Not getting deep enough insights from your data? You might be looking at your data on too high of a level. For specific and meaningful insights about specific parts of your company and strategy, you need to perform cohort analysis.
Cohort analysis is an effective way for companies to glean actionable and unique insights from their data that might not be discovered by looking at their data as a whole. The unique insights this kind of analysis creates helps companies meet their marketing, sales, UX, customer service, and other goals.
What is a cohort?
A cohort is a group of users/customers who share a set of characteristics during a specific time period. The group’s shared characteristics can include anything from:
- Customers who signed up during a specific month
- Customers who used your product before or after a specific launch
- Customers who converted because of a specific marketing campaign
- Customers who use or don’t use a specific feature on your app
- Your lowest or highest tier users
- The type of device users/customers use to interact with our app or website
How does cohort analysis work?
Cohort analysis is part of behavioral analytics. Breaking customers/users down into similar groups helps you gain a better understanding of their behavior by knowing not only what is happening, but also how and why it is happening.
Cohort analysis makes it easier to see patterns throughout a customer’s/user’s lifecycle. Actionable information relevant to specific situations is tough to gain by combing through data from different active users at different stages. Reviewing the data of all of your customers as a whole during a certain period of time muddies your ability to find useful insights because you are comparing the actions and habits of long-time and new customers together. Viewing data in this way fails to account for the fact that these customers are likely at different stages in your customer cycle and will act differently. This makes it hard to see micro trends that you could capitalize on when you clear out the noise created by other data.
Based on your findings, you can then know how to create a better experience for similar customers or users in the future and achieve the same positive results or avoid repeating the same negative results.
Which cohorts are worth tracking and analyzing?
Every time you analyze your data, you should do so with the purpose of knowing how to meet or exceed your goals or initiatives. There are many different cohorts you can create and study. But you need to figure out which cohorts will produce the most meaningful insights.
When deciding which cohorts to track and study, consider the following questions:
- What problem/question do you want to solve/answer by studying specific cohorts?
- Will studying these cohorts produce insights that can improve your current strategy?
- Will those insights help you meet your current business goals?
Who can benefit from cohort analysis and how?
Cohort analysis can help any company, whether they’re SaaS or ecommerce companies, marketing agencies, or simply companies looking to improve their user experience.
As a SaaS company, separating and analyzing users by in-app behaviors creates a much clearer picture of how people interact with your product over their lifecycle. This allows you to analyze how their unique behaviors affect retention, churn rates, and other vital metrics.
If you’re an ecommerce company, separating out your customers based on which promotion caused them to buy or what they purchased, you can better understand the major factors that impact your revenue streams.
Cohort analysis helps companies calculate and improve the customer lifetime value (LTV) of specific cohorts. Knowing the LTV of particular cohorts allows you to identify your most valuable customer segments and direct efforts towards increasing those segments’ value or bring more of your customers into those segments.
Accurately understanding your LTV for specific cohorts helps to determine how much you should spend on lead acquisition and customer retention of those cohorts to maintain profitability.
Cohort analysis helps marketers look at and optimize specific acquisition channels and campaigns. With this information, you can see which channels and campaigns produce the best customers. You can then spend more on high performing channels or create similar campaigns. Or, you can optimize poorly performing channels and campaigns in hopes they will perform better.
Cohort analysis also answers other questions like:
- When is the best time to re-engage with your users?
- How do users on different plans use your application?
- When is the best time for remarketing?
- What behavioral differences exist between users who signed up before and after a product upgrade or launch?
- Which products bring the majority of customers to your site?
- Do these customers then view and buy other products?
- How much money do customers spend on average?
How can I effectively track and measure cohorts?
The right BI tool will help you perform and visualize the results of your different cohort analyses so insights are much more forthcoming. Check out the power Grow has to offer when it comes to organizing and visualizing your cohort data along with your other data.