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What it is a North Star Metric? How do I find my North Star Metric?

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The North Star Metric is a metric for retention created by Sean Ellis (from GrowthHackers). In this presentation we show what is a North Star Metric with examples like the Facebook North Star Metric, Subway North Star Metric or AirBnB North Star Metric, and in deep detail. We also provide a simple framework for you to discover and implement your North Star Metric.

Published in: Data & Analytics

What it is a North Star Metric? How do I find my North Star Metric?

  1. 1. SérgioTavares,ph.D. LeadConsumerScientistatDigitalist sergio.tavares@digitalistgroup.com Digitalist.global Findingyour NorthStar Metric
  2. 2. Howtoquantifyan experience? The North Star metric is a metric that binds together experience, customer retention and your most valuable business KPIs.
  3. 3. Yourcoreexperience definesyourcore metric. Once you know what your core experience is, you are able to quantify it. Rewiring it as a North Star Metric, you basically create a guiding light to lead recently-acquired customers into becoming loyal customers.
  4. 4. NorthStar —Simplicityandsilo-breakingalignment —Impact,progressandprofits —Teamsandproductscommittedtooutcomes
  5. 5. — inrelationtoyourbusiness metrics, — inrelationtothecore experienceyouoffer, — inrelationtoretaining
 thevaluablecustomers. NorthStar Thecombinationof metricsthatreallymatter.
  6. 6. Business Analytics Leading KPIs Experiences you offer North Star in diagrams Experiences your loyal customers value NorthStar domain
  7. 7. Subway Question: You mentioned that finding “the metrics that matter” should center on the metric that matters. What is Subway’s? Chad Sanderson: There are a few: the number of purchasers, revenue per visitor, and elements of loyalty and time. We don’t want to just maximize what people are buying right now; we want to maximize how frequently they come back over weeks and weeks. Our ‘metric that matters’ is a combination of all of those elements; that’s our North Star. NorthStar: Numberofpurchasers Revenuepervisitor Elementsofloyalty Elementsoftime toimproveHowfrequentlytheycomeback. O'Brien, Mike. “Website Conversions and the 'North Star' Metric: Q+A with Subway's Chad Sanderson.” ClickZ, ClickZ, 19 Dec. 2017, www.clickz.com/website-conversions-north-star-metric-qa-subways- chad-sanderson/203506/.
  8. 8. (Theexperienceyouprovide) x (Akeymeasurementofyourstrategy) Value to your customer what brings growth and ensures continuous revenue NorthStar
  9. 9. NorthStar (Themomentyourcustomerrealisesyour experiencewillbeworththeirmoney) x (Akeymeasurementofyourstrategy) Experience:Value to your customer It’s a leading indication of what will keep bringing growth and continuous revenue
  10. 10. AirBnB North Star: Number of nights booked It doesn’t matter to have many new users if they don’t book nights and experience AirBnB
  11. 11. Yourproduct’sNorthStar isavaluableleading indicator—itshouldbe madeoutofleading indicators,notlagging indicatorsthatdemonstrate pastresults.
  12. 12. Leading and lagging indicators In performance management we often talk about “lagging” and “leading” indicators. But what do they mean exactly? Lagging indicators are typically output. Easy to measure, but hard to improve or influence. For example, the number of accidents in a construction site is a lagging indicator of safety. More closely related: a lagging indicator is revenue… but what brings revenue? Leading indicators are typically input. Hard to measure, easy to influence. A leading indicator is a measurement that predicts something else. For instance, the number of people with safety hats on a construction site is a leading indicator of safety level. A closer example, now, is to measure number of innovation projects in house and compare it to the lagging indicator, revenue. Der Poel, Karen Van. “Lagging and Leading Indicators.” Lagging and Leading Indicators | KPI Library, KPI Library / Mirror42, 2012, kpilibrary.com/topics/lagging-and-leading-indicators. Lead and Lag Indicators. Intrafocus, www.intrafocus.com/lead-and-lag-indicators/.
  13. 13. North Star Laggingindicators.Revenue, average revenue per customer, average order value etc. Leadingindicators
 Frequency of purchase, churn rate, acquisition rate, referral traffic etc.
  14. 14. There is no point in acquire customers for 100€ if they leave before spending 50€. There is no point in creating a referral campaign if the ones who join leave after a week. There is no point in people buying, but not using — nor coming back for more. TheNorthStarisall aboutretention.
  15. 15. Facebook North Star: Number of users adding 7 friends in the first 10 days The experience of Facebook only makes sense when the user has friends in it. Lagging indicator: “Active users”
  16. 16. Whenitcomestoyour product,whatdoyour trulyloyalcustomers valuethemost?
  17. 17. Loyalcustomersstickwith you.Andit’sallaboutthe stickiness. Identifyit,isolateit, measureit.
  18. 18. The value loyal customers see: using retention as the original compound of your North Star “To uncover your North Star Metric you must understand the value your most loyal customers get from using your product”, states Sean Ellis in his seminal Medium article. The emphasis on loyal is key. Probably your service or product provide various experiences and benefits to your customers. In order to identify your North Star — that is, the metric that can take you to your a long-lasting and profitable relationship with your customers — you must first isolate what makes your most loyal customers different from others. What are they getting from your product that others are not? What are they valuing so much that they keep coming back to you? Ellis, Sean. “What Is a North Star Metric?” GrowthHackers Blog, GrowthHackers, 5 June 2017, blog.growthhackers.com/what-is-a-north-star-metric-b31a8512923f.
  19. 19. Finally,yourNorth StarMetricshould bepartofyour experimentation plan. Vision 
 sprint Experience proposition Basic KPI setting Team meeting: design experiment Experiment runs t runs Results on knowledge base Team meeting
 (1h) Define North Star Metric & KPIs Experiment runs Results on Knowledge Base Team meeting Experiment runs Experimentation is an essential part of businesses today. They will help you find product/market fit, fix usability problems, increase onboarding and revenue and continuously improve your business until you reach your design maxima. Ignoring experiments is investing blindly and, in most cases, losing money. If you are used to them, just apply your North Star as a secondary KPI. With time, you will be able to embody it as your overarching KPI throughout all experiments, and a clear way to overrule those who are harming the North metrics.
  20. 20. Finally,yourNorth StarMetricshould bepartofyour experimentation plan.ASAP. Vision 
 sprint Experience proposition Basic KPI setting Team meeting: design experiment Experiment runs t runs Results on knowledge base Team meeting
 (1h) Define North Star Metric & KPIs Experiment runs Results on Knowledge Base Team meeting Experiment runs If you are new to experiments, pick up the pace. Formulate your new idea into something testable — and measure the outcomes with simple KPIs in connection to the North Star. Does it correlate with retention? Does it generate loyal new customers? Those are simple ways to start.
  21. 21. Who’swithyou? It used to be that change would happened after big green lights were turned on, and big budgets allocated to big projects, and things would move slowly and (hopefully) steadily. That’s not the case in today’s lean and data-driven businesses. The best way to get people to onboard you project is to make it happen, make it succeed, and create a template that is easy to assimilate and start. You have the template, right here. Put your plan in practice, and share with colleagues and people who care. Once everyone is on the same page, the impact of having a North Star in place gets even bigger, more measurable — and the pioneers come to the spotlight.
  22. 22. In a nutshell, applying a North Star metric goes like: Experience at the core. Identify the core experience your loyal customers value the most Who else? Mobilise teams so that performance is evaluated across silos by the same metric. Once the stars are aligned, the magic happens. Stardust. Find the leading indicator that most closely relate to the experience. You can combine with further indicators, too. Set up a manual sheet, a DataStudio dashboard or an Analytics report to keep track of it. Create an experiment plan. Measure your North Star now, pair it with a lagging indicator (such as revenue and retention). Now and then. Measure indicators before and after the implementation of each of your experiments You can even assess experience satisfaction alone, using a number of proxies or leading indicators. Similarly, do it now, and later.
  23. 23. ReadmoreonhowtodiscoverandapplyyourNorth Starmetrictobusinessgrowth.Downloadtemplates, designtoolsandotherfreematerials. Digitalist.global/Talks Der Poel, Karen Van. “Lagging and Leading Indicators.” Lagging and Leading Indicators | KPI Library, KPI Library / Mirror42, 2012, kpilibrary.com/topics/lagging-and-leading- indicators. Ellis, Sean, and Morgan Brown. Hacking Growth: How Today's Fastest-Growing Companies Drive Breakout Success. Crown Business, 2017. Ellis, Sean. “What Is a North Star Metric?” GrowthHackers Blog, GrowthHackers, 5 June 2017, blog.growthhackers.com/what-is-a-north-star-metric-b31a8512923f. Lead and Lag Indicators. Intrafocus, www.intrafocus.com/lead-and-lag-indicators/. O'Brien, Mike. “Website Conversions and the 'North Star' Metric: Q+A with Subway's Chad Sanderson.” ClickZ, ClickZ, 19 Dec. 2017, www.clickz.com/website-conversions-north-star- metric-qa-subways-chad-sanderson/203506/. Ries, Eric. The Startup Way How Modern Companies Use Entrepreneurial Management to Transform Culture and Drive Long-Term Growth. Penguin Random House LLC, 2017. Skok, David. “What's Your TRUE Customer Lifetime Value (LTV)? – DCF Provides the Answer.” For Entrepreneurs, 21 Feb. 2017, www.forentrepreneurs.com/ltv/. Sources SérgioTavares,ph.D. LeadConsumerScientistatDigitalist sergio.tavares@digitalistgroup.com Digitalist.global

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