Cohort Analysis

Cohort analysis is a powerful analytical technique that provides valuable insights into customer behavior over time. It involves grouping customers with shared characteristics into cohorts and analyzing their behavior patterns.

This glossary explores the concept of cohort analysis, its benefits, applications, and how it can be used to improve marketing campaigns and product development.

What is Cohort Analysis?

Cohort analysis is a method of behavioral analytics where users are grouped into cohorts based on shared traits or experiences within a defined time span.

A cohort is simply a group of users who share a common characteristic. This characteristic could be their signup date, first purchase date, the marketing campaign they came from, their location, or any other attribute that is meaningful to your analysis.

By tracking the behavior of these cohorts over time, brands can identify trends, patterns, and insights that would be missed when looking at data in aggregate.

In other words, cohort analysis allows you to see how different groups of customers behave over time, revealing valuable information about their journeys and interactions with your brand.

Why is Cohort Analysis Important?

Cohort analysis is crucial for brands because it provides a deeper understanding of customer behavior than simply looking at overall trends.

By analyzing cohorts, brands can:

Identify Patterns and Trends

Cohort analysis helps identify how different groups of customers behave over time, revealing trends in engagement, retention, and churn.

This allows you to see which groups are most engaged, which are most likely to stick around, and which are most likely to leave.

Measure the Effectiveness of Marketing Campaigns

By analyzing the behavior of cohorts acquired through different marketing channels, brands can determine which channels are most effective at acquiring high-value customers.

This helps optimize marketing spend and focus on the channels that deliver the best results.

Improve Customer Retention

Cohort analysis can help identify factors that contribute to customer churn, allowing brands to take proactive steps to improve retention rates.

By understanding why certain groups of customers leave, you can develop strategies to keep them engaged and coming back for more.

Optimize Product Development

By analyzing how different cohorts use a product, brands can identify areas for improvement and develop features that better meet customer needs.

This helps create a product that is more valuable and user-friendly for different customer segments.

Make Better Decisions

Cohort analysis provides valuable data that can inform marketing strategies, product development, and overall brand decisions.

This approach helps ensure that decisions are based on evidence and insights rather than assumptions.

Cohort Analysis Example

A common cohort analysis example is analyzing customer churn. A brand might group customers into cohorts based on the month they signed up for a service.

By tracking the retention rate of each cohort over time, the brand can identify trends in churn and determine if recent changes have improved customer retention.

For instance, if the cohort analysis reveals that customers acquired through a specific marketing campaign have a higher churn rate than those acquired through other channels, the brand can investigate why and adjust its marketing strategy accordingly.

This could involve refining the targeting, messaging, or even the offer itself to attract customers who are more likely to stay engaged.

Cohort Retention Analysis

Cohort retention analysis is a specific type of cohort analysis that focuses on customer retention. It involves tracking the percentage of customers in each cohort who continue to use a product or service over time.

This information is valuable for identifying factors that contribute to customer churn and for measuring the effectiveness of retention initiatives.

For example, a brand might implement a new customer onboarding program and then use cohort retention analysis to see if it has a positive impact on customer retention rates.

Customer Cohort Analysis

Customer cohort analysis is a broad term that can be applied in many ways to understand customer behavior.

It can be used to analyze customer lifetime value, purchase frequency, engagement patterns, and other key metrics.

By segmenting customers into cohorts, brands can gain a more granular understanding of their customer base and tailor their marketing and product development efforts accordingly. 

For example, a brand might use customer cohort analysis to identify its most valuable customer segments and then develop targeted marketing campaigns to increase their engagement and loyalty.

Types of Cohort Analysis

There are several types of cohort analysis, each with its own focus and benefits:

Time cohorts

These cohorts are based on a specific time period, such as the month or year a customer signed up for a service. This allows you to see how customer behavior changes over time.

Behavior cohorts

These cohorts are based on specific customer actions, such as making a purchase or completing a tutorial. This helps you understand how different behaviors relate to customer engagement and retention.

Size cohorts

These cohorts are based on the size of a customer’s initial purchase or engagement. This can help you identify your most valuable customers and tailor your marketing efforts accordingly.

How to Conduct Cohort Analysis

Conducting cohort analysis involves several steps:

• Define Your Cohorts: 

Determine the shared characteristic that will be used to group your customers. This could be their signup date, acquisition channel, or any other relevant attribute.

• Choose Your Metrics: 

Select the key performance indicators (KPIs) that you want to track for each cohort. This could include retention rate, customer lifetime value, or engagement metrics.

• Collect Your Data: 

Gather the necessary data from your analytics platform or customer relationship management (CRM) system. This data will be used to track the behavior of your cohorts over time.

• Analyze Your Data: 

Use a cohort table or graph to visualize the data and identify trends and patterns. This will help you understand how different cohorts behave and what factors influence their behavior.

• Draw Conclusions and Take Action: 

Based on your analysis, make informed decisions to improve your marketing campaigns, product development, or customer retention efforts. This could involve adjusting your marketing spend, developing new features, or implementing customer retention programs.

Trackier and Cohort Analysis

Trackier’s performance marketing platform provides valuable tools and features that can enhance cohort analysis.

By integrating Trackier with your analytics platform or CRM system, you can:

Track Cohort Performance

Monitor key metrics for each cohort, providing insights into their behavior and identifying areas for improvement. This helps you understand how different cohorts are performing and where you can focus your efforts.

Segment Cohorts

Easily segment cohorts based on various criteria, such as acquisition channel, campaign, or customer demographics. This allows you to analyze specific groups of customers and tailor your marketing efforts accordingly.

Visualize Cohort Data

Create cohort tables and graphs to visualize data and identify trends and patterns. This makes it easier to understand your data and draw meaningful conclusions.

Analyze Cohort Behavior

Analyze cohort behavior over time to understand customer journeys and optimize marketing efforts. This helps you see how customers interact with your brand and identify opportunities to improve their experience.

By leveraging Trackier’s capabilities, brands can gain a deeper understanding of their customers through cohort analysis, enabling them to make better decisions that improve marketing effectiveness, product development, and customer satisfaction.