Finding the perfect focus for your product with the North Star metric
Launching a product is just the beginning of the road. Eventually, you’ll need to focus on growth and it’s better to do it earlier to find the right audience and triggers to widen it without burning your budget chasing irrelevant metrics.
Defining a North Star metric is an important step to successful product growth.
Here’s the story of Yauheni Lashkevich’s journey to finding the perfect North Star focus during his time at Daily Burn workout app.
Spoiler — it took some time for experiments!
Quick North Star FAQ
There are a lot of definitions for the North Star metric, but the simplest one says that it’s a measurable indicator that can stand for a product’s long-term growth and predict it.
North Star helps with:
- Alignment for all teams and their plans;
- Transparency across the organization because it justifies each initiative within the company;
- The user-centric focus of the product and its features;
- Easier prioritization and planning for both near- and long-term forcasting.
Some products survive without defining their North Star, but if you’re looking for exponential growth, it’s crucial to define and monitor this metric.
Finding Daily Burn’s North Star
To find your North Star, you need to look back at the product and audience first, then do a basic summary of all your current findings.
Daily Burn is a streaming service for doing workouts, yoga, and other exercises at home. It was subscription based with a hard paywall and a 30-day trial period.
Putting such a trial period wasn’t random, it was a decision made after several experiments with different periods, including 7 days, 2 weeks, etc. Still, using this monetization model influenced the whole process of validating product hypotheses. Why?
Part 1 — Knowing a product success formula
There is a basic formula for any product's success on the market:
- Marketing brings you customers;
- You make your customers happy;
- All the happy customers stay with a product/service for a long time and spend more money on it.
It sounds easy and logical, but this formula works only if you can manage the key metrics. If the metric is influenced by some external factors you can’t control, things get complicated.
Part 2 — Focusing on the wrong key metric
The Daily Burn’s team focused on t2pCVR (trial-to-payment conversion rate) metric because it seemed to be a good indicator of product quality. Nobody expected the service to be used daily or several times per day, but it was crucial to know how many users stay after the end of the trial period and convert into paying customers.
The team agreed upon 3 months to find the numbers needed and focused on the conversion from trial to payments.
Was it the right key metric to focus on? It seemed so in the beginning, but things went wrong.
- Too long to measure and see the trend. This metric has a highly delayed effect: we had to wait at least a month to confirm the hypothesis and even more for the trend to see a long-term effect. It radically increased the costs of experiments.
- Seasonality. The metrics strongly depend on external factors such as seasons. People tend to start new fitness habits at certain times of the year, like the New Year holidays or at the beginning of the summer. So it was hard to compare the measurable findings of different periods.
- Highly affected by marketing activities. The metric proved to be hard to control. Even from the graphs, it was clear that it was stormy. Hypotheses and changes have always been unpredictable. As soon as marketing launches a new campaign, pours traffic into the channel, or attracts traffic to not the most successful campaign, everything immediately affects the audience and their expectations.
Combining all circumstances it was clear that focusing on this metric will lead to failure and low conversion into payments.
The metric was not suitable for a North Star, because it proved to be uncontrollable and blurry.
Part 3 — Changing the focus to find the North Star
There are many ways to look for a North Star metric. One of them is a theory on three-product games. Simply put, it states that all products can be divided into three types depending on what you are playing with your audience: to get attention, transaction, or productivity (or trigger actions).
When you find the category of your product, you can dig deeper into it to find your core metric.
You can try this method or decompose your revenue indicator, as it was done with Daily Burn. Upon decomposing the service business goal, three core elements were found:
- Revenue per subscriber
- How users convert into payments
- How users are retained
To find the North Star metric it’s crucial to look at each of the core elements and focus on the value of the product.
Was it about money? Hardly. The subscription model tells more about monetization, marketing, and pricing than the product's actual value. Was it conversion into payments? It’s closer because conversion derives from quality. Still, keeping in mind that conversions can’t be easily controlled and managed, it may also not be the right choice.
So it was decided to focus on the long-time retention rate. This indicator has some flaws too. For example, it’s delayed in time. You’ll need to spend a lot of time measuring trends, and you need so much traffic you don’t necessarily have to measure it.
When you need to anticipate your key metrics and their changes, it’s a good practice to turn to proxy metrics.
Part 4 — Working with proxy metrics
Proxy metrics help you to anticipate future changes and work with them. To do so, build a tree of metrics and identify proxy metrics relative to your indicators.
When the Daily Burn metric tree was decomposed in the direction of the retention curve, there happened to be a lot of direct and indirect dependencies.
The main task was to determine which of the proxy metrics reflect the key value of the product. To do so:
- Perform the cohort analysis of your core indicator. Which one is the actual game-changer?
- Find the crucial difference in metrics. In Daily Burn, the more workouts per month the user did, the higher the retention rate was. There was also a direct correlation between the number of training sessions during the first week which became a key indicator in the end.
- Define your key indicator and test your hypotheses. The percentage of users who did two or more workouts during the week after the installation was checked.
That's how Daily Burn has found a perfect focus. Focusing on these metrics eventually led the product to much-awaited growth.
Part 5 — Making sure your North Star is good
Don’t stop at defining your North Star metric. Always check whether it’s a good one to focus on.
The right North Star must:
- Measure the value that your product brings to customers
- Represent your product strategy
- Be a leading indicator of revenue
- Be easy to measure without spending too much time and resources on it
- Be easy to control and not influenced by external factors
- Be NOT a vanity metric and reflect the product's real state, not just look beautiful on your presentation for investors.
Check all hypotheses, experiments, results, and trends. This checklist will help you to avoid obvious errors in selecting the right North Star metric.
Focus on the product and its goals
Your North Star is an important metric, but you don’t need to put it above your product goals. Metrics are success measures and indicators of your goals, not the other way around. Do not get hung up on manipulating metrics, it is better to develop the product and help your users.
Don’t look for a way to tweak some metrics. Build your hypotheses around solving user problems and improving the product.