Cohort analysis is the process of performance evaluation, done on visitors to the website while keeping in mind commonalities and differences that emerge from the company’s defined customer life-cycle.
This analysis can be effective only when it has the capabilities to analyze the similar cohorts from a wholesome level, examining each group’s performance during the same part of the customer life-cycle (e.g. onboarding) across different time periods.
Successful cohort analysis can help understand customer behavior over time (usually focusing on quarterly or YoY behavior) and identify patterns and trends.
It is very similar to Behavioral Segmentation where visitors sharing common characteristics are grouped and analyzed together, but in cohort analysis the focus on specific parts of the customer lifecycle across different time periods is integral.
Visitor segmentation happens on two levels: membership origin and month of sign up. The purchase rate of every cohort is then tracked and examined for 24 months. Once time has elapsed, the retailer can glean from the analysis the segment yielding the highest purchase rate over time, and the month most ideal to sign up said visitors for membership.
This analysis helps understand the customer lifecycle, and the customer purchase behaviours, calculate lifetime value and optimize each cohort’s experience.