Implementing Product Health Metrics
The concept of north star metrics has become a guiding light (no pun intended) for many product managers to drive better prioritization decisions. These metrics, while invaluable for aligning teams and driving focus, reveal their true power when complemented by health metrics.
A health metric is essentially a metric you monitor to make sure you're not sacrificing quality for quantity. Health metrics serve as safeguards, ensuring that your focused pursuit of optimizing the north star metric doesn't inadvertently harm your customers and the long-term viability of your business.
Let's pretend that you’re currently leading a freemium mobile app: your north star metric is the conversion rate from free users to paid users, a crucial indicator of your business's growth.
In this case, a relevant health metric could be the tenure of a paid subscription. This health metric acts as a litmus test, checking whether you've taken shortcuts to inflate the number of paid users, only to see them quickly become dissatisfied and churn.
In other words, health metrics serve as guardrails, guiding you to strike the delicate balance between achieving short-term wins and nurturing the long-term health of your product and business. They ensure that you're not just chasing numbers for the sake of appearances but rather catalyzing genuinely sustainable growth.
In this guide, I’ll discuss the role that health metrics play in product management. I’ll break down how to select an appropriate health metric, and I’ll also discuss how to set a meaningful threshold for your health metric.
Let's delve into the world of health metrics to uncover their significance!
The Vital Role of Health Metrics for Product Managers
Health metrics act as sentinels, guarding against the perilous path of over-optimization of the north star metric. They ensure that our relentless pursuit of higher numbers does not come at the expense of our customers and the long-term health of our business.
Consider this scenario: You're the product manager for a consumer task management app (e.g. Trello, Asana, Todoist, Notion, etc.) and your north star metric is the "number of monthly active users." You currently have a healthy user base, and the metric stands at 50,000 monthly active users (MAU).
Imagine that you’ve launched a new generative AI feature that suggests new tasks based on previously completed tasks. This functionality helps drive a sustained 14% increase in MAU over the next three months; you conclude that your product initiative has solved a real pain.
Then, you have a brilliant idea to drive even more engagement. You decide to run a contest, offering an all-expenses-paid trip to an exotic destination as the grand prize. Users are entered into the raffle if they use your generative AI feature at least three times in the next 30 days.
The contest generates buzz, and your north star metric skyrockets to 85,000 monthly active users. Success, right?
However, upon closer examination, you discover a disturbing trend. The conversion rate from free users to paying customers has dropped significantly. The contest entrants, enticed solely by the allure of the trip, have no interest in your core product. They sign up for the contest and leave, contributing nothing to the bottom line.
Moreover, your loyal users, seeking productivity solutions, find the contest distractions unbearable. The contest promotion takes up valuable screen real estate, and your core product becomes challenging to access. Many of your existing users abandon ship, seeking alternatives elsewhere.
In this scenario, a well-chosen health metric could have sounded the alarm. Tracking the conversion rate or user engagement alongside the north star metric would have revealed the adverse effects of the contest.
Providing Health Metrics to Stakeholders
The utility of health metrics extends beyond personal insight; it plays a pivotal role in fostering alignment among stakeholders. Even when you personally understand the pitfalls of optimizing a single metric to the detriment of the overall business, not all stakeholders may share this awareness yet.
Product managers exert substantial influence across diverse stakeholders, spanning various functions within the organization. As PMs, we’re responsible for ensuring that all stakeholders are attuned to what serves the best interests of the business. This means guarding against the myopic pursuit of a single metric to the detriment of broader goals and overall health.
To empower your cross-functional teammates to make decisions that advance the collective interest of the organization, you should ideally equip them with both a north star metric and a health metric. This dual perspective provides a holistic view of progress and guides stakeholders in making informed choices that align with the long-term health of the business.
Selecting the Right Health Metric
When I work with others in our PM coaching sessions to set health metrics, I ask them this question: “Pretend your north star metric improved. Come up with three hypothetical scenarios where this is a bad thing and not a good thing.”
For example, let’s say that you manage a notifications product. You see that average notifications clicked per user has gone up. How could this be a bad thing?
Well, you could have sent 10x the notifications from before, and now your average “notification click rate” has cratered due to notification spam.
In other words, what are some ways where you (or someone else) might try to game the system to spike the north star metric, whether intentionally or unintentionally? What are some sanity checks that we should run when we initially see that “ah, our north star metric improved”?
Here’s another example: imagine your north star metric is the conversion rate from free users to paid users, a pivotal metric in assessing business growth. In this context, a health metric could be the retention rate of paid subscribers. This health metric serves as a sentinel, checking if your push for more paid users inadvertently results in churn due to a lack of satisfaction.
In simpler terms, health metrics are like the trusted co-pilot on your flight. They ensure that while you're aiming for the stars, you don't lose sight of the ground. To be effective, health metrics, much like north star metrics, should meet specific criteria:
Critical to the business: health metrics must relate to vital aspects of your business. Using a frivolous health metric, such as "total number of registered accounts," offers little value, as it only tends to increase over time without providing meaningful insights.
Measurable: To be useful, health metrics must be quantifiable. If you can't measure them, you can't monitor the impact they have on your business.
Actionable: health metrics should be metrics you and your team can act upon. Choosing a health metric that you can't influence leaves your team feeling powerless. For instance, if you're a platform product manager, selecting "number of enterprise contracts secured per quarter" as a health metric may not be actionable because it's beyond your control.
Here are some more examples of valuable health metrics, paired with their corresponding north star counterparts:
Examples of paired north star metrics and health metrics
Keep in mind that there can be many viable health metrics for any given north star metric. It's definitely not a one-to-one match! The goal of the health metric is just a lightweight health check, and not a rigorous "only one right answer" type of tool.
By carefully selecting health metrics, you ensure that your pursuit of the north star aligns with the overall health of your product and business.
Setting Meaningful Thresholds
Once you've chosen your health metric, the next step is to establish a threshold that triggers action when crossed. The threshold's value depends on your business's risk tolerance and the potential impact on your north star metric.
In my experience, thresholds in the range of 3-5% often strike a good balance. Setting a threshold of 0% is unrealistic, as metrics fluctuate naturally.
A strict threshold could lead to unnecessary alarms, while a lenient one might miss critical warning signs.
The Synergy of North Star and Health Metrics
To reap the full benefits of north star and health metrics, it's essential to incorporate them into your tracking and reporting mechanisms. These metrics are a key part of product review meetings and retrospectives.
Remember, the goal is not merely to report numbers but to demonstrate how your initiatives influence both the north star and health metrics.
If an initiative fails to positively impact the north star metric or adversely affects the health metric, it's a signal to reassess your strategy.
When Health Metrics Come into Play
Not all tools should be wielded at all times! Health metrics truly shine when your product has achieved product/market fit.
In earlier phases, when your product is still in the process of discovering its fit within the market, the relentless pursuit of product/market fit takes center stage. At this juncture, you're in the experimentation phase, continuously testing and iterating to find the right combination that resonates with your audience.
Health metrics really only matter when your product is already stable and has an existing user base. When the product is still pre-product/market fit, there's no "health metric" to measure because there isn't a stable user base to protect yet!
So, if you're still seeking product/market fit, don't spend time worrying about whether you've selected the right health metric or the right north star metric yet - instead, focus on identifying a viable trio of customer segment, customer pain point, and solution direction.
Closing thoughts
North star metrics provide the focus, while health metrics ensure you haven’t deviated off the right track. They serve as guardians, protecting your customers and the long-term health of your business.
By thoughtfully pairing these two metrics together, you’re significantly more likely to drive sustainable growth for your products.
Thank you to Pauli Bielewicz, Mary Paschentis, Goutham Budati, Markus Seebauer, Juliet Chuang, and Kendra Ritterhern for making this guide possible.
