Even Peter Pan had a solid direction: “second star to the right and straight on ’til morning.”
How about your SaaS company? What’s your star?
As you think about your marketing plan for this year and your KPIs, what one metric stands out most of all? What one number matters more than the others and indicates the success of your company? That metric is your North Star Metric (NSM) — the one that best encapsulates the core value your product delivers to your customers or the core measure of your company’s growth.
Determining, pursuing, measuring, reporting on, and refining your NSM will help align and bring clarity to your entire team.
How to Find Your North Star Metric
Before you dive into your own company, take a look at these real examples from B2B tech:
Facebook: Number of users adding seven friends in the first ten days
Slack: Daily Active Users (DAU)
Uber: Weekly rides
Medium: Total time reading
Airbnb: Nights booked
LogMeIn: Hours of use by users per month
Amplitude: Weekly Querying Users (WKUs) is the number of weekly users for whom Amplitude answered at least one question
As you can tell from these examples, your NSM is not necessarily revenue. It brings laser focus to the one aspect of your company that drives sustainable long-term growth.
For your SaaS company, make sure your NSM adds value for both you and your customers. For example, a few years ago, LinkedIn set an NSM related to endorsements, the number of users who check boxes of another user complimenting their skills and demonstrating their expertise. Individual users felt esteemed and loved endorsing others so some would in return endorse them. However, it didn’t work as an NSM for LinkedIn’s business. Recruiters didn’t trust the endorsements because they were concerned about misleading or inflated information from users.
Look through your KPIs and drill down until you find the handful that matter the most to you. Seek input from other team members or ask them to go through the same exercise. Work with each other to define your NSM. That will help with unity and clarity.
Using Your North Star Metric to Drive Growth
Like most of your KPIs, your NSM can actually be acted upon by a number of inputs and variables. These variables can span the entire customer lifecycle. If you define your NSM as weekly active users of your SaaS product, look at the steps a buyer needs to go through in their decision-making journey. They need to become aware of your products, visit your site, sign up for a trial or demo, then finally convert to a customer.
By breaking your NSM down into these inputs, you will be able to see where bottlenecks occur. Perhaps it’s at the top of the funnel, due to low website traffic. Or you might find that it’s at the very last step in the journey, from demo to purchase, that people are dropping off. Understanding the relationship between these variables lets you see and understand their journey and which levers need to be pulled in order to improve the user experience, optimize conversion rates, and and grow your key metric.
Here are some practical steps to take to deploy your North Star Metric:
Break down the year into weekly parts
Annual goals can be overwhelming. “Aim small. Miss small.” Simple math can take your annual goal and break it into 52 weekly parts. If you want to be fancy, create percentages of growth for each quarter multiplying your annual goal by 22% fo Q1, 24% for Q2, 26% for Q3, and 28% for Q4 allowing you to ramp up with growth. Remember, past activity is always best. Your numbers from last year on this same metric — whether you declared it your NSM or not — are the best indicator for this year’s results.
Report on the weekly progress across your entire department or company
Having a North Star allows all of you to know where you’re going and how much progress you’ve made toward it. It is not your goal or the goal of the leadership team. It is everyone’s goal. Let everyone in on the number on a regular cadence.
Celebrate when you can
Most of the time, heading toward your NSM will be just plain work. But from time to time, you’ll crush a particular week or month. Celebrate the extra success. Who knows: you might energize your team to put more elbow grease in for the next round.
Don’t stop believing
The story is told that Christopher Columbus kept looking ahead for land every day. He would climb to the crow’s nest and look through for land his monocular. Even when the seas grew dead calm for days, he never stopped his ritual and he never stopped believing that they would reach the new world. Your NSM may feel daunting and impossible some weeks. Don’t stop believing. Keep pressing.
How Marketing Contributes to Your NSM
Your NSM can and should determine the day-to-day activities of sales, customer service, product development, marketing and more. When it comes to marketing, that means tracking and improving activities that contribute to your NSM.
Work on the inputs
If your NSM is the most important number you’re tracking, the tasks that contribute to its growth should be your most important tasks. Make sure team members are working on those tasks before anything else it touched or pursued.
As you work on the inputs and stimuli, you might notice that they aren’t giving you the results you need. Make small changes to the work you’re doing there and look for other things in your system that might be contributing to the NSM. Are there inputs you missed? And, if you discover a big hiccup — like LinkedIn — find another NSM. As my mentor in orienteering used to say, “One degree off in a compass heading will take you to a completely different destination the longer you hike in that direction.”
Discovering a big hiccup may feel contradictory to the idea above of “Don’t Stop Believing.” If your NSM is adding value to your customers, keep going. If you discover, like LinkedIn did, that your customers are not being served, then you know you’re off.
“You make what you measure.” It’s the corollary to “we change what we study.” Pursuing your NSM will help you build a better product and a more profitable company. Almost every team within an organization will play some role in tracking, optimizing and improving it.