We all have heard of North star metrics or counter metrics in our product management journey. But when it comes to define the right metric, how to start? Generally, we look for any similar reference inside the organization or look out for any benchmark.
Clarify few things before you start:
1. Vision/Mission: Understand the long-term vison and mission of the company. If the vision is to make the world a better place by reducing CO2 output, carbon footprint or carbon emission can be a important factor here.
2. Goals vs Metrics: Which one shall I focus? Sometimes it may come to mind that shall I set up any specific KPI suggested by higher management or develop KPI which will be aligned to organizational goal.
3. Capability of the product: What the product do? What is the problem the product is going to solve for the customer? For example in Uber, the business focus on customer convenience while travelling. So along with profitability metrics, number of accidents, user ratings are also linked here.
4. Understand the current PLC: The metric is directly dependent on the product life cycle. For example if it is the start of life cycle where product is introduced at the market, revenue per user or profitability per user won't be a good idea. Instead of that number of user added or user registration to the product might be a good idea. Because at the beginning, focus is much on increasing user base rather than profitability. Similarly when the product is matured, then the focus can be shifted to track the revenue or profitability.
5. Decide the key customer goal: What is the key customer goal we are trying to achieve?
For example a messaging app focuses on to send or receive message in encrypted way. So the KPI can be developed thinking upon that. Hospitals focuses on to provide best services to the patients, so the rating on the hospitality service is an important factor here.
6. Ideation of Metrics: Generally, it is suggested that you develop one north star metric and along with that 3-4 support metrics. Adding per user to each of your KPI make it more actionable and easier to analyze. Adding counter metric help to understand whether the north star metric is working properly or not.
For example, let's assume revenue per user is the NSM and cost per user is supportive metric. Revenue per user is increasing but cost per user is also increasing. So, to increase profitability we need to focus on the cost of the product.
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