Cohort analysis taps into the many groupings of consumers and analyzes how they influence business strategies and marketing campaigns. Focusing on and discovering which groups of customers are more valuable and why, is important so that your business can better focus its marketing efforts.
There are different ways to conduct a cohort analysis, but all methods have the same goal: to identify patterns in customer behavior and take action based on what is discovered. In order to achieve this goal, you need to first gather data on your customers. This data includes looking at customer demographics (age, income, race) and purchase history (date of the first order, the next time they returned, when they unsubscribed/churn). Once you have this data, you can begin to look for patterns in how these different cohorts of customers behave.
Cohorts are extremely valuable tools for getting answers to questions. Questions range from how long it takes a subscriber to become customers to which cohorts are driving the best results. Listed below are some more examples of questions that cohort analysis can help answer:
1. Which cohorts are more likely to make a purchase on their first visit?
2. What is the average order value for customers who made their second purchase within 7 days of their first purchase?
3. How many times do customers from different cohorts return before unsubscribing?
4. What are the most popular items amongst customers who made their first purchase more than 60 days ago?
5. What is the average lifetime value of a customer in each cohort?
6. What is the percentage of total revenue that each cohort contributes?
All of these questions and more can be answered through cohort analysis. It is important to segment your audience into cohorts to better understand how you can improve and make changes to previous strategies/tactics.
How does Cohort Analysis help marketers?
Cohort Analysis helps marketers gain valuable insights into customer behavior, such as how long customers stay with a product or service, which features they use most often, and what drives their loyalty. It also allows marketers to compare different customer segments to determine which ones are more profitable and where to focus marketing efforts.
What are the benefits of using Cohort Analysis?
The main benefit of using Cohort Analysis is that it enables marketers to gain a better understanding of their customers’ behavior and preferences. This information can then be used to optimize marketing campaigns and improve customer retention rates. Additionally, it can help identify opportunities for growth and expansion by identifying new markets or customer segments with potential for higher engagement.
Fun Fact:
"Cohort analysis can be used to identify patterns in customer behavior and preferences, enabling companies to better understand their target audience and develop more effective marketing strategies. According to a survey conducted by Statista, 80% of marketers found that cohort analysis improved their ability to measure the success of marketing campaigns." (Statista, 2020)