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like china keeps cracking When it comes to how companies handle user data, it’s time for businesses to think about what exactly they are collecting and measuring. The country’s strict data privacy laws make it more challenging to store and manage Chinese consumers’ data, but it could also have more far-reaching implications if other countries decide to adopt similar regulations (such as the EU’s General Data Protection Regulation). ). This will lead to a new digital marketing landscape when it comes to data and metrics.
Not long ago, marketing and growth teams relied on just a handful of metrics to analyze campaigns and measure business performance: revenue, spend, and profit. Then the internet exploded and everyone entered the information age. The rapid spread of technology, product development, and data collection methods created a kind of nutritional frenzy.
Marketers and product teams started recording and measuring everything they could get their hands on. Their intentions were good: they thought that if they collected all available data, then voila, those stats would reveal what worked and what didn’t in their products. In practice, however, they just created a game of ‘find the needle in the haystack’. And unfortunately there is no winning that game.
When it comes to product growth metrics, more isn’t always better. Having too many stats is just as bad as not having them at all. Just look at the sheer amount of data people are generating to understand why. Research estimates that people will create collectively more than 180 zettabytes of data by 2025. To put that into perspective, that’s equivalent to storing 2,587 iPhone 13 Pros per second (1 terabyte model).
Just imagine how much resources and time it would take to maintain that much data. In addition, some of the information may be old or outdated. Other metrics may be readily available but ultimately lack relevance and usefulness. In the end you have a lot of data but little insight – not a good position to be in.
Why do you need a North Star stat?
Instead of tracking down every metric remotely related to your product, consider centering your product growth strategy around a single leading metric. Just as sailors used the North Star, located directly above Earth’s north celestial pole, to navigate oceans, you can use a North Star metric to align your team for the highest goal of product growth.
Of course, the sales, engineering, product, and marketing teams can still have their own sub-goals and metrics. But when that North Star shines brightly overhead, everyone keeps moving in the same general direction. Because a North Star metric focuses on overall product growth, there is a built-in level of team-wide transparency and camaraderie not found in other team-specific initiatives.
However, what makes a North Star metric such an effective measure of success is its intrinsic relationship with users. By definition, a North Star metric is the number that best represents the value your product delivers to users. That’s why your teams will always be aligned and working together to grow your product.
Related: Customer experience will determine the success of your business
What is a North Star stat?
So, what exactly is a North Star stat? It is important to note that yield is not a North Star metric. When you track your product’s revenue, you keep track of how much money you made at the end of the month, quarter, or year. While this is a good indicator of success, it is not user specific. For example, revenue alone can’t tell you how much the average user spends on your products and how long they remain loyal.
In general, there are five categories of North Star stats:
- Customer growth: North Star customer growth metrics include market share and number of paid users.
- Consumption growth: Consumption goes beyond just site visits. Instead, think about this category through the lens of product usage, such as messages sent or lessons taken.
- Engagement Growth: If your product is an app, you can use engagement metrics, such as monthly or daily active users, to track the number of unique users over a period of time.
- Growth efficiency: When you compare the value of a new user to the cost of acquisition, your North Star can use statistics around lifetime value and customer acquisition costs.
- User experience: User experience metrics, such as the Net Promoter Score, provide data to measure user satisfaction and product experience.
Related: 4 Reasons Why Sharing Performance Metrics Will Speed Up Your Business
What is your Pole Star?
Your North Star metric should be the one that is most predictive of the continued success of your product and how users derive value from the product. Therefore, it will vary based on your industry, target audience, offering, etc. For example, a fintech product may coalesce around the total assets under its management or daily active users. By contrast, streaming company Netflix uses the total number of hours streamed as their North Star metric.
Of course, the metric you choose should be measurable on a regular basis. It must also meet two other criteria to be considered a North Star metric: helping monetize and reflecting customer value.
1. Help monetize
A metric that doesn’t measure progress toward goals in a way that informs your next steps isn’t going to be helpful at all. So make sure you can link your North Star metric directly to product growth. For example, Airbnb’s North Star metric is: number of nights booked. This reveals platform growth and correlates with the value customers and hosts receive from good experiences.
Remember that it is important to balance this criterion with the other two. For example, if you put your cap on a money-oriented measure at the expense of customer satisfaction, you end up driving users away. On the other hand, you cannot put customer satisfaction first at all costs, otherwise you will bankrupt yourself.
2. Mirror customer value
Your North Star metric should include what users find valuable about your product. If you don’t understand what they value, you’ll end up measuring the wrong thing. For example, users did not like logging into Meta’s virtual reality headset with a Facebook account. Meta was too focused on boosting its social media platform to realize that the public wanted more flexibility and anonymity.
To define your North Star metric, gather key stakeholders to outline your company’s needs and the value your product adds to users’ lives. Determine whether a metric helps users achieve the intended results of your offering. Look at the external factors that can affect your North Star stat, as well as the internal factors that you can control.
Related: How leaders can stay focused on a company’s key metrics
Long ago, sailors looked to the sky to determine where they were going and what adventures awaited them. Likewise, you can use your North Star metric to inform your product growth strategy no matter what the future holds.