Stop 04 · Data & Metrics for PMsTopics · 5/12

Funnel Analysis

In short

Every product has a path users must walk to get value, and people drop off at every step. Funnel analysis shows you exactly which step leaks the most.

Breaking a multi-step user flow (e.g. signup → onboarding → first action → purchase) into stages and measuring drop-off at each one to find the biggest leverage point.

The purple blob pours lots of marbles into a big funnel while only a few drop out the bottom.

Think of it like this

The mall walk

Of everyone who walks into a mall, some enter a shop, fewer try something on, and fewer still reach the billing counter. If a shop sees lots of trials but few bills, the problem is near the counter, not the door.

Watch it happen

An online course checkout funnel

10000

6000

2400

1800

900

1/5Users at each step: course page, add to cart, start checkout, enter payment, paid. Example numbers for one month.

The big ideas

What you need to know

Define steps clearly

Each step is one tracked event. Users must pass steps in order to count.

Step conversion

Divide users at each step by users at the previous step. The lowest rates show the biggest leaks.

Segment the leaks

Split by device, source or city. A leak often hits one group much harder.

Numbers say where, not why

The funnel finds the leak. Session recordings and user calls explain it.

See it in code

A tiny example

excel

1=B3/B2

Put step names in column A and user counts in column B. In C3, this gives the conversion from the previous step. Fill down and format as a percentage.

Save yourself the pain

Common mistakes

Oops

Only looking at the overall conversion from first step to last.

Do this instead

Look at each step's conversion. The overall number hides which step is broken.

Oops

Assuming you know why users drop off.

Do this instead

Watch recordings or talk to users who dropped at that step before designing a fix.

Your mission

Build a funnel in Sheets

~25 min

Quick check

Steps: 1,000 visit, 800 add to cart, 200 start checkout, 180 pay. Which step leaks most?

Go deeper

1Draw the funnel for a signup flow you've personally been through.
2Estimate (or find) the drop-off rate at each step and rank them by opportunity.
3Practice framing 'improve the funnel' as a specific hypothesis about one step.