How To Use Cohort Analysis To Gain Insights Into Customer Behavior

Do you want to know how your customers interact with your business? Or how they perceive your brand?

One of the best ways to learn about your audience is to carry out cohort analysis. It can help you keep track of audience data and use them to optimize their experience.

Cohort analysis is a powerful tool for gaining insights into customer actions over time. It lets you spot patterns, and keep track of trends in customer behavior.

But it's not just a way of tracking customers' actions. There's more to it. So before jumping to - how to use cohort analysis - let's first explore what cohort analysis is in detail, and its overall benefits, and then move on to learning how to use it.

Let this post be a guide which will walk you through everything you need to know about this awesome data collection and analysis technique.

What Is Cohort Analysis?

'Cohort' means a group of people.

So, cohort analysis means taking a closer look at how a group of people behave over a certain period.

For your business, this 'group of people' will refer to your customers who have something in common.

You can determine your ‘cohort’ based on purchases made, the time when they engaged with your business, or any other such criteria.

For example, you have an e-commerce store that has been running for a year.

Now you can run cohort analysis to track the behavior of customers who have made purchases on your site over that year. You can group your customer data depending on criteria like products they bought, the time between purchases, and so on.

The overall idea is to compare the actions of different customer groups within the same timeframe. This helps you identify patterns that can enhance your customer experience and marketing strategies.

How To Use Cohort Analysis?

Cohort Analysis is a thorough strategic process. You can't just start analyzing data and get insights right away.

Instead there are a number of steps that you need to consider while using cohort analysis.

1. Identifying The Cohort You Want To Target

The first step is to determine the criteria that you want to use for segmenting customers. You can group them based on a purchase they made, types of goods they bought, purchase frequency, etc.

But before choosing any criteria, remember that you're running cohort analysis with a purpose in mind - the purpose to achieve your business goals.

That's why you should ask some basic questions before going forward with choosing a cohort.

• What kind of problem do you want to solve with the insights of your cohort analysis?
• Will the defined criteria help you reach your goal?
• After analyzing the cohort will you get insights that will help increase your sales?

You do cohort analysis with the aim to enhance customer relations, so make sure the segment or cohort you choose to target helps you with that.

2. Analyze The Cohort And Identify Trends

Once the cohort is identified, the next step is to analyze it.

You can use analytics tools like Google Analytics to monitor the engagement and activity of your customers over time.

Suppose you've chosen to create a cohort of customers who have made purchases over the last six months.

You analyze their activity within this period, such as -

• How often do they come to your website?
• What type of products do they buy?
• Price of products they usually buy
• Offers they make use of, etc.

By analyzing such data, you will be able to identify trends and patterns like - products they like buying, preferred price range, offers they're acting upon, etc.

3. Use Data Visualisation For Analysis

Cohort analysis is incomplete without charts.

You use charts for visualizing trends and patterns in the cohort analysis.

As visualizations make it easier for you to detect patterns. Different tools offer different kinds of charts.

Like Google Analytics offers bar graphs on your dashboard. But I recommend that you export your data and use a spreadsheet to refine the information. This would mean learning how to manage spreadsheets, using different data tools, and knowing how to present such information.

There is some effort needed to learn such information, but a great short cut is to hire a remote worker on Upwork or some other place to help.

With data visualized in the form of graphs, charts, and more, you’ll find it easier to detect patterns and use information to get what you need.

4. Implement Actionable Insights

The last step is to actually use the insights obtained from the analysis. For example, you might have done a cohort analysis on a group of customers who are having a long time gap between their orders. And this time gap between placing orders is just increasing.

After doing the analysis, you find out that the time gap is happening because this group of customers usually acts on marketing strategies like offers or discounts.

Now, depending on this insight you can make some changes like starting new offers, giving more discounts, or time-constrained deals, or reducing the time between your promotional campaigns.

These changes will not only increase your sales but will also keep your customers satisfied and stick with your brand.

More Benefits Of Cohort Analysis

So far, we've discussed how cohort analysis is a great way to get insight into customer behavior.

But apart from this, there are also some other benefits of cohort analysis:

• It helps you identify customer segments. By grouping customers, you can easily identify users who are similar to each other.
• It lets you do cross-selling. With insights like what type of products customers are buying and the price range they're comfortable with, you can suggest other products that would fit their budget.
• Marketing also gets easier with cohort analysis. When you know your customer's needs and wants you can create marketing tactics that are relevant to them.

Wrapping Up

So if you want to figure out how to keep your customers engaged and motivated to buy from you, then cohort analysis is the way to go.

Be it for customers or your business cohort analysis helps you in identifying the trends and patterns. But again it's not an easy process. Along with software, it takes time and effort, and a great team to carry out cohort analysis.

But, if done right, cohort analysis can bring in customers, which in turn will only increase your sales.