Cohort Analysis Meaning
Cohort analysis behavioral analytics that draws data from a particular subset such as an ecommerce platform, SaaS business or game the groups it into associated groups instead of accessing the information as a single unit. The groups are called cohorts and share similar attributes like size and time.
Companies leverage cohort analysis to examine behavior through the customer life cycle. They can better understand customer patterns and trends over time. This can inform the nature and path of product development and deployment to each cohort.
Cohort analysis could highlight weaknesses in current marketing techniques so the business can make changes to its communication for different types or groups of customers. It can provide pointers on changes to the design of incentives that will drive customers into keeping using their product if there are indications they are about to stop doing so.
The average business receives a large amount of complex data every day that would require costly resources to analyze as a single data set. Without cohort analysis breaking down customers into more manageable and actionable sets, businesses will not know or understand the lifecycle every customer navigates over a given period.
Cohorts may be grouped by:
- Time — Customers that signed up during a specific period which could be a given month, quarter or year.
- Segment — Customers that bought a specific product.
- Size — The customer’s size. This could be startup, micro, small, medium-sized and large.
A cohort analysis does not have to be based on one type of grouping. It may be necessary to combine two or more to have a more granular understanding of customers and products.