A cohort is a group of people with similar behaviors or characteristics within a certain period of time. Cohort analysis is a type of behavioral analytics, which is primarily identified by breaking down customers into related groups in order to gain a better understanding of their behaviors.
🧪 Example of Cohort analysis
Behavioral Cohorts: Loyal Customers are divided based on their purchasing behaviors for a specific category and for a specific channel.
The analysis can be measured through the:
- Frequency - The time Customer comes to shop in a selected period scope.
Customers who come to shop 1 time per month vs.
Customers who come to shop up to 5 or more times per month.
- Basket Tier - Average Value spent per basket/transaction within a selected Category by tiers from Most to least in the selected period scope.
For example: Customer's Average Spending per Basket varied from 10$ - 100$ in November 2022
Customers who spend 81$ - 100$ per in Tier 5
Customers who spend 61$ - 80$ per in Tier 4
Customers who spend 41$ - 60$ per in Tier 3
Customers who spend 21$ - 40$ per in Tier 2
Customers who spend 1$ - 20$ per in Tier 1
- ABC Segment - Spending Contribution groups who spend from the biggest value to the lowest value per trip (similar to Pareto).
Segment A: Customers who spend the biggest value contribution per trip.
Segment B: Customers who spend the Top 2nd value contribution per trip.
Segment C: Customers who spend the Top 3rd value contribution per trip.
Segment D: Customers who spend the 4th value contribution per trip.
Segment E: Customers who spend the lowest value contribution per trip.
- RM Segment - 2 Criteria combination of the Analysis
: Recency - How recent Customers come to shop.
: Monetary - How much Customers spend per trip.
Recency >= 80% (on rank) AND Spending >= 80% (on rank) =>> "CHAMPIONS"
Recency < 80% (on rank) AND Spending >= 80% (on rank) =>> "LOYAL"
Recency >= 80% (on rank) AND Spending < 80% (on rank) =>> "POTENTIAL"
Recency < 80% (on rank) AND Spending < 80% (on rank) =>> "AT RISK / CHURN"
❓What is used for
Customer cohort analysis is particularly useful when one wants to better understand a certain group of individuals. Let's say you want to better understand Pet Food Buyers. The cohort analysis will share insights about their shopping frequency, the value of their spending (inside the pet food category and across the whole store as well), the profitability they contribute to, etc... Analyzing these trends within cohort will help you progressively fine tune the quality of your commercial offering to this specific population.
A cohort analysis will also be very relevant when used with a cross merchandising analysis: what are the next bets purchases for this population, depending on their shopping behaviors.
In comparing different user groups, the Marketing Team can identify Customer segmentation through their buying trends and patterns, and identify which behavioral changes, either Recency, Frequency, or Spending can cause different results.
Cohort Analysis is a useful practice for reducing early Customer Churn. Cohort Analysis charts will indicate the period of time after which customers churn. If churn occurs within the first few weeks, the typical reasons may be: the product is not meeting customers’ expectations; poor onboarding processes; and/or a poor user acquisition model. So, the right actions can be implemented to better target their messaging to engage Customers closer, alter their services, meet customers’ needs, and improve Sales and profits.
- To identify what type of Customers should be prioritized
- To plan the Targeted Campaign based on different Customer Behavior
- To make better product decisions and improve product retention rate
- To visualize Customer Behaviors in terms of Traffic and Spending in a Business Unit
- To increase product revenue
- To track, understand and reduce Churn Rate
- To increase Customers Retention Rate
- To be able to predict future Customer consumption.
💻Cohort analysis in Ulys CRM
How to access Cohort analysis in Ulys:2 Simple Steps
Step 1: Select Cohort Analysis Menu from Segmentation Menu Bar.
Step 2: Select the KPI and period at which you want to measure type of behavior.
And here it is. Classification of customers group can varies depending on the selected KPIs.
And form any segment, a campaign can be automatically generated, building the product offer and sales forecasts on the behaviors of that selected population.