identifying your north star metric & building a model to predict growth
TRANSCRIPT
Identifying your North Star Metric & Using a Growth Model to move it
Presented by:
Sean Ellis@SeanEllisCEO & FounderGrowthHackers
Chris More@ChrisMoreHead of Growth for FirefoxMozilla
Identifying yourNorth Star Metric (NSM)
North Star MetricOverview
1. What is it?
2. Examples
3. Case study on
business impact
4. Benefits
Most important concept in growthNorth Star Metric
- Focal point of fastest growing businesses - Opposite of a vanity metric- All important metrics key off of the NSM
What is a North Star Metric?
- Single persistent metric for real growth- Reflects growing footprint of
aggregated value- A way of measuring sustainable growth
based on value
Examples of Good North Star Metrics
- Value: see friends’ updates- NSM = Daily Active Users (DAU)- → to value: 7 friends 10 days
Uber/Lyft
- Value: $ for drivers, rides for riders- NSM = Weekly rides - → to value: First ride/passenger
Examples of Poor North Star Metrics
- Registrationsno value delivered
- Repeat usage ratenew users not considered
- Average purchase sizenew not considered
How to determine a good North Star Metric
Step 1:
Start with finding value (key “must have” benefit)
Step 2:
Find metric that quantifies delivery of this value
LogMeIn Case Study
- Initially marketing focused on
registrations
- Most new registrations never
used product
- CEO refocused team on
growing usage (NSM)
- Focusing on usage NSM =
hockey stick growth
- Today a $6B value business
Benefits of using a North Star Metric
- Marketing ROI
tied to value delivered
- Customer retention
tied to value delivered
- Customer evangelism
tied to value delivered
NSM is a full company metricNot just a marketing metric
- Marketers only influence subset of NSM levers
- Right NSM aligns full company to deliver value
- All teams should evaluate their impact on NSM
Using a Growth Model to move the North Star Metric
Growth Model Overview
1. What is it?
2. Benefits
3. Using a model
What is a growth model?
- A critical tool for growth teams
- Contains inputs, outputs over time
- Tailored to each product and primary growth levers
- Calculates growth ratios between inputs and outputs
- Mathematical representation of your user base
Example DAU growth model of baseline user base
Growth Model Benefits
- Source of truth
- Forecast changes in user base
- Data-driven planning
- Focuses teams on outcomes (instead of local maxima)
- Sizes up potential “what if..” growth lever changes
Example “what if” scenario of a positive change in retention
Example “what if” scenario of a negative regression in acquisition
Example “what if” scenario of a positive retention + negative acquisition change.
Example “what if” referral loop went viral D30+
Real questions from Mozilla’s marketing and product team.
“How much would we need to improve our acquisition and retention rates to hit our 2017 key results in December?”
“In Q1, we acquired 300k incremental downloads of Firefox from new channels, how much did my team contribute to our DAU targets?”
“A recent A/B onboarding test show a 5% improvement in retention after week 3. If we launch it in July, how will it impact DAU in December 2017?”
“Should we invest in optimizing our acquisition funnel for the United States or Germany in Q2?”
Using a Growth Model
1. Determine what is “acquisition” for your product2. Input real acquisition and retention cohorts over time3. Perform calculations from launch to far future4. Understand key ratios and growth rate (or stall)
or...
Follow @chrismore on twitter as I will announcing an open source growth model.
Building a Growth Model
Steps
1. Determine NSM user event
2. Use NSM event as acquisition
3. Use NSM retention input
4. Understand growth ratios
5. Size up NSM hypotheses
Using a model to move the NSM
A model within a model
Example of NSM user model (segment of overall growth model)
- A model lets you understand your key variables and how
they impact your growth.
- A model allows your growth team to make more better
decisions.
- After successfully modeling your entire user base, model
your NSM cohorts.
- Remember: keep it simple!
Growth Model Recap
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