Onboarding, Retention, And The Elusive “Bottom of the Funnel” Metric

The word “funnel” is used a lot in the tech world. It’s a way of describing how your users navigate through your product/service. Defining your funnel in a smart way helps you build a business around what your users do throughout their experience.

The top of the funnel starts with something like downloads, page visits or app launches. If the user is interested in learning more, the user goes through onboarding.

Many onboarding flows include a signup phase that is designed to weed out those who aren’t actually interested in the product (i.e. people who will end up being bad users).

Once users get through onboarding, they move to the next step — the part where the value of the product starts showing. For most products, this part is very long (majority of the user lifecycle) and is referred to as engagement.

A product with amazing engagement will result in higher retention of users. You work so hard to get users in the door in the first place — don’t shoot yourself in the foot by losing them for lack of offering value!

People in a company tend to work on a certain piece of the funnel: filling the top, lubricating the middle, defining the bottom, etc. Product managers are often responsible for zooming out and defining the funnel, and then zooming into various pieces of the funnel to make sure they’re optimized.

Each product has a very unique value proposition to users of that product. Once users understand the value — assuming they fall into the target audience for the product — they’re happy to proceed with their exploration of the product to see if it really does what they think it does.

So how do you measure user engagement over time? Retention metrics.

Your retention metrics should vary based on the type of engagement you offer. I like to think of engagement as dividing products into 2 buckets: Foreground Products and Background Products.

Foreground products require you to open the app/site to receive the value. These are services like Twitter, Instagram, Snapchat, etc. If you don’t open the app, you don’t receive anything of value in the app. For Foreground products, retention metrics include things like 7–30–90 day retention (how many people still come to your product 7, 30, 90 days after they’ve joined).

Background products offer value when you don’t have the app open on your phone or computer. These include email newsletters, curated content digests, and relevant/contextual push notifications. For Background products, retention metrics are more about how long people receive value before they churn. They don’t necessarily have to open your app to count as “active” because as far as they can tell, they’re being active by using your product in the background.

And this hits on a fundamental philosophy of product metrics — the only metrics you should care about in the product are those that can help you learn how to offer more value to the users. Metrics that don’t have a direct tie to the value you’re offering your users are called “vanity metrics”.

Vanity metrics tell a story that might matter to non-product-oriented execs and outside investors, but it’s very rare to see a company succeed because it hit the ball out of the park for a vanity metric.

[Note: I believe it’s a bad idea to drive traffic to the top of your funnel before you’ve really nailed your product metrics.]

The final step (the bottom) of your product funnel will be the one that makes your company stand out from the rest. It’s absolutely, undeniably, the most important step. Most companies are not good at defining the bottom of their funnel because it’s just not obvious.

The bottom of the funnel is also a dynamic metric; the bottom of your funnel metric today will most likely be different than the bottom of your funnel metric a year from now. The bottom of the funnel evolves with the company as you learn more about your value proposition to users. The ideal bottom of the funnel metric will steer the company towards offering maximum satisfaction to the largest number of users in that stage of your company’s life.

Here’s the framework I’ve developed for thinking about the bottom of the funnel. It really comes down to getting people to both 1) come back for more and 2) tell others about it.

Recurring usage — getting people to come back for more. For e-commerce this means repeat purchases. For SaaS companies this means subscription renewals. For restaurant and food services, this means eating with them again. For standup comedians, this means people coming to your show again. Note: this is different than one-time engagement because the bottom of your funnel must define your best users. Your best users live in the bottom of your funnel and don’t just order once!

Virality — getting people to tell others. For a social network, this means getting people to invite their friends. For a TV show, this means getting people to tell everyone about it. It’s really hard to get people to vouch for your product/service — people usually only put their neck on the line if they are extremely confident that your product/service will delight that person they tell. Nobody wants to recommend something that will make them look bad.

If you’re able to create something that delights people enough that they choose to keep coming back AND tell other people about it — you’ve done something quite magical.

There’s no one answer to what the bottom of your funnel should be — that’s only up to you to know. But if you break your product down to recurring usage patterns and virality coefficients, you’ll be a lot closer to defining the bottom of your funnel in a way that sets you up to build a highly successful product.

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