Reduce Customer Churn – Blend Commerce

Reduce Customer Churn – Blend Commerce

Welcome to your ultimate guide on cohort analysis! 


Let’s face it, cohort analysis is the unsung hero of data analysis. It’s like the Batman of customer behaviour, working behind the scenes to save the day for your business.


If you’re reading this blog, there’s a good chance you already know that understanding customer behaviour and continually optimising your strategies are critical for success. Among the various analytical techniques available, cohort analysis stands out as a powerful (and, in our opinion, under-utilised) strategy that allows you to gain meaningful insights into how different customers are behaving. It can provide valuable actions to increase customer retention and reduce that all-important churn, which in turn, helps keep acquisition costs down.


We’ll dive into what a cohort analysis actually is, what insights you can expect to gain, and how we go about conducting this for our clients at Blend. Get ready to unlock valuable customer insights and make data-driven decisions that drive your success. 

What Is Cohort Analysis? 

Reduce Customer Churn – Blend Commerce

Let’s start with the basics. Cohort analysis is a quantitative analytical technique that involves segmenting customers into groups (or cohorts) based on shared characteristics or behaviours. These cohorts are typically defined by a specific time period, such as the month or quarter of a customer’s first purchase or registration. By tracking these groups of customers over time, you can gain a deeper understanding of customer trends and make data-driven business decisions.


Cohort analysis goes beyond surface-level analysis and allows you to dive into the nitty-gritty of customer behaviour. It’s a great activity to undertake if you’re looking for next-level insights into customer retention, engagement and lifetime value. In short, it can provide a granular understanding and reveal hidden patterns you can learn and grow your business from.

Why your Shopify Store Needs a Cohort Analysis 

Reduce Customer Churn – Blend Commerce


If you want to reduce churn and improve your customer lifetime value (CLV), listen up. Here’s why you should be excited about diving into cohort analysis and conducting this regularly:


Uncover Retention Insights: 

Cohort analysis allows you to assess customer retention rates over time. By comparing the behaviour of different cohorts, you’ll be able to discover trends, patterns, and factors influencing customer loyalty. This information is invaluable for developing strategies to enhance your customer experiences, tackle churn, and build long-term relationships.


Optimise Customer Acquisition and Retention: 

Through cohort analysis, you can identify cohorts that show higher customer lifetime value, discover when and how they reached your site, and any additional factors that give you a clear view of why that cohort is more engaged than others. It doesn’t stop at just the identification of these cohorts: once you’ve discovered trends, patterns and factors that influence your customer loyalty, you should then focus your resources on acquiring or retaining customers from these high-value cohorts. 


By tailoring marketing efforts and personalised experiences to specific cohorts, you can optimise your strategies and drive long-term profitability.


Evaluate Marketing Campaigns and Initiatives: 

Say goodbye to guesswork and one-dimensional analytics! Cohort analysis provides a means to evaluate the effectiveness of marketing campaigns, product launches, and other initiatives. By tracking the performance of cohorts exposed to different strategies, you’ll gain insights into the most successful approaches and can then refine your future efforts (and maximise impact!) accordingly.

Here’s What You’ll Gain, and How You Can Utilise Cohort Analysis to Grow

Reduce Customer Churn – Blend Commerce


Cohort analysis generates a wealth of valuable information, so prepare to be empowered with new insights. You can create a confident, data-driven strategy. Here are some key types of information derived from cohort analysis and how you can leverage this data:


Retention Rates: Cohort analysis helps you understand how well your business retains customers over time. By comparing retention rates across cohorts, it’s easy to identify which cohorts have the highest and lowest retention. Armed with this knowledge, you can focus on improving customer experiences, addressing pain points, and implementing strategies to increase overall retention.


Customer Lifetime Value: Cohort analysis enables you to calculate the CLV for different customer segments. By understanding the CLV of specific cohorts, your business can allocate resources effectively, prioritise high-value customer segments, and tailor marketing efforts to maximise returns. This data is invaluable when it comes to shaping customer acquisition and retention strategies.


Behaviour Patterns: Cohort analysis reveals behavioural patterns within customer segments. By analysing the behaviour of different cohorts, you’ll identify preferred channels, product preferences, and engagement patterns. Armed with this information, you can personalise your offerings, optimise customer experiences, and enhance overall customer satisfaction.


Seasonal Effects: Cohort analysis helps you identify seasonal trends and understand how cohorts respond to them. By recognising the impact of seasonality on customer behaviour, you’ll be able to plan promotional activities based on data, inventory management, and customer support strategies accordingly. Aligning your strategies and capitalising on the most relevant seasonal opportunities for your customer base, you’ll be able to optimise resources and drive exceptional results.

How We Conduct a Cohort Analysis Report at Blend

Now, let’s dive into the step-by-step process of conducting a cohort analysis report. There are plenty of different ways to do this (and some are more effective than others). At Blend, we regularly conduct cohort analysis for our clients, and it must be your lucky day as we’re sharing our playbook on how we achieve these super-powered insights. 


We recommend following these steps to unlock valuable data:


Define the Cohort: Choose the specific characteristic or behaviour that will define your cohorts. Examples include signup date, first purchase date, acquisition channel or product category preference. Ensure that the chosen criteria are relevant to your business objectives.


Set the Time Period: Choose the time intervals for your analysis, such as monthly, quarterly, or annual cohorts. The selection depends on the nature of your business, the available data, and the insights you seek.


Gather Data: Collect the necessary data for each cohort, including customer information, purchase history, engagement metrics, demographics, and any other relevant data points. Ensure the data is accurate, complete, and well-organised – trust us, it’ll make the analysis so much easier.


Calculate Metrics: Calculate the key performance metrics for each cohort, which may include things such as retention rate, average revenue per customer, CLV, and engagement metrics. We recommend using appropriate formulas and statistical techniques to discover meaningful insights.


Visualise and Analyse: Present your findings using visualisations like line graphs, bar charts, or heatmaps. Analyse the trends, patterns, and anomalies within cohorts to gain actionable insights. Look for significant differences or similarities between cohorts and identify factors driving those differences.


Draw Conclusions and Make Recommendations: Based on the cohort analysis, draw meaningful conclusions about customer behaviour, preferences, and retention patterns. Identify opportunities for improvement, develop data-driven recommendations for marketing strategies, product development, customer retention efforts, and customer experience enhancements. 

There are a wealth of tools and apps available to make this information easier to gather and analyse. We recommend utilising Peel, our go-to all-in-one data solution to conduct a cohort analysis. With Peel, you can manipulate the data with a few clicks and visualise the data easily. 

You’re Ready to Go! 

Congratulations! You’ve now unlocked the power of cohort analysis. Armed with this knowledge, you can now make informed decisions and optimise your business strategies accordingly, like never before. 


By conducting thorough cohort analysis and leveraging the insights it provides, you can unravel the complexities of customer behaviour, unlock opportunities for improvement, and drive long-term success in today’s competitive marketplace. 


Don’t know where to start? No worries. That’s why we’re here. Contact us today if you’re serious about using cohort analysis to deliver exceptional customer experiences, outshine your competitors and achieve your business goals.

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