Optimize Absolute Throughput, Not Local Conversion Rates
Goal teams on the total number of people who complete a funnel stage, never the conversion rate.
- Difficulty
- Moderate
- Time to result
- ~months to results
- Steps
- 3
- Confidence
- 95%
When large orgs split a funnel across teams, each team optimizes its own conversion rate as a North Star. The cheapest way to lift a local conversion rate is to constrict the step just above yours, so fewer but higher-intent users reach you, which quietly harms the whole business. Shopify counters this by goaling every team on the absolute number of people who reach the end of their part of the journey, which rewards teams for getting MORE people in the door even when it lowers their rate.
Origin
Archie Abrams, VP Product & Head of Growth at Shopify, describing how Shopify's ~600-person growth org avoids the funnel-gaming trap.
Core principles
- 01Conversion rate is a ratio that can be gamed by shrinking the numerator's input
- 02Constricting the step before yours is the easiest, most destructive way to lift your rate
- 03Absolute headcount through a stage aligns local incentives with company growth
- 04Lower CAC from more top-of-funnel volume can more than offset lower LTV/retention
How to run it
- 1
Map where the funnel is split across teams
Identify each team that owns a distinct funnel stage and the conversion rate they currently optimize.
Pro tip The risk is highest in large orgs where teams 'naturally break up the world into different funnel stages'.
Watch out Local conversion-rate targets create incentives to make the previous step harder.
- 2
Replace rate goals with absolute-number goals
Re-goal each team on the total number of people who reach the end of their part of the journey, not the percentage who convert.
Pro tip Frame it as 'I just want more people to get activated' instead of 'increase my conversion rate'.
- 3
Reduce friction upstream to grow the input pool
Often the best way to get more people to a step is to get more people in the door in the first place by making sign-up easier, even though it lowers the rate.
Pro tip Expect retention rate and LTV to dip; check whether CAC dropped by more, which usually unlocks more spend headroom.
Watch out Teams will panic that LTV/retention fell without noticing CAC fell further.
In the wild
Abrams notes the simplest way to increase a sign-up-to-activated rate is just to make it harder to sign up, so fewer but higher-intent people make it through, which he calls 'the bane of my existence'.
→ By goaling absolute merchants instead, teams are incentivized to widen the top of the funnel rather than choke it.
Common mistakes
Treating a rate improvement as real growth
A rising conversion rate can simply mean you filtered out lower-intent users upstream, producing fewer total customers.
Ignoring CAC when LTV drops
Teams get nervous when retention and LTV fall but miss that lower CAC often more than compensates and increases spend capacity.
Is it for you?
Best for
Growth and product leaders running multi-team funnels who see teams protecting local metrics
Not ideal for
Tiny teams with a single owner of the whole funnel where local gaming isn't structurally possible
From the transcript
“it gets very seductive to look at my part of the funnel and what's my conversion rate through that part of the funnel”
“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…”
“orienting every team to think about the total number of people not the rate but the total number of people who got to the end…”
From the episode
Breaking the rules of growth: Why Shopify bans KPIs, optimizes for churn, prioritizes intuition, and builds toward a 100-year vision
Archie Abrams (VP Product, Head of Growth at Shopify)