Cohort Analysis

Posted on Updated on

Cohort Analysis is a technique used to analyze characteristics of a cohort (a group of customers distinguished on a common characteristic) over time. It is actually another type of customer segmentation which extends the analysis over a defined period.

One of the frequently applied use case in sales function is to segment customer base based on some set of characteristics. The criteria could be to categorize them into groups who are likely to continue buying, who are likely to defect or who have already defected (went inactive).

Once these groups are formed, some of the common applications for analysis would be to:

  1. Study customer retention – use the results to learn about conversion rates of certain groups and accordingly focus marketing initiatives (may be try to focus on customers who could be retained)
  2. Forecast transactions for cohorts/individual customers and predict purchase volume
  3. Bring more business – Identify groups for upselling and cross-selling
  4. Estimate marketing costs by calculating lifetime value of a customer by cohort
  5. Improve customer experience based on individual customer needs across websites and stores

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s