What is customer cohort analysis?

Customer cohort analysis is the act of segmenting customers into groups based on their shared characteristics, and then analyzing those groups to gather targeted insights on their behaviors and actions.

As a branch of behavioral analytics, customer cohort analysis organizes users into subsets in order to better monitor customer behaviors and user engagement.

What is a customer cohort?

Simply put, a cohort is a group of people with shared traits and characteristics. A customer cohort is a group of customers or users who perform shared actions during a set period of time.

For example, users who signed up for a particular product in the month of May 2021 could be classified as a cohort, since they share a specific action: they all signed up for the same product during the same time period.

Using that example, a company could perform a customer cohort analysis on the May sign-up group to see if their behaviors differ from users who signed up for the same product in June. If members of the May cohort tended to abandon the product faster than those in the April or June cohort, it might indicate that there is an issue worth looking into, such as a glitch in a previous version of the app, or that other groups received more comprehensive onboarding that improved retention.

Why perform a customer cohort analysis?

Customer cohort analysis is a useful tool for marketing professionals, development teams, and other stakeholders who may want to better understand their customers’ behaviors in order to better target their messaging, alter their services, and meet customers’ needs.

Analyzing trends in cohort behavior is a useful way to improve retention and continue providing value to different groups of users.

By giving companies a way to analyze how groups of customers behave under certain parameters, customer cohort analysis can yield more valuable insights and data.

“Another reason to perform customer cohort analyses is to see what actions users take when using your app, product, or website”

For instance, if 100% of new users open an app the day they download it, but only 10% of them open the app five days later, that could indicate an issue with onboarding that is preventing customers from understanding how to get value out of the app.

A customer cohort analysis could show you that, giving you a chance to uncover why customers initially downloaded the app, what they were hoping to accomplish with it, and why their interest may have waned. Ideally, this will allow you to course correct to fix the problem going forward.

Another reason to perform customer cohort analyses is to see what actions users take when using your app, product, or website. Maybe you want to know how many customers visited your blog or read your testimonials before making a purchase.

By helping to isolate certain user groups based on these behaviors, you can learn more about how to tailor your marketing strategies and continue driving sales, engagement, and customer loyalty.