This guide equips you with the essential knowledge and tools to leverage a powerful North Star Metric (NSM) framework.
What is the North Star Metric Framework?
The North Star Metric (NSM) framework helps businesses define a single, measurable metric that captures the core value they deliver to customers. This metric, like a compass, guides strategic decisions and tracks progress towards long-term success.
While there's no one-size-fits-all North Star Metric (NSM) framework, an established and proven framework like AARRR offers valuable foundational guidance. But the ideal approach, which I believe is right here in this document, depends on your unique business and industry, requiring a tailored combination of varying methods and additional context.
Here's why this is important:
Relevance: Just using an established NSM framework like AARRR might not perfectly capture your unique value proposition. You need an NSM that reflects what truly matters for your customers and aligns with your business goals.
Actionable Insights: Real-world considerations like customer segments and data limitations can influence how you use these frameworks. Tailoring the approach ensures actionable insights specific to your company.
Focus and Prioritization: By incorporating your company's needs, you avoid getting overwhelmed by metrics. The framework helps identify the single NSM that truly matters, allowing you to prioritize resources.
The analogy of building a house is used to illustrate this concept. Frameworks are the blueprints, providing a foundation, while real-world needs and company specifics are like the family's needs and the plot of land. Combining these elements ensures a solid NSM framework that's both practical and strategically valuable for your business.
Best in Class “off-the-shelf” North Star Metric Framework
Part of our 6-step process for creating a North Star Metric (NSM) (detailed in this document) relies on a helpful off-the-shelf framework called AARRR. AARRR stands for different stages users go through when interacting with a product or service. Before diving into the details of our 6 steps, let's explore AARRR so you'll be familiar with these user journey stages when we reference them later. This way, when we get to those steps, you'll have a better understanding of the types of metrics we'll be considering.
The Pirate North Star Metrics Framework (AARRR)
The AARRR framework, also known as Pirate Metrics, is a popular NSM framework that is used to track user behavior across key stages of the customer lifecycle. This framework helps businesses identify measurable metrics for each stage, allowing them to understand where to focus their efforts to achieve sustainable growth:
Acquisition: Helps you measure the effectiveness of your marketing and outreach efforts in attracting new customers. Answer to the question “How do you attract new customers?” (e.g., Website visitors, App downloads)
Activation: Indicates if new customers take the desired action, showing if your initial value proposition resonates. Answer to the question “Do new customers take the desired action?” (e.g., Free trial signups, Account creation)
Retention: Tracks how well you keep customers engaged and coming back to use your product or service. Answer to the question “Do customers keep coming back and using your product/service?” (e.g., Monthly active users, Login frequency)
Referral: Shows customer satisfaction and the likelihood of them recommending your product or service to others. Answer to the question “Do satisfied customers recommend you to others?” (e.g., Social media shares, Referral codes used)
Revenue: Measures the direct financial impact of your customer base. How much money do you generate from your customers? (e.g., Average revenue per user, Customer lifetime value)
Benefits for Measurable North Star Metric:
Focus on Stages: The AARRR framework breaks down the customer lifecycle into five distinct stages described above. This helps identify metrics relevant to each stage, making it easier to pinpoint the stage that best reflects your overall business goal.
Measurable Metrics: Each stage typically has associated metrics that are readily measurable through analytics tools and business data sources. This allows you to track progress and identify areas for improvement within the user journey.
Limitations
The AARRR framework, while valuable for getting started with understanding user behavior and defining a North Star Metric (NSM), has some limitations to consider:
Oversimplified View of User Journey:
The AARRR framework presents user behavior as a linear progression through distinct stages (Acquisition, Activation, Retention, Referral, Revenue). However, user journeys are often more complex, with users potentially moving back and forth between stages or engaging with the product in unexpected ways.
Limited Focus on Specific User Segments: The framework doesn't explicitly account for different user segments with varying needs and motivations. This can lead to a one-size-fits-all approach that might not be effective for all users.
Potential Overemphasis on Acquisition:
The framework starts with Acquisition, which can lead to a focus on simply attracting new users, even if they don't become engaged or contribute to long-term value. In some cases, retaining existing users might be more cost-effective and have a bigger impact on business goals.
Outdated Definitions (for Early-Stage Products):
The framework was originally designed for web products and might not fully capture the nuances of today's diverse digital landscape (mobile apps, SaaS platforms, etc.). The definitions of each stage might need adaptation depending on the specific product or service.
Limited Guidance on Prioritization:
While the AARRR framework identifies relevant user behavior stages, it doesn't explicitly guide you on which stage to prioritize or how to weigh their relative importance for your specific business goals.
Here's how these limitations can be addressed:
Combine with other frameworks: Use AARRR alongside frameworks like the our NSM framework, which helps translate AARRR stages into measurable metrics and user behavior analysis.
Consider user segmentation: Adapt the AARRR framework to consider different user segments with potentially unique journeys and priorities.
Focus on the outcome: Don't get hung up on the order of the AARRR stages. Use them as inspiration to identify the metrics that best represent user value and business success.
Modernize as needed: Adapt the definitions of each stage to fit the specific context of your product or service.
Set clear business goals: Clearly define your business goals to understand which AARRR stage or combination of stages contributes most to achieving those goals.
Conclusion
The AARRR framework provides a valuable structure for understanding user behavior and selecting metrics that reflect your product or service's core value. It breaks the customer journey into distinct stages (Acquisition, Activation, Retention, Referral, Revenue), making it easy to identify relevant metrics for each step. Additionally, the associated metrics are typically measurable through existing data sources, allowing you to track progress and optimize your approach.
However, it's important to acknowledge the limitations of AARRR. The framework can oversimplify the user journey, which may not always be linear. It also doesn't explicitly consider user segmentation and might lead to a one-size-fits-all approach that's not effective for all customer groups. Additionally, AARRR can overemphasize acquisition over retention, even though retaining existing users can be more cost-effective in the long run.
By being aware of these limitations and using AARRR alongside other tools and considerations like our more complete and tailored NSM framework , you can gain a more comprehensive understanding of your users and develop a data-driven North Star Metric (NSM) that informs your overall user experience strategy.
The North Star Metric Framework
While there's no one-size-fits-all approach to identifying your North Star Metric, a proven process has emerged that combines practical experience, established strategic planning principles, and insights from successful businesses. This step-by-step guide will equip you to effectively define and implement your NSM. Let's take a look at each step of the NSM framework.
Step 1: Define Your Business Goal
This first step clarifies your company's mission statement and establishes specific, measurable, achievable, relevant, and time-bound (SMART) goals. Understanding your strategic goals is crucial for choosing an NSM that tracks progress towards achieving them.
While this step doesn't directly involve choosing your NSM (this is done in later steps), it's foundational. Establishing clear, measurable goals, preferably using the SMART framework, is crucial for success. You can find a wealth of resources on SMART goals online. We'll delve deeper into SMART goals in future editions of this newsletter. In the meantime, feel free to reach out with any questions via email or comments!
This step is valuable regardless of whether you have an existing mission statement and/or strategic goals defined. It can help solidify your offering or identify areas for improvement.
Clarifying your business goal involves two key parts:
a. Defining Your Mission:
Think Big Picture: Start by outlining your company's overall mission statement. This statement should capture the core purpose of your business and the value you aim to deliver on a large scale.
Here are some prompts to get you started:
What problem are you trying to solve for the world, or what positive impact do you want to make?
What unmet need are you addressing for your target audience?
How does your product or service contribute to a larger societal good or trend?
For example:
Mission Statement (Social Media App): "To connect people and foster meaningful relationships across the globe."
b. Setting SMART Goals:
This is a crucial part of this process because SMART goals provide a clear roadmap for achieving your desired outcomes. By being Specific, Measurable, Achievable, Relevant, and Time-bound, your goals ensure your chosen NSM is truly impactful and aligns with your business objectives. In essence, SMART goals set the stage for a successful and measurable journey towards your North Star Metric.
We know setting SMART goals could seem like a daunting task. You can find a wealth of resources on SMART goals online. We will also delve deeper into SMART goals in future editions of this newsletter. This step provides the basic process to define these goals. In the meantime, feel free to reach out with any questions via email or comments!
Here are the the basics to get you started on what you need to do:
Break Down the Mission: Now, translate your broader mission statement into specific, actionable goals. These goals should follow the SMART framework:
Specific: Clearly define what you want to achieve.
Measurable: Establish metrics to track your progress.
Achievable: Set realistic and attainable goals.
Relevant: Ensure your goals align with your mission and value proposition.
Time-bound: Define a timeframe for achieving your goals.
Here's an example:
SMART Goal (Based on Mission Statement): "Increase monthly active users of our social media app by 20% within the next quarter."
Why is Step 1 important?
A clear understanding of your business goals helps you choose an NSM that truly reflects your desired outcomes. The NSM should ultimately track progress towards achieving those goals. Imagine the NSM as a compass guiding your ship (your business). If you don't know your destination (business goal), the compass (NSM) can't effectively guide you.
Additional Tips:
Involve Stakeholders: Get buy-in from key stakeholders within your organization during the goal-setting process. This ensures everyone understands the overall direction and how their efforts contribute to achieving those goals.
Align with Value Proposition (Later): While Step 1 focuses on business goals, remember these goals should ultimately be achievable through delivering on your value proposition. We'll explore this connection in Step 3 of the NSM framework.
You can find a wealth of resources on SMART goals online.
We'll delve deeper into SMART goals in future editions of this newsletter. This step provides the basic process to define these goals. In the meantime, feel free to reach out with any questions via email or comments!
By following these steps and considering the importance of Step 1, you can lay a solid foundation for selecting a North Star Metric that effectively guides your organization towards achieving its long-term goals.
Step 2: Define Your Value Proposition
Step 2 of the North Star Metric (NSM) framework dives deep into understanding the core value your business offers to customers. This value proposition acts as the foundation for your NSM, ensuring it truly reflects the impact your product or service has on your target audience.
This step is valuable regardless of whether you have an existing value proposition. It can help solidify your offering or identify areas for improvement.
Here's a breakdown of this crucial step.
Shifting Your Focus to the Customer:
In Step 1, you clarified your business goals and desired outcomes. Now, it's time to switch perspectives and put yourself in your ideal customer's shoes.
Understanding Customer Needs:
Problem Identification: What problems or challenges do your target customers face? What are their pain points, frustrations, or unmet needs? Conduct market research, analyze customer feedback, and talk to your sales team to gain a deep understanding of these challenges.
Value Delivered: How does your product or service address these customer needs? What core benefit or solution do you offer that makes their lives easier, better, or more efficient?
Here are some guiding questions to explore:
What jobs are your customers trying to get done?
What obstacles are preventing them from achieving their goals?
How does your offering remove those obstacles or provide a valuable solution?
Crafting Your Unique Value Proposition (UVP):
Once you understand the customer needs you address, it's time to articulate your unique value proposition (UVP). This concise statement highlights what sets you apart from competitors and captures the essence of the value you offer.
Here are some key elements of a strong UVP:
Clarity: Your UVP should be clear, concise, and easy for anyone to understand.
Focus on Benefits: Don't just describe features; emphasize how your offering benefits your customers.
Differentiation: Clearly communicate what makes you unique and why customers should choose you over competitors.
For example:
UVP (Social Media App): "Connect with loved ones meaningfully, share experiences, and build lasting relationships - all in one secure and user-friendly platform."
Why is Step 2 Important?
Your value proposition is the bridge between your business goals and your North Star Metric. The NSM should ultimately track how well your offering delivers on that value proposition and resonates with your target audience. If your UVP is clear and compelling, it becomes easier to identify metrics that truly capture the impact you're making on your customers.
Additional Tips:
Customer Validation: Test and refine your UVP with your target audience. Conduct surveys, user interviews, or A/B testing to ensure your value proposition resonates and accurately reflects the benefits you deliver.
Focus on Outcomes: Frame your UVP around the positive outcomes your customers experience thanks to your product or service.
By following these steps and focusing on the customer, you can define a compelling value proposition that forms the core of your North Star Metric. This, in turn, guides you towards selecting the right metric to track your success and achieve sustainable growth.
Step 3: Bridging the Gap - Connecting Value Proposition and Business Goals
Step 3 in the North Star Metric (NSM) framework focuses on building the bridge between your business goals (defined in Step 1) and your value proposition (defined in Step 2). We call this “bridging the gap” because it plays a crucial role in connecting your high-level business goals with a tangible North Star Metric (NSM). This crucial step ensures your chosen NSM truly reflects both the value you deliver to customers and the outcomes you desire for your business.
Before we dive in, let's review the essential key components needed for this step.
Here's a breakdown of the key components:
Leading Indicators:
Leading indicators are metrics that predict future changes in your North Star Metric. They provide early insights into user behavior (related to your value proposition) and allow you to identify potential roadblocks before they significantly impact your NSM. Think of them as warning signals
Contributing Factors:
These are the elements within your product, service, or marketing that influence both your leading indicators and ultimately your NSM.
By analyzing which features or marketing campaigns drive engagement (leading indicators), you can optimize them to ultimately improve your NSM.
Here's a helpful analogy: Imagine a bridge where your business goals are on one side and your NSM is on the other. Step 3 is about building the bridge itself. The leading indicators act as the support beams, connecting your business goals to the NSM. Analyzing contributing factors involves identifying the materials used to build the bridge – the features, functionalities, or marketing strategies that influence user behavior and ultimately your NSM.
Benefits of “Bridging the Gap”:
Early Intervention: Leading indicators provide early warnings, allowing you to address potential issues before they significantly impact your NSM.
Data-Driven Optimization: Analyzing contributing factors allows you to identify areas for improvement within your product or service to drive the desired user behavior and ultimately improve your NSM.
Actionable Insights: This step helps you move beyond vanity metrics and gain insights that inform strategic decisions about product development, marketing strategies, and user experience optimization.
By effectively bridging the gap between business goals, value proposition and your potential NSM, you contribute to a data-driven framework that guides your efforts towards achieving sustainable growth.
Here is a breakdown of the key steps involved.
Steps to “Bridging the Gap”
Analyze leading Indicators
Brainstorm potential Leading Indicators: Don't wait for a finalized NSM to brainstorm potential leading indicators!
Think broadly about metrics that could reflect user engagement with your value proposition and potentially influence your business goals.
Identify metrics that predict changes in your (potential) North Star Metric (NSM) and reflect user behavior relevant to your value proposition.
Consider factors related to user acquisition, activation, engagement, and retention – all connected to how users interact with your value offer.
Examples: Daily App Logins, Feature Usage Frequency, Time Spent on Platform
Refine Based on Availability and Relevance: While brainstorming, prioritize leading indicators that you can readily track with available data. You also want to focus on metrics that provide meaningful insights into user behavior relevant to your value proposition. Here is the breakdown and some questions to answer:
Assess data availability – can you easily track these metrics?
Analyze relevance – do these metrics truly provide insights into user behavior that impacts your potential NSM?
Prioritize leading indicators that are measurable and relevant to your business goals.
Analyze Contributing Factors
Even without a finalized NSM, you can start thinking about contributing factors – the elements within your product, service, or marketing that influence user behavior. Think about features, functionalities, or marketing strategies that directly connect to how you deliver your value proposition.
Map Leading Indicators to Contributing Factors:
Identify elements within your product, service, or marketing that influence your leading indicators.
Example: "Daily App Logins" might be influenced by user onboarding experience or in-app notifications.
Prioritize Based on Impact:
Analyze the potential influence of each contributing factor on your leading indicators.
Focus on factors most likely to significantly impact your potential NSM in the long run.
Consider user feedback, A/B testing results, and user behavior analytics to identify areas for improvement.
Remember, the NSM framework overall is an iterative process. As you gather data and gain insights, you'll refine your leading indicators, contributing factors, and ultimately your North Star Metric itself.
Here's an example:
Imagine you're a music streaming service. Your business goal might be to increase user engagement. Your value proposition is "Curated playlists for every mood and activity."
Here's how you could approach Step 3 without a finalized NSM:
Brainstorm Leading Indicators: Time Spent Listening to Playlists, Frequency of Playlist Creation, Exploration of New Genres
Prioritize Availability and Relevance: Focus on metrics you can track (listening time, playlist creation) that reflect user engagement with playlists.
Consider Contributing Factors: Personalized playlist recommendations, easy playlist creation tools, diverse genre selection.
By taking these initial steps, you're laying the groundwork for Step 3 and the broader NSM framework. As you gather data and gain user insights, you can refine your leading indicators, contributing factors, and ultimately identify the North Star Metric that best reflects your business goals and user behavior.
Other Helpful Relevant Information
Optional, but Helpful: Consider doing this now to set yourself up for success in the future steps...
Visualize how your potential NSM, leading indicators, and contributing factors connect (flowcharts, diagrams).
Share your NSM framework with relevant teams for alignment and understanding
Here are some guiding questions to explore as you go through this process:
Widespread Adoption: Imagine widespread adoption of your value proposition by your target audience. How would this translate into achieving your business goals (e.g., increased revenue, market share)?
Customer Actions: What specific customer actions, directly related to your value proposition, would indicate progress towards your business goals? For example, if your value proposition focuses on improving customer productivity, frequent use of a specific productivity feature could be a positive indicator.
Aligning the NSM (later):
Focus on Leading Indicators: The ideal NSM should be a leading indicator of your business goals. This means it should predict future success towards those goals, rather than simply reflecting past performance.
Here's an example:
Business Goal: Increase customer lifetime value (CLTV).
Value Proposition: Streamlined expense management software that saves users time and money.
Potential NSM: Average monthly recurring revenue (MRR) per active user. This metric indicates the ongoing value users derive from the software, potentially leading to higher CLTV in the long run.
Why is Step 3 Important?
This step ensures your chosen North Star Metric isn't just a random data point, but a meaningful reflection of how your business strategy aligns with customer needs. By understanding the connection between your value proposition and business goals, you can select an NSM that effectively measures progress on both fronts.
Additional Tips:
Consider Different Stages: Your value proposition might deliver value to customers at different stages of their journey. Explore how the NSM could track value delivery at different points (e.g., initial activation vs. long-term engagement).
Data-Driven Insights: As you track your NSM over time, analyze the data to see if it accurately reflects the connection between your value proposition and business goals. This may lead to further refinement of either your value proposition or your chosen NSM.
By following these details and carefully considering the connection between your value proposition and business goals, Step 3 empowers you to define a North Star Metric that truly guides your organization towards achieving sustainable growth and success.
Step 4: Identify Candidate Metrics - Building the NSM Pool
Step 4 of the North Star Metric (NSM) framework dives into brainstorming potential metrics that could serve as your North Star Metric. Here, you'll explore a variety of metrics that capture different stages of user engagement and the value they derive from your product or service. This initial pool of candidate metrics will be evaluated and narrowed down in Step 5.
Leveraging Existing Framework:
Existing frameworks like Pirate Metrics (AAARRR) provide a helpful structure for identifying candidate metrics. This framework categorizes metrics across different stages of the user journey:
Acquisition (A): Metrics related to attracting new users (downloads, signups)
Activation (A): Metrics related to initial value realization (completed tutorials, first purchase)
Retention (R): Metrics related to keeping users engaged (daily active users, repeat purchases)
Revenue (R): Metrics related to generating income (subscriptions, in-app purchases)
Referral (R): Metrics related to user advocacy (social media shares, referral codes used)
Exploring Different Stages:
Go Beyond a Single Stage: Don't limit yourself to metrics from just one stage of the user journey. Consider metrics that capture value delivery across the entire user lifecycle, from initial acquisition to long-term retention and advocacy.
Brainstorming Beyond Frameworks:
Existing frameworks are a great starting point, but don't be afraid to think outside the box. Consider unique metrics specific to your business model or industry that effectively capture the core value you deliver.
Here are some additional tips for brainstorming candidate metrics:
Focus on Measurable Actions: Your candidate metrics should be based on measurable user actions or behaviors that can be easily tracked and quantified.
Actionable Insights: The ideal metric should provide actionable insights that can guide strategic improvements to enhance the value you deliver.
Alignment with Value Proposition: Each candidate metric should ideally connect back to your value proposition and reflect how well your offering addresses customer needs.
For example:
Business Goal: Educational language learning app
Value Proposition: Learn a new language effectively and conveniently through personalized learning plans.
Candidate Metrics:
Acquisition: App downloads, signups from targeted demographics
Activation: Completion of initial language placement test
Retention: Daily active users, average time spent learning per session
Revenue: Monthly recurring subscriptions
Engagement: Completion rate of personalized learning modules
Unique Metric: Average number of new words learned per week (tracks core value proposition)
Why is Step 4 Important?
This step provides a comprehensive pool of potential metrics to evaluate against your criteria in Step 5. By brainstorming a wide range of candidate metrics, you increase the chances of identifying an NSM that truly captures the essence of your business and resonates with your target audience.
By following these details and considering these tips, Step 4 equips you to generate a robust list of candidate metrics that can be further refined into the perfect North Star Metric for your organization.
Step 5: Evaluate and Select the North Star Metric - Choosing Your Guiding Star
Step 5 of the North Star Metric (NSM) framework is where the rubber meets the road. Here, you'll meticulously evaluate the candidate metrics identified in Step 4 and select the single metric that will serve as your North Star Metric. This chosen metric will be the guiding light for your organization, reflecting both your business goals and the value you deliver to customers.
Applying Critical Criteria:
Don't simply pick the first metric that catches your eye. Carefully analyze each candidate metric based on the following key criteria to ensure it effectively aligns with your overall strategy:
Alignment with Value Proposition: Does the metric truly capture the essence of the core value you offer to customers? How well does it reflect the impact your product or service has on their needs and challenges (as defined in Step 2)?
Leading Indicator of Business Goals: An ideal NSM should be a leading indicator of your business goals (established in Step 1). This means it should predict future success towards those goals, rather than simply reflecting past performance. For example, a high activation rate (completing a tutorial) could indicate a higher likelihood of long-term retention (a business goal).
Measurability: Can the metric be easily tracked and quantified? Does your existing data infrastructure allow you to capture and analyze this metric effectively?
Actionability: Does the metric provide actionable insights that can guide strategic improvements to your value proposition or overall business strategy? Can you use the data gleaned from the NSM to make data-driven decisions that enhance customer experience and value delivery?
Prioritization and Selection:
Prioritize Based on Criteria: After evaluating each candidate metric against the criteria above, prioritize them based on how well they meet all the requirements. Metrics that strongly align with both your value proposition and business goals, while being measurable and actionable, should rank higher.
Refine Based on Insights: The evaluation process might reveal insights about potential gaps in your value proposition or areas for improvement in your business strategy. Use these insights to potentially refine your initial value proposition or even revisit some business goals before finalizing your NSM selection.
Beyond a Single Metric:
Complementary Metrics: While the NSM is a single metric, it might be beneficial to track a few additional, complementary metrics alongside it. These metrics could provide a more holistic view of your user journey and how different aspects contribute to achieving your North Star Metric.
For example:
NSM: Average monthly recurring revenue (MRR) per active user (educational language app)
Complementary Metrics: Daily active users, average time spent learning per session, completion rate of personalized learning modules
Why is Step 5 Important?
Choosing the right NSM is crucial for the success of the entire framework. A well-selected NSM ensures your organization is focused on the metric that truly matters - the one that drives progress towards your business goals while reflecting the value you deliver to customers.
Additional Tips:
Data-Driven Selection: Leverage data from past performance or user behavior analytics to support your selection of the NSM.
Stakeholder Alignment: Get buy-in from key stakeholders across different departments within your organization to ensure everyone understands the chosen NSM and its significance.
Iterative Process: Remember, the NSM framework is an iterative process. As you gain more data and insights, you might need to revisit and potentially adjust your chosen NSM in the future.
By following these details and meticulously evaluating your candidate metrics, Step 5 empowers you to select the North Star Metric that will effectively guide your organization towards sustainable growth and success.
Step 6: Refine and Iterate - Keeping Your North Star Shining Bright
Step 6 of the North Star Metric (NSM) framework focuses on the ongoing process of refining and iterating on your chosen metric and value proposition. The NSM framework is not a "set it and forget it" approach. As you track your NSM and analyze data over time, you gain valuable insights that can inform adjustments to both your value proposition and potentially even your NSM itself.
Continuous Improvement:
Track and Analyze: Once you've chosen your NSM, it's time to actively track it and analyze the data it generates. This data will provide insights into user behavior, the effectiveness of your value proposition, and the overall progress towards your business goals.
Identify Trends: Look for trends and patterns in your NSM data over time. Are you seeing the desired growth trajectory? Are there any unexpected dips or plateaus?
Using Insights for Improvement:
Refine Value Proposition: The data from your NSM and user behavior analysis can reveal areas where your value proposition might need refinement. For example, if a low activation rate indicates users are struggling to find value early on, you might need to adjust your onboarding process or user interface to better communicate the core value you offer.
Adjust NSM (if needed): In some cases, the data might reveal that your chosen NSM no longer effectively reflects the evolving relationship between your value proposition and business goals. If this happens, you might need to revisit Step 5 and re-evaluate your candidate metrics to potentially select a new NSM that better aligns with your current strategy.
Here's an example:
NSM: Average monthly recurring revenue (MRR) per active user (educational language app)
Data Analysis: The data reveals a high churn rate after the first month, suggesting users aren't finding long-term value.
Action: Refine the value proposition to focus on ongoing engagement and achieving fluency goals. This might involve developing a more gamified learning experience or introducing personalized learning paths to keep users motivated.
Why is Step 6 Important?
The business landscape and user needs are constantly evolving. By continuously refining your value proposition and potentially adjusting your NSM based on data insights, you ensure your North Star Metric remains relevant and continues to guide your organization towards achieving long-term success.
Additional Tips:
Regular Reviews: Schedule regular reviews to assess the effectiveness of your value proposition and chosen NSM.
Embrace Experimentation: Don't be afraid to experiment with different approaches to delivering your value proposition and track the impact on your NSM.
Open Communication: Maintain open communication channels across your organization to ensure everyone understands the rationale behind your chosen NSM and any potential adjustments.
By following these details and fostering a culture of continuous improvement, Step 6 empowers you to keep your North Star Metric shining bright, guiding your organization on the path to sustainable growth and achieving its full potential.
Two Use Cases
Use Case #1: Fitness App and the North Star Metric
Company: FitLife, a mobile fitness app offering personalized workout plans and motivational coaching.
Goal: Increase long-term user engagement and paid subscriptions.
Step 1: Clarify Business Goals
Mission: Empower individuals to achieve their fitness goals through personalized training and a supportive community.
SMART Goals: Increase monthly active users by 20% within 6 months. Convert 5% of monthly active users to paid subscriptions within the same timeframe.
Step 2: Define Value Proposition
Problem: People struggle to stay motivated and consistent with their fitness routines.
Solution: FitLife provides personalized workout plans tailored to individual fitness levels and goals. The app offers motivational coaching, progress tracking, and a supportive community to keep users engaged.
Step 3: Bridge the Gap
Connection: Widespread adoption of FitLife's personalized workout plans and ongoing engagement with the motivational features (e.g., coaching, community) will lead to users achieving their fitness goals. This success story will encourage them to subscribe for continued support and access to premium features.
Step 4: Identify Candidate Metrics
Acquisition: App downloads, signups from targeted demographics interested in fitness.
Activation: Completion of initial fitness assessment and creation of a personalized workout plan.
Engagement: Daily active users, average time spent using the app per session, completion rate of workout sessions.
Retention: Monthly active users (retention rate), number of repeat logins within a specific timeframe.
Revenue: Monthly recurring subscriptions, in-app purchases of premium features.
Unique Metric: Average weekly increase in user fitness score (calculated based on app activity data) - reflects core value proposition of achieving fitness goals.
Step 5: Evaluate and Select the North Star Metric (NSM)
Chosen NSM: Average weekly increase in user fitness score.
Reasoning: This metric directly aligns with FitLife's value proposition of helping users achieve their fitness goals. It's a leading indicator of long-term user engagement and potential subscription growth. It's measurable through app data and actionable by informing improvements to personalized workout plans and motivational features.
Step 6: Refine and Iterate
Track and Analyze: FitLife tracks the chosen NSM and other relevant metrics (e.g., engagement, retention) to understand user behavior and the impact of app features.
Insights and Action: Data reveals a high drop-off rate after the first week, suggesting a lack of initial motivation. FitLife refines the onboarding process to include a gamified introductory challenge and personalized goal setting, aiming to increase user engagement and initial progress reflected in the NSM.
This use case demonstrates how the North Star Metric framework, with all its six NSM framework steps, can guide FitLife in achieving its business goals by focusing on a metric that truly captures the value they deliver to their users – helping them reach their fitness goals. As FitLife continues to analyze data and refine its approach, the NSM ensures they stay focused on the core metric that drives long-term success
Use Case #2: E-commerce Platform - Increasing Customer Lifetime Value (CLTV)
Imagine you're working for an e-commerce platform and want to establish a strong North Star Metric (NSM) framework to increase Customer Lifetime Value (CLTV). Here's how you could apply the 6-step NSM process:
Step 1: Define Business Goals
Goal 1: Increase Customer Lifetime Value (CLTV) by 20% year-over-year.
Goal 2: Achieve a 15% growth in repeat purchase rate.
Step 2: Value Proposition
Our e-commerce platform offers a wide selection of products, competitive prices, a convenient shopping experience, and a hassle-free return policy. We aim to be a one-stop shop for customers, fulfilling their everyday needs and exceeding expectations.
Step 3: Bridge the Gap
Increasing repeat purchases and encouraging larger order sizes directly contributes to higher CLTV.
Metrics that track customer engagement and post-purchase behavior can indicate loyalty and potential for future purchases.
Step 4: Brainstorm Candidate Metrics
Acquisition Metrics: Website traffic, user signups, app downloads
Activation Metrics: First purchase completion rate, average order value
Retention Metrics: Repeat purchase rate, customer engagement (time spent browsing, product reviews), number of active users
Revenue Metrics: Average order value, customer acquisition cost (CAC), customer lifetime value (CLTV)
Step 5: Select the North Star Metric (NSM)
While CLTV directly reflects our business goal, it's a lagging indicator. We need a leading indicator to guide our efforts.
Based on Step 3, consider "Average order value for repeat customers" as the NSM.
This metric encourages increasing order value from loyal customers, ultimately contributing to higher CLTV.
Step 6: Continuous Improvement
Regularly track and analyze the chosen NSM alongside other relevant metrics (e.g., repeat purchase rate).
If data shows a stagnant order value, refine the value proposition to incentivize larger basket sizes (e.g., bundle discounts for multiple products).
The NSM framework allows for adjustments based on insights. We might revisit Step 5 in the future and potentially choose a different metric if our business goals or customer behavior evolve.
Benefits of this approach:
This 6-step process ensures your chosen NSM is directly tied to increasing CLTV, your core business goal.
By focusing on repeat customers' order value, you encourage customer loyalty and higher overall revenue in the long run.
Regularly monitoring and adapting the NSM allows for continuous improvement and ensures your e-commerce platform stays competitive.
Does Software Help with Your North Star Metric?
You can certainly use a spreadsheet like Excel to get started with the North Star Metric (NSM) framework. Spreadsheets offer a familiar and accessible platform for defining your goals, brainstorming metrics, and tracking data. However, while spreadsheets can be a viable starting point, strategy planning and execution software offers several advantages that can significantly enhance the NSM process
Strategy Planning and Execution Software Advantages
Strategy planning and execution software can be a powerful tool to support all six steps of the North Star Metric (NSM) framework and empower you to define and achieve your North Star Metric.
Here's how this software can assist you in each step:
Step 1: Clarifying Business Goals
Goal Setting & Tracking: These tools can help you define your mission statement and set SMART goals by providing templates, collaboration features, and progress tracking dashboards.
Scenario Planning: Some software allows you to model different business scenarios to understand the potential impact on your goals.
Step 2: Defining Value Proposition
Customer Persona Development: The software can facilitate building detailed customer personas by integrating with customer relationship management (CRM) data and user feedback tools.
Value Proposition Testing: Some platforms offer features for A/B testing different value proposition messaging to see what resonates most with your target audience.
Step 3: Bridging the Gap
Goal Alignment Tools: These tools can help you visually map your value proposition to your business goals, highlighting the connection and potential impact.
Data Analytics: Software can integrate with various data sources to analyze customer behavior and identify how it contributes to achieving your business goals.
Step 4: Identifying Candidate Metrics
Metric Libraries: Many strategy execution software programs offer pre-built libraries of metrics categorized by industry or user journey stage (e.g., acquisition, activation, retention).
Data Visualization: The software can help you visualize various metrics and their relationships, allowing you to explore potential connections to your value proposition and business goals.
Step 5: Evaluate and Select the North Star Metric
Metric Scoring & Comparison: These tools can help you score candidate metrics based on predefined criteria (alignment, measurability, etc.) to facilitate a data-driven selection process.
Customizable Dashboards: You can create custom dashboards to visualize your chosen NSM alongside relevant supporting metrics for comprehensive monitoring.
Step 6: Refine and Iterate
Real-time Data Tracking: The software allows you to track your NSM and other metrics in real-time, enabling you to identify trends and potential areas for improvement.
Data-driven Reporting: These tools can generate reports that analyze NSM performance and user behavior, providing insights for refining your value proposition or potentially adjusting your NSM.
Enabling the North Star Metric:
By providing these functionalities, strategy planning and execution software empowers you to develop a strong North Star Metric that is:
Data-Driven: The software facilitates data collection, analysis, and visualization, ensuring your NSM selection is based on concrete data and user insights.
Aligned: The tools help you ensure your value proposition, business goals, and chosen NSM are all aligned and working together towards your desired outcomes.
Actionable: The data and insights generated by the software can guide strategic decision-making and inform ongoing refinements to your value proposition and potentially your NSM.
Overall, strategy planning and execution software can be a valuable asset in establishing and maintaining a North Star Metric by streamlining the process, providing data-driven insights, and facilitating ongoing refinement for long-term success.
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