North star metric or how we measure our product-market value
You probably all heard about the concept of the north star metrics. If you did not, there is a platform called “Medium”, which helps you grow as a professional and learn new stuff. You may learn how to zip your bag using 2 fingers, or how to present a keynote presentation about penguins in 4 hours, or what is… the north star metric.
If you still struggle and this did not help, then okaaayyy… here is the article.
Ok, now that we all understand a north star metric, let’s see some examples of the big companies.
As you can clearly see from the image above some metrics are standard ones, such as active usage metrics and so on, but some are really industry and business model specific. That being said, none of them are monetization metrics, because those metrics are the ones, which reflect the price of the product, but not the value customer gets. (If insights are flowing around in the sky, the you can read more about it here).
That being said, then …
Why some businesses need it like hell?
Well, probably you already guessed, based on the articles shared above, but to sum up…
A north star metric perfectly reflects the product value, therefore it is a measure for the product-market fit.
This sounds cool but as cool as it sounds it is way harder to find one.
The process of searching
So, in order not to talk too much generic stuff, let’s get deep into the details without covering the confidential or the boring stuff.
Ok, the first time we were thinking about the metric was just after our seed investment round. Our investors mentioned it a couple of times and were telling us to start searching for it. The problem with the north star metric is, that as cool and simple as it sounds, one should really get deep into the details of the business and product operations to be able to measure it.
That being said, we really wanted to understand who our users are, meaning not only the generic criteria(Countries, active hours, age, shoe size, and why all of them name their daughters “Jane”) but also how they use our platform, what are the values they get from the platform, why they don’t switch to others, or why they switch. So as you understood we wanted to get the overall profile of our main users and define the personas.
So how we did it? We, on a daily basis, were checking our users' behaviors and users’ flow, we talked to as many of them as possible and we got very happy when we could identify at least some common patterns.
In the end, we got our main user personas and could identify the single goal all of them needed from the platform.
The product vision
Although, we understood, who our main personas are we still needed to define the product vision, strategy and understand where we want to be in
2–3 years. You can read more details about how we figured out our product vision here. This would help us understand whether what we currently do and what we want to do match.
One-to-many product
Another problem, which we identified is that although we have one brand and we position ourselves as one platform, we are a set of up to 10 products. The same is true for any big platform, such as Facebook, Amazon, Google, Linkedin, Atlassian, etc. So the thing is, this way you may provide more than one value to your users and if those values do not match, then it is even worse. That’s exactly what our case was. There were certain personas, who cared about completely different things than the others.
Now you probably are asking: “If there are multiple values can’t you measure them with more than one metrics?”
Well, technical yes, but that kills the whole notion of the metric, you probably may have sub-metrics, but you should identify the one, which can tell you whether your product is doing good or bad.
Before I lost you I will try to bring an example. Facebook is a really big platform, and the only way it can understand whether the users love the tool or at least will use it on a daily or weekly, or monthly basis is the usage metrics. Meaning DAU, WAU, and last but not least MAU. They probably figured out, that if the users are coming back, then we are doing something right, and if users are coming back then we probably need to understand how to monetize it. I am pretty sure there is probably some correlation between MAU and the MRR, maybe I am mistaken, but if it is their north star metric, then it is definitely big for them. They also should have some big ones like session duration and/or a number of sessions, but I guess value is reflected in active usage more.
Our north star metric
I don’t want and cannot tell you what exactly our north star metric is, but we measure it based on all of the above-mentioned things. We know we are a B2B SaaS platform, we know our user personas, we defined our business model, we defined our product vision and product strategy and the north star metric is the perfect reflection of that. Our north star metric has grown by 20 to 30% month over month as our revenue and our NPS score.
I know you would like to know more…However, I will, hopefully, share more details when it is the right time and this can potentially become another story.