Cohort Analysis

Why you should do cohort analysis for your online store

I know you have a thousand things to do and cohort analysis on not top of the list, but you should incorporate it in your marketing activities and business performance reports because it is gold.

Cohort analysis gives you personalization at scale since it’s not 1-on-1, but it’s not blanket approach to your whole customer base either.

Ecommerce Cohort Analysis

Definition:
Cohort analysis in ecommerce means to monitor your customers’ behavior based on common traits they share – the first product they bought, when they became customers, etc. – to find patterns and tailor marketing activities for the group.

Do you need a CRM for cohort analysis?

It’s not a must, but it helps a lot.

A CRM for ecommerce stores will have all the info on customer behavior that you need to understand buying habits and be able to serve them better.

For a proper cohort analysis – even if you do the segmenting and filtering yourself, you’ll need details like:

  • Time of first purchase
  • Time of all purchases made
  • Products bought
  • CLV, order values
  • Activity other than buying

A good CRM will do the cohorts for you and map out their behavior over time so you can compare how different cohorts perform.

Related: How online stores boost sales using a CRM

Cohort Analysis For Customer Retention

Source: Henry Johnson LR on Medium

Customer Retention Activities

After you do cohort analysis, you’ll be able to do more and better retention because you’ll know what stimulates repeat buying in your store: what products, what promotions and what marketing initiatives attract loyal customers.

What products stimulate repeat orders -> more effective presentation of products
What offers work best -> better personalization
How often different cohorts shop – > build relationships with ongoing engagement between orders
How the customer journey goes -> more accurate timing of lifecycle marketing

Related: How to use cohort analysis to create better customer experiences

How Cohort Analysis Can Improve Customer Retention

When you do cohort analysis and understand the behavior of your customers over time, you can do more of what stimulates loyalty and retention, and drop what’s not doing it.

This will increase your customer retention rates overall because you’ll focus on the efforts that truly move the needle.

  1. Run more campaigns like the ones in your most successful months in terms of retention. If you had a month-long initiative with an influencer, for example, it surely did influence your results and direct referred sales are not the only result to look at. A campaign during which you gained loyal customers should be replicated.
  2. Cohort analysis will show your store’s strong months. Find out people’s motivation to shop then and put more stress on it in future campaigns, e.g. a full-blown Valentine’s Day campaign if you realize people give your product as a Valentine’s gift.
  3. Make loyalty-inducing products more visible so more people get hooked. There’s no use to keep pushing other items that only bring one-time customers. This will help you optimize your inventory, too. Read more: The Superstar Product Technique
  4. Some tools like Metrilo can give you cohort analysis by coupons so you can keep on using only the types of coupons that make sense. For some ecom businesses that’d be percentage off, for others – exclusive deals. The idea is to do what has a long-term impact on your customer retention.
  5. Historical data will help you prepare for the behavior of future cohorts. Some types of cohorts like people who buy Christmas gifts of school supplies from you will show similar behavior year after year. It’s good to look at past data and know what to expect.
  6. Thanks to the insights from cohort analysis, you’ll know how to time your marketing communication so it doesn’t annoy your customers. It’ll be less intrusive and salesy, and more useful and timely. This will help you build better relationships and more favorable brand image.

Related: Cohorts, sales, and seasonality – case study

Customer Retention

Credits: David Brier on Medium

Cohort Analysis and Email Marketing for Customer Retention

Cohort analysis works wonders for your email marketing.

It gives so much insights that you can completely re-organize the way you send customer retention emails.

Timing of emails

When you know time between orders (TBO), average customer lifetime, how the orders are distributed over time, it’s easy to time your emails for the best possible moment when customers are ready to buy again.

You’ll know when they’re likely to run out of item X and gently offer a reorder. Or you’ll know they like to shop for shoes every 3 months so you won’t waste marketing budget on this cohort before.

Reminders are also right on spot: push if only people go over the average period between orders, not before. This prevents you from getting too pushy and alienating your customers.

Engaging communication

Throughout the customer lifecycle, you can keep the relationship going with content and value-rich emails.

Content is a great way to say more about your products without getting on your customers’ nerves. Here are more ideas for content for ecommerce stores.

Such emails improve the customer experience because the communication is not just sales calls, but people can get something of value for free. They’re more likely to open your emails and generally feel more positive about your brand.

Not blanket approach

I know it’s hard to keep tabs on each and every customer, but you still want to tailor offers and personal attention.

You can do it after cohort analysis. The cohorts are smaller segments and they share something in common which makes personalization possible and meaningful.

Tailor your communication by what the products bought tell you about the customer and their needs, and offer only related products. The same goes for the promotions that brought them in – if someone converted from a “final sale -70% off” coupon, chances are they need equally deep discounts to continue shopping from you.

On the other hand, a cohort might consist of tens or hundreds of people (depending on your store and products) and that means 1 personalization effort for each cohort, not person.

Using customer segmentation for retention is the most logical thing to do: find the common thing among all those people and target them with the right offer for all of them. That’s why we say cohort analysis allows personalization at scale.

Feel like your store can use some extra sales?
Do a cohort analysis today and sell more.

Free cohort analysis

 

About the author

Dimira is the Words Pixie of Metrilo. A daydreamer and a coffee junkie. Can’t live when a comma is misplaced. A dog lover with a geeky sense of humor.

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