How To Optimize Your Marketing Strategy With Cohort Analysis

Have you ever wondered which acquisition channels attracted the most engaged customers over time? Or which period of the year is the best time to run a marketing campaign? Or which products are good at keeping your customers coming back?  If so, it's time to dive into the world of cohort analysis. This powerful tool allows you to better understand your customers and their behavior, so you can make data-driven marketing decisions and boost your revenue. Cohort analysis may sound complex, but it's a simple concept that can transform the way you approach your marketing efforts. In this article, we'll explore why cohort analysis is important, how it works, and most importantly, how you can use it to supercharge your marketing strategy. 

So, what is cohort analysis? It is a method of analyzing customer behavior over time. One of the most well-known use cases is Google Analytics, which uses it to track how visitors keep coming back to a website. But it also makes a lot of sense to use it to track the behavior of existing customers! Cohort analysis involves grouping customers based on a common characteristic, such as the month they made their first purchase, the marketing channel they came from, or the product they have bought. By tracking these groups (or “cohorts) over time, you can gain insights into how customer behavior changes and identify patterns and trends. 

But, why is it so important? Because it provides a more nuanced view of customer behavior than traditional metrics like conversion rate or customer lifetime value. By tracking how different cohorts behave over time, you can see how your marketing and product strategies impact customer behavior and track retention rates over time.   While it’s possible to create your own cohort analysis in Excel, it may become a long and complex task, and it should be updated constantly. That is why if you plan to use it more than once and/or don’t want to spend a lot of time preparing your models, having a tool can help you be more efficient. 

Fructifi’s cohort analysis is focused on existing customers. You first select how to create the cohort - by date of first order, by acquisition channel, by account owner, and by product, then choose a metric you want to track: client retention, re-ordering patterns, or revenue retention. Finally, you decide the periodicity of the analysis: monthly, quarterly, or annually. However, just having that data will not help you if you don't use it to adapt your marketing and sales strategy. Thus, how do you interpret the graphs? 

Here are 4 examples of analysis you can make at Fructifi (note: all numbers below are fictional and purely provided as examples):  

1) Client retention by date of first order