Data Science

Cohort Analysis: What It Is and How It Helps Increase Sales

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By Pep Canals, on 18 January 2024

If you are constantly seeking ways to boost sales, then cohort analysis can be a valuable strategy for you. It functions as a user segmentation method that analyzes historical user behavior to identify patterns or changes and take targeted actions. However, this analysis is often underutilized.

In this article, we'll explain what cohort analysis is and how it can be successfully applied in a digital marketing strategy.

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Cohort Analysis

What Is Cohort Analysis in Marketing?

Cohort analysis, involves segmenting users based on one or more characteristics and analyzing their behavior over time. This segmentation helps identify patterns or changes in behavior throughout the customer lifecycle, making it particularly useful for detecting trends and taking informed actions. It is a valuable tool within digital marketing, especially for ecommerce, aiding decision-making, particularly when common patterns are identified.

While users can be grouped in various ways, this is typically done based on the date of their first purchase or the date of their first interaction. However, segmentation options are limitless, depending on a company's needs.

Benefits of Cohort Analysis for Boosting Sales

Cohort analysis is highly beneficial for ecommerce businesses and offers several advantages:

  • Understanding Customer Behavior Over Time: Segmentation allows businesses to detect patterns and changes in customer behavior, providing a clearer picture of post-purchase satisfaction.
  • Tracking and Understanding Customer Churn: Analyzing customers in groups is an effective way to visualize and understand customer churn, aiding in the design of strategies to increase retention and loyalty.
  • Identifying Behavioral Segments for Personalized Campaigns: Data obtained from segmented groups can be used to design strategies or actions that capture their attention more effectively.
  • Providing Relevant Insights into Marketing Campaign Effectiveness: Cohort analysis offers clear and relevant information about how marketing campaigns have influenced conversions.

However, it's crucial to implement a cohort analysis strategy correctly. Many ecommerce companies fail to do so and miss out on the potential benefits.

Implementing Cohort Analysis in Your Sales Strategy

Google Analytics 4 stands out as a key tool for conducting cohort analysis. To extract customer group analyses, log in to this platform, navigate to the Audience tab, and select the Cohort Analysis option.

It's worth noting that there are different types of cohort analysis—one based on methodology, analyzing behavior within a specific time frame, and the other based on scope, evaluating behavioral changes in response to certain actions or events. Regardless of the analysis type, successful implementation requires defining the objective, choosing the topic for analysis, and clearly defining events.

Selecting relevant cohorts is essential. These are typically the first purchased product, the month of the initial conversion, traffic source, first conversion campaign, number of orders per customer, average order value, or customer lifetime value.

After selecting cohorts, choose the type of analysis (prospective or retrospective) for analysis, and intracohort or intercohort for scope analysis.

  • Prospective analysis is used to study future behavioral changes. It requires prolonged tracking to detect behavior patterns that lead customers to take specific actions.
  • Retrospective analysis studies current behavior by considering past data.
  • Intracohort analysis applies when seeking common behavior in response to a specific event.
  • Intercohort analysis compares two groups to identify common patterns or differences.

Finally, interpreting the results obtained will provide the information you need to design strategies or campaigns accordingly. If you're interested in implementing these actions and leveraging your company's data, Cyberclick's team of experts can assist you. Contact us today!

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Pep Canals