Cohort analysis in marketing. How to use it?

PROBLEM

You have to be prepared to explore and explain behavior of you clients and patterns in data collection to know exactly what your indicators mean.

That requires additional analytical techniques.

SOLUTION

Use cohort analysis

Cohort it is a collection of individuals who are experiencing the same phenomenon in the identical period of time.

In the case of business solutions we have people that have established an account or made a first purchase at a particular time, for example, on the first day of a month or the first day of a week.

These people form so-called static fields - unchanging group of customers who represent certain behaviors at the same periods.

Each user can belong to only one cohort, therefore, they can not migrate to other groups.

The basis of the analysis here is the time interval, not, for example a location.

Analysis of cohorts can be applied to many types of data: sales volume, number of page visits, subscriptions to a specific services or conversion rates. The purpose of analysis causes the appropriate measures.

Comparing levels of sales in different cohorts - for example, customers who make their first purchase in the next five months - can help uncover deep mechanisms.

See how it looks in practice

As an example could be the phenomenon, consisting of the fact that previously acquired customers are increasingly less likely to purchases, and sales growth is heavily dependent on the time of year.

Cohort (No.) Month 1 Month 2 Month 3 Month 4 Month 5

First purchase in December (1)

1000,00 PLN 650,00 PLN 150,00 PLN 50,00 PLN 0,00 PLN

First purchase in January (2)

750,00 PLN 500,00 PLN 200,00 PLN 0,00 PLN -

First purchase in February (3)

300,00 PLN 150,00 PLN 0,00 PLN - -

First purchase in March (4)

200,00 PLN 0,00 PLN - - -

First purchase in April (5)

50,00 PLN - - - -

In total 2300,00 PLN 1300,00 PLN 350,00 PLN 50,00 PLN 0,00 PLN

As the table presents, customers who made their first purchase during the Christmas and New Year time (December - January), spent the most money.

Cohort (No.) Month 1 Month 2 Month 3 Month 4 Month 5

First purchase in December (1)

1000,00 PLN 650,00 PLN 150,00 PLN 50,00 PLN 0,00 PLN

First purchase in January (2)

750,00 PLN 500,00 PLN 200,00 PLN 0,00 PLN -

First purchase in February (3)

300,00 PLN 150,00 PLN 0,00 PLN - -

First purchase in March (4)

200,00 PLN 0,00 PLN - - -

First purchase in April (5)

50,00 PLN - - - -

In total 2300,00 PLN 1300,00 PLN 350,00 PLN 50,00 PLN 0,00 PLN

However, in subsequent months, revenues begin to decline. The graph shows that new customers spend less and less.

Cohort (No.) Month 1 Month 2 Month 3 Month 4 Month 5

First purchase in December (1)

1000,00 PLN 650,00 PLN 150,00 PLN 50,00 PLN 0,00 PLN

First purchase in January (2)

750,00 PLN 500,00 PLN 200,00 PLN 0,00 PLN -

First purchase in February (3)

300,00 PLN 150,00 PLN 0,00 PLN - -

First purchase in March (4)

200,00 PLN 0,00 PLN - - -

First purchase in April (5)

50,00 PLN - - - -

In total 2300,00 PLN 1300,00 PLN 350,00 PLN 50,00 PLN 0,00 PLN

In April sales collapse - this situation can show high seasonality of the business.

Cohort (No.) Month 1 Month 2 Month 3 Month 4 Month 5

First purchase in December (1)

1000,00 PLN 650,00 PLN 150,00 PLN 50,00 PLN 0,00 PLN

First purchase in January (2)

750,00 PLN 500,00 PLN 200,00 PLN 0,00 PLN -

First purchase in February (3)

300,00 PLN 150,00 PLN 0,00 PLN - -

First purchase in March (4)

200,00 PLN 0,00 PLN - - -

First purchase in April (5)

50,00 PLN - - - -

In total 2300,00 PLN 1300,00 PLN 350,00 PLN 50,00 PLN 0,00 PLN

BENEFITS

Comparison of several cohorts will allows you to discover trends and to estimate the revenue in coming months, and thus take appropriate action.

Comparison of several cohorts will allows you to discover trends and to estimate the revenue in coming months, and thus take appropriate action. In previous example you can design automated and personalized promotional campaign, which will start at the beginning of April (when your sales dramatically decrease).

TO CONSIDER

Cohort analisis will not be usefull at the time of dynamic changes in the market or your company, so to get the most reliable results you should based them on a data from at least several months.

SYNERISE SOLUTION

Thanks to Synerise you can vary a content of messages and promotions depending on the customer's date of registration.

As a result, you will have a chance to a reach current (less and less buying) customers.

With Campaign section you can send different types of messages and promotions to reach clients in different context.

Automation module allows to sent messages to the right cohort at the right time and choose one of the previously prepared message template.

Choose right trigger, contition and action.

www.synerise.comul. Podole 60/3.30, 30-394 Kraków hello@synerise.com

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