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Phase 2
Defining North Star Metrics
Every product needs a compass. For product-led companies, that compass is the North Star Metric (NSM) — the single measure that best reflects the enduring value customers get from your product. A good NSM aligns teams, predicts revenue growth, and ensures effort is directed toward meaningful outcomes. But not all metrics qualify. This section breaks down what makes a good vs. bad North Star, common pitfalls, and how to define one that truly guides your product strategy.
What Is a North Star Metric?
A North Star Metric is not just another KPI. It is value-centered, influenceable by the team, and a leading indicator of long-term revenue and growth. It captures the core benefit users derive from your product.
Example: For Dropbox, a stronger NSM was “trial accounts with >3 active users in week 1” rather than just “trial signups.” The first reflects genuine value and signals conversion potential.
Good vs. Bad North Star Metrics
What Makes a Good NSM?
- Focuses on customer value
- Reflects company vision & strategy
- Is actionable & measurable
What Makes a Bad NSM?
- Vanity metrics (e.g., page views)
- Lagging indicators (e.g., ARR/MRR)
- Over-focus on revenue
- Isolated measures teams can't influence
The North Star Framework: Metric + Inputs
The NSM doesn’t exist in isolation. It lives within a framework of inputs — the levers teams can directly pull.
Example: Grocery Delivery App
North Star Metric
Monthly items received on time
Drive repeat orders
Increase items per order
Fulfill orders reliably
Reduce late deliveries