FAQ: What Is Cohort Analysis and How Do You Perform One?

By Indeed Editorial Team

Published October 21, 2021

On a brand website, it can be important to evaluate how successfully the web pages attracted target audiences. Marketing analysts often conduct a cohort analysis to recognize patterns in how consumers responded to promotional messages in online spaces. Learning the components of a cohort analysis can enable you to lead comprehensive tracking and measurements of your own, where you can learn how to improve the campaigns for the future. In this article, we define the purpose of a cohort analysis, explain the steps for conducting one using analytical software and discuss the circumstances for surveying groups of website users.

What is a cohort analysis?

A cohort analysis is an analytics tool that separates data into specific categories before the evaluation takes place. Professionals define the categories according to the common traits that pieces of the data share, which fulfill the cohorts. It enables the marketing team to study the activities of a particular group of consumers who took similar actions on a business' website. The analysis can offer a perspective for building marketing techniques that can better appeal to users that exhibit certain behaviors.

For example, you work for a furniture store that recently had a 50% holiday sale. Your goal is to track the customers who survey the webpage with all the discounted inventory, so you conduct a cohort analysis. The results reveal that 75% of users purchased the items they browsed, which indicates that the sale banner on the landing page successfully attracted visitors. Consider using designated groups in your marketing analytics technique to highlight patterns among consumers and apply the feedback to the next promotional campaign.

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How do you perform a cohort analysis?

Follow these steps to conduct a cohort analysis of the data on a website:

1. Make a spreadsheet of the raw data

The first step is to transfer the raw data from the analytical software into a spreadsheet, allowing you to view and interpret the users' actions more easily. You can also see the commonalities between customers, which helps you ascertain how you want to develop cohorts. For example, if you want to study only the consumers who bought expensive products, then you might create a cohort based on the amount of their purchases. If you want to look at consumers of particular demographics, such as age, gender or city of residence, then you may group categories according to their personal characteristics.

Think about the trends you want to illuminate among your consumers before conducting the analysis. You can ensure the results can help you understand a certain group more clearly. It may also be helpful to compare the trends of two different cohorts to comprehend which segments of the audience the marketing campaign appealed to more effectively. Attach precise names to your cohorts so you and members of your team can identify the categories of consumers you're studying.

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2. Assign a time period to the cohort

The second step is to contemplate the time period you want to study the consumers' actions on the website. Looking at the spreadsheet, pay attention to the dates the users accessed the webpage or application. You can filter the data according to the occasion you want to analyze. For example, if the online store released a new product, then you may perform a cohort analysis starting on the date the product debuted on its website, which can indicate the interest that the consumers showed.

The time designation can make the results of your evaluation more specific, and you can understand how the content of your website performed for a certain period. Another option is to organize the data according to the date the users joined the online community of the website or made a user account on the application. For example, your objective may be to analyze young adult users between the ages of 18 and 23 who downloaded the application in the first month of the year. Attach the time period to the name of the cohort to further narrow the raw data from the spreadsheet.

3. Define the length of the evaluation

The third step is to determine how long you want to study the behavior of users from the initial start date, which is the lagging period. Specifying the duration of the study can enable you to recognize the life cycle of the user. You can also acknowledge how efficiently your website or application performed with sustaining the interests of consumers during that period. For example, if you're analyzing users who created a personal account in the first month of the year, then you might review their behaviors until the end of the second month. The lagging period is two months.

Specify the exact date for ending the analysis. You can make sure that the results you collected represent the specific occasion you aimed to study and don't interfere with data from other time periods. For example, if you structured the lagging period to be two months long, then attach the date and year at the end of the second month to finish measuring the behavior.

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4. Design visual representations

The final step is to compile the results of the cohort analysis into visual representations, which can be bar graphs, line graphs or pie charts. The graphs can help you make conclusions on the effectiveness of the website or application. You can also illustrate how the behavior of consumers in the same cohort changed throughout their life cycle. For example, if you studied customers who made expensive purchases in one month, the line graph may indicate that their purchase amount steadily increased. Consider sharing the graphs with your team to gain insight into the techniques that succeeded the most.

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When should you use cohort analysis?

Here are three occasions when it can be helpful to conduct a cohort analysis:

Measuring customer retention

Customer retention is the practice of acquiring new customers to a business and encouraging them to continue buying and using the products. Professionals may aim for high retention rates to show the company is experiencing consistent successes. A cohort analysis can determine if the website or application is yielding high engagement rates over time. You can make sure the users you're appealing to feel inclined to visit the website, log into the application or make repeat purchases.

Reducing customer churn rates

The customer churn rate is the percentage of consumers who stopped supporting the business after a certain period. Conducting a cohort analysis during a specific occasion can enable you to identify churn rates and strategize how to reduce them. You can look at areas of the website to see what content contributes to the customer's decision to leave or stay. The results can help you restructure the product to boost the longevity of engagement.

Identifying successes in website and application performance

The cohort analysis can signify the strengths of your marketing endeavors and the areas where you can improve. You can interpret the results to learn the parts of the website or application that produced positive outcomes for the business, which can be an increase in purchases and subscriptions. It can be helpful to perform cohort analysis after the end of a marketing campaign. You can also reference the results during future marketing efforts.

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