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Cohort analysis is a powerful tool for understanding customer behaviour.
In a context where customer loyalty is crucial to optimising acquisition costs, this method offers precise insights into user habits.
Using cohort analysis, companies can not only assess the effectiveness of their referral or loyalty programs, but also refine their marketing strategies to maximise engagement and retention.
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What is cohort analysis?
Cohort analysis is based on a simple but effective concept: to study groups of customers who share common characteristics or who have carried out a similar action at a given time.
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A simple definition of cohort analysis
A marketing cohort is a subset of customers grouped together according to specific criteria.
Unlike traditional segmentation, which groups customers according to their demographic characteristics, cohort analysis focuses on users' behavior or date of acquisition.
For example, a cohort could include all customers who made their first purchase in January.
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To understand more about your customers' behaviour, we help you segment them in this post on RFM segmentation.
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This method enables a more in-depth analysis of customer behaviors, revealing trends that traditional approaches might overlook.
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The 4 key benefits of cohort analysis for your business
1. Improve customer retention
By visualising the lifespan and engagement of different cohorts, you can identify best practices for strengthening loyalty.
For example, you can detect that one cohort engages more with a specific offer, helping you to plan the same offer for other groups.
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2. Better understand customer behavior
The data from this analysis helps you to adjust your strategies in line with customers' real needs.
If a cohort spends more after a well-targeted promotion, this indicates that a key lever for building loyalty is linked to temporary offers.
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3. Optimise marketing campaigns
The insights obtained enable campaign performance to be linked to the behaviour of the targeted cohorts.
For example, an e-mail campaign that performs well with one cohort can be extended to others to maximise its impact.
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4. Make informed decisions:
For example, if a specific cohort shows a high attrition rate after the first month, you can adjust your actions to reverse the trend.
This could include specific re-engagement campaigns or adjusting the offers available at this stage of the customer lifecycle.
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The 2 types of marketing cohort: acquisition and behavioral
To help us with our customer loyalty strategy, we can divide cohorts into two main categories: those based on acquisition and those based on customer behavior.
These two approaches offer complementary perspectives.
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Grouping customers by date or channel of acquisition with acquisition cohorts
Acquisition cohorts group customers according to the date they signed up or the channel through which they were acquired.
This makes it possible to identify the best-performing channels and assess the impact of your marketing campaigns.
For example, a special campaign in December could show that customers acquired via social media have better retention than those acquired via email. Why would this be? Because they immediately see the benefits of your company as relevant.
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Focus on customer actions with behavioural cohorts
Behavioural cohorts group customers according to their actions, such as average order value or retention rate.
This approach makes it possible to analyse key behaviours such as :
- Purchase frequency.
- Use of referral programs.
- Commitment to a loyalty programme.
These cohorts are invaluable for identifying the most loyal customers or those at risk of attrition.
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Cohort analysis are strategic for your retention strategy, and we can probably help. Check out our platform!
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4 use cases for loyalty programs
At Loyoly, cohort analysis plays an essential role in our loyalty strategies for our users.
Our dashboards offer advanced tools to transform your data into strategic actions. Here's how:
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Retention rate
This view allows you to track precisely how each cohort evolves over time. For example, you can identify whether a drop in engagement systematically occurs in the third month and anticipate corrective actions such as targeted campaigns.
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Average Order Value
Analysing variations in the average order value by cohort helps you to understand which strategy encourages higher-value purchases. If a cohort shows a significant increase after a special offer, this may indicate the effectiveness of personalised promotions.
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Sales
Check the direct impact of your referral programs on sales. A cohort with high referral activity could reveal natural ambassadors, whom you can reward further to boost their commitment and generate more revenue.
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Number of customers
Track the growth of your customer base to measure the overall effectiveness of your initiatives. For example, a spike in acquisition followed by strong retention demonstrates the relevance of a well-designed loyalty program.
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With these tools, Loyoly makes it easy to identify strengths and areas for improvement, while automating the analysis to save you time and improve accuracy.
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5 steps for conducting a cohort analysis
Cohort analysis may seem complex at first, but by following a structured approach, it becomes accessible and effective.
Here are the five essential steps for a successful analysis:
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1. Define your objectives: clarify your goal, for example, to reduce churn or increase purchase frequency.
2. Segment your customers into cohorts: group your customers according to relevant criteria, such as registration date or acquisition channel.
3. Collect and prepare data: use tools like Loyoly to automate the process and guarantee accurate analyses.
4. Analyse trends and behaviour: identify critical periods, such as months with a significant drop in retention.
5. Take action: adapt your strategies and measure the results to make ongoing adjustments
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By applying these steps rigorously, you can turn your data into real levers for action to optimise your loyalty and referral programs.
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3 common mistakes to avoid in cohort analysis
When you carry out a cohort analysis, certain common mistakes can compromise your results. Here's what you need to avoid to get the most out of this method:
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1. Ignoring the evolution of cohorts over time: Customer behavior is not static. They change over time, influenced by external factors (market trends, seasonality) or internal factors (new products, adjustments to your offers). For example, a cohort that showed high retention during the first three months may see its commitment drop if a competitor introduces a more attractive offer. Regularly re-evaluating these cohorts enables you to identify these changes and adjust your strategies accordingly.
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2. Focusing solely on acquisition cohorts: behavioural cohorts are just as essential for a complete picture, as we explained earlier in this article.
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3. Failing to exploit insights: failing to act on results can mean missing out on strategic opportunities.
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By taking these mistakes into account and correcting them quickly, you can ensure that you make optimum use of cohort analysis to improve your marketing performance and build long-term customer loyalty.
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3 examples of cohort analysis applied to loyalty and referral programs
Cohort analysis really comes into its own when applied to practical cases.
Let's take the example of several cohorts from a loyalty programme in 2024. Here are the main findings:
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Retention rate:
The January 2024 cohort shows an excellent retention rate in the fourth month, reaching 15% of the initial membership, while other cohorts, such as the July cohort, climb to 17%.
This demonstrates the increased effectiveness of customer follow-up campaigns launched during this period.
On the other hand, some cohorts, such as the May cohort, show a decline from the fifth month onwards, highlighting areas for improvement in extended engagement strategies.
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Changes in the Average Order Value:
Analysis of the data shows that the March 2024 cohort has an increasing average order value, rising from β¬66.2 at the time of the first purchase to β¬119 in the sixth month.
This increase can be attributed to targeted promotions or personalised offers.
Conversely, the June and July cohorts, although important in terms of volume, show stagnation after the third month, requiring adjustments to boost their dynamism.
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Cumulative sales and additional insights:
The May 2024 cohort generated a total of β¬260.5k in the sixth month, outperforming the other cohorts.
This performance reflects the success of the marketing actions carried out during the holiday periods.
However, a cross-analysis with retention rates shows that these sales are not necessarily accompanied by long-term customer commitment.
This suggests the need to diversify campaigns for their product beyond seasonal promotions.
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These 3 analyses highlight the periods and actions that have the greatest impact. By comparing cohorts, it is possible to fine-tune offers and ensure continued progress in overall performance.
Tools for cohort analysis: choosing the right partner
Loyoly offers intuitive, high-performance dashboards that transform cohort analysis into a fluid, efficient process.
Thanks to its remarkable intuitiveness, even non-technical teams can quickly get to grips with its tools and analytics. Compatibility with CRM and marketing tools means you can centralise all your data in one place, facilitating optimised management.
Loyoly's highly detailed dashboards available in the app provide in-depth visibility of the performance of each cohort, with clear, actionable insights. These dashboards, designed with ROI in mind, highlight the most profitable strategies and the actions to prioritise to maximise your results.
By choosing Loyoly, you are opting for a complete solution that automates analysis, reduces data complexity and perfectly aligns your customer loyalty efforts with your business objectives.
Loyoly doesn't just provide tools: we are committed to transforming your data into concrete, measurable growth levers.
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Cohort analysis is a powerful tool for improving customer retention
Cohort analysis offers a precise view of customer behaviour, which is essential for boosting customer loyalty and user engagement. Whether you want to optimise your referral programs or adapt your marketing strategies, this tool is essential.
Take action now: find out more about Loyoly's solutions to transform your customer retention strategy!
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