Sunday, January 13, 2008

Funnel Drop Off/Abandonment Rate

Drop Off or Abandonment Rate measures the number of visits/visitors who left a conversion process (funnel) without completing it. Any process with 2 or more actions on the site can be considered a conversion process but what you define as a conversion depends on the purpose of your site and your business objective. 

Before I continue, I want to mention that Drop Off Rate is the opposite of Conversion Rate. Conversation Rate is typically calculated as (Visits of the Last Conversion Step)/Visits of the First Conversion Step) X 100. Some of the commonly used conversion funnels are eCommerce shopping carts, registration forms or lead forms.

Abandonment Rate helps identify the steps in the funnel that are causing users to drop off. Conducting analysis of those steps will help us take necessary steps to minimize the drop offs and optimize the conversions.

There are 2 ways to calculate Drop Off Rate and each of them provide the data in slightly different ways. Both of them are correct ways to calculate and are commonly expressed as a percentage:

1) Drop off/Abandonment rate = ((Visits of the Last Conversion Step-Visits of First Conversion Step)/Visits of the First Conversion Step) X 100. Let’s assume that we want to use Product as the first step of the conversion process and that step gets 10,000 visits. But of those 10,000 only 7,000 continued to the next step of adding the product to shopping cart. Then in the next step only 2000 out of total 10,000 that started the process continue to Registration form and finally 1,200 out of 10,000 got to the final confirmation page. This means we saw 30% abandonment between Step 1 and Step 2 ie. ((7,000 -10,000))/10000)*100. Abandonment was 80% from Step 1 to Step 3 ((2,000 – 10,000)/10,000)*100. Final abandonment rate was 88% ((1,200 – 10,000)/10,000)*100. Though this calculation gives us a good idea of final drop off rate and conversion,  it can be a little misleading.

2) Drop off/Abandonment rate = ((Visits of the Current Conversion Step-Visits of the Previous Conversion Step)/Visits of the Previous conversion Step) X 100. This calculation takes into account the previous conversion step and the current conversion step. In the Funnel, we see that 7000 visits are measured on the Add to Cart page (Step 2) and only 2000 continue to the Registration form so the calculation based on this formula would be ((2000-7000)/7000)*100 which is -71%.

Based on the above formulas, it looks like the first one seems better in terms of Funnel visualization but personally I like the second formula better. I say this because in the second funnel, we are only considering the respective conversion steps in the calculation and not just Step 1 (Products) because Step 1 is entirely a separate user experience. According to me, the Drop Off Rate should be calculated based on two consecutive conversion steps as they are independent of the user acquaintance on the other pages of a funnel. These 2 pages alone can determine how we can improve the conversion rate at each step as these are not based on the Products page experience. For e.g. The Registration form design and engagement is totally different than what it is on the Products page. 

Here's a link to a calculator I built which includes these two calculations for you to use. Please note that the first calculation only takes in the first and last step as it only calculates the drop off rate based on the first and last steps.

Here's a link to a post I wrote to cover some steps on how you can reduce funnel drop off. I hope you like this post and would love to hear your opinion on it.


Voyagerpod said...

This is a clear and illuminating explanation. The debate about which of the two calculation techniques works best, concludes in favour of the second.

I agree that it is of more practical use and more logical.

The summary is well written and supported by simple graphics.

usability tools said...

Thanks for sharing these tips I believe this will help us to improve our traffic if they will apply some principle that you have shared here.