Focus on absolute numbers, not conversion rates

Archie is discussing conversion funnel optimization at Shopify, where teams focus on moving users through stages like signup to activation.

Everyone is thinking about absolute number of people who made it through their 'stage' of the funnel. So instead of I'm trying to convert a bunch of people, a conversion rate, I just want more people to get activated. And then once you start thinking that way, you realize actually the best way to get more people to get to a step sometimes, and often they just get more people in the door in the first place.

When you have teams naturally break up the world into different funnel stages or different points in the journey, it gets very seductive to look at my part of the funnel and what's my conversion rate through that part of the funnel, right? And then the team starts to optimize for that conversion rate as their north star. But in practice, it's actually almost always easier to just make it harder to do the thing right before your step in the funnel to increase your conversion rate.

Archie is discussing why Shopify focuses on absolute numbers rather than conversion rates when measuring team performance across different funnel stages.

The easiest way to increase my signup to activated thing is just make it harder to sign up. Nuts and bolts, that will always happen is when you have teams on that local conversion rates, you get all these weird team incentives, because they're optimizing to basically implicitly make it harder to do the step before them.

There's a fundamental flaw to it which obviously is that you're focusing on cost and not the value derived. And so when you focus on CAC and reducing CAC, what tends to happen is you actually might be doing something very damaging where you're succeeding in reducing CAC, but you're actually bringing in customers that are less valuable because those are the ones that you're able to attract with a lower CAC.