Base for conversion rates

Question

In Q4, what is the reason for calculating conversion rate out of a base of 7M? 5M of these users are pre-existing, so shouldn't we be solving for how to get to 0.7 M new premium users out of the 2M new downloads?

Answer 1

Hi there,

I’m the author of the case so happy to explain.

You need to calculate from the base of 7M because the increase in the base will trigger changes further down the recruitment funnel.

Basically, the question is asking you to calculate the difference in two conversion rates - between present state and future state. The present state is the one where you have an initial base of 5M users. You can only get to the future state conversion if you apply the new, 7M users base.

Hope this helps!

Cristian

Answer 2

It's not super clear what the success metric is based on the information you provided.

The success metric sounds like how many people download the app.

So in this case the conversation rate at the start and finish is determined by total number of downloads / total number of visitors to the site. What you should discover is by increasing the number of visitors doesn't automatically increase the conversation rate. The absolute number of conversations may increase, but the actual rate may decrease/increase. If the conversation rate holds, great. But if the conversation rate drops significantly, essentially what it is saying is the new users that you have gained aren't really qualified customers.

I haven't read the case, but I would also assume the number of downloads can arise from both new and pre-existing users. Not just the new ones.