~/learn/Product Metrics · Funnels & cannibalization
Conversion funnels & drop-off
Measure each step, find the biggest leak, and avoid misleading funnel definitions.
why this matters
Checkout and sign-up funnel questions are standard for e-commerce and growth roles.
A funnel is the sequence of steps a user takes toward a goal: visit → sign up → add item → checkout → pay. Step conversion is the share moving from one step to the next; overall conversion is end ÷ start. The biggest absolute drop-off is usually the best place to look first.
Funnels can be counted in sessions or users, and within a time window (e.g. pays within 7 days of visiting). Changing the definition changes the numbers, so state it explicitly.
visit 10,000 → signup 2,000 (20%) → add item 800 (40%) → checkout 400 (50%) → pay 300 (75%) Overall = 300 / 10,000 = 3%
Funnel analysis
1. define steps + time window 2. compute step conversion 3. find the biggest leak 4. segment the leak (device, source, country) 5. hypothesise why → test a fix
Interview trap
Improving one step can make a later step look worse. A simpler sign-up lets in less committed users, so 'add item' conversion drops — yet total purchases rise. Judge by the end-to-end outcome.
key takeaways
- Define steps and a time window.
- Find the biggest leak, then segment it.
- Judge changes by end-to-end conversion.
check your understanding
A simpler sign-up raises sign-ups 30% but 'first purchase' step conversion falls. What should you check?