketing,
- guides product strategy (and aligns it with the wider business strategy),
- acts as an overall measure of success for the product.
A good North Star metric tracks the progress of your product development, includes an element of value to the user, and leads to revenue.
Should you have only one North Star metric?
If your North Star metric is focused on a specific product then naturally, you can have other (broader) North Star metrics that relate to other areas of your business (or the business overall). Also, each North Star metric will likely have a set of subsidiary metrics, each measuring a specific element of the project. Which is to say, setting a North Star metric is not about cutting down your number of business metrics to one – a business is too complicated an environment for that – it is about prioritization and clarity for all involved in product development. North Star metrics give shape and order to your list of goals and objectives.
Why use North Star metrics?
The simple answer is that using a North Star metric for your product development encourages consistency of approach and effort across the project.
Having a single, central goal for the product means everyone is focused on the same thing. The key question for any situation becomes, how will this impact the North Star metric? What’s more, North Star metrics fit with the idea of transparency: what is important is clear to everyone, regardless of their role.
Benefits of using North Star metrics
Keeping goals simple, focusing on user needs, and using data and information as a guide to your development strategy mean that using North Star metrics is very aligned with Agile working. Other benefits include:
- The product team knows exactly what it is aiming to produce, and why.
- Development dead-ends and other issues can be quickly spotted and addressed.
- Progress against the North Star metric is widely understood throughout the organization; it is a way in which non-development team colleagues from other departments can understand the product and project.
- Using a North Star metric ensures that the product and its development are tied to the business and user needs, and not vanity metrics such as number of users or downloads, etc.
- Development decisions are based on data and progress towards the agreed, shared goal as opposed to decision-making based on gut feeling or whoever shouts loudest.
- A well crafted North Star metric is the ultimate measure of success or failure for the product, progress against that metric can be used as a predictor of the project’s outcome.
- The product team is held accountable to a single outcome.
Using North Star metrics
A good North Star metric includes the product vision and a measure of how well that vision is being fulfilled. The key is to align the measure to customer or user value. Simply monitoring the number of users or downloads does not give an indication of the product’s value to those users, nor return on investment to the business, for that matter.
What’s more, your North Star metric should not focus on indicators of the product’s impact – for example, monthly revenue might sound good but it is telling you about the past, the effect your product has had and not the effect your product will have. Most North Star metrics are ‘pre-revenue’: predictors of future revenue perhaps, but not of revenue already received. One way to do this is to measure the event or factor that results in users and customers signing up – the point at which they are now confirmed, retained users.
To summarise, a North Star metric:
- Is central to your product strategy.
- Is a measure of the point at which users begin to gain a benefit from the product.
- Is an indicator of future business, not past benefits already received.
Categories of North Star metric
When looking for the right North Star metric for your product, there are six basic types to choose from:
- Revenue – Yes, we just argued against revenue-based metrics but, depending on where your product is in the development life cycle (for example, if you’re scaling your product to broaden the market and user based, and revenue) monthly recurring revenue or gross merchandise value might be ideal.
- Users/Customers – How many people are paying for the product?
- Consumption – How many people are actually using the product. Usually, “using” means more than just a brief visit to a website; it’s more about sign-ups, order completion, messages sent, etc.
- Engagement – The number of active users of the product.
- Growth rate – Product revenue is one thing but how does it compare to product costs? Does your product represent growth or a resource pit?
- User experience – The UX is a key factor (often the key factor) for a digital product’s success. How easy to use and intuitive is the product?
Ask yourself what factors are essential to the product’s success. Prioritise those factors and then look for your existing metrics and KPIs that match them. Prioritise the existing measures in relation to the product’s success. Whatever is at the top of the list is either your North Star metric or leading you closer to it.
Use the following checklist of questions to help identify your product’s North Star metric:
- When do your users begin to see appreciable value? (For example, for a ride-booking service, it’s not the ride itself, it’s when the ride is booked.)
- Does your metric apply to all users? It should.
- Is the moment/event measurable? If your thing is retaining users, for example, your North Star metric isn’t measuring when the product is used, it’s measuring repeated uses, second purchases, resubscriptions, etc.
- How often do you measure? Like any metric, your North Star should be measured regularly to show change (hopefully improvement!) over time.
- What impact do external factors have? Ideally, the answer is none (or at least, minimal); your North Star metric is a measure that is influenced by the work and actions of the development team.
- How does your North Star metric align with business growth? If it doesn’t, you need to find one that does – a North Star metric should never be an isolated measure.
- Can everyone on the development team affect the metric? Everyone involved in the product’s development should have a stake in the North Star metric (put another way, if the metric doesn’t measure what they do in some way, then the message is what they do doesn’t matter!)
North Star metrics – key principles
Identifying a North Star metric for your digital product’s development is a way of setting a single, unifying goal that the whole team can get behind. It is an overarching measure of success that reflects all positive efforts towards that goal. A North Star metric fits well with Agile development methods because it is focused on the transference of value to the user. Furthermore, it is an indicator of future success or benefits and is at the heart of your product development strategy.
Share this article:
