To drive better startup growth, use cohort analysis

Cohort analysis is a way of evaluating your business that involves grouping customers into “cohorts” and observing how they behave over time. Monthly cohort analysis is a common approach. Customers are placed in groups according to the month that they joined, which allows you to compare how those who signed up last month with the ones who signed up this month.

A Cohort analysis provides a forward-looking, multivariable view of your company compared with static and simple values such as totals or averages.

Flexible and flexible, cohort analysis can analyze many performance metrics such as revenue, acquisition costs, and churn.

Imagine you are the Chief Marketing Officer of Bluetooth Coffee Company. You manage a technology-enabled coffee maker that can brew coffee and track consumption. It also orders replacement coffee for users who run out. You make more money the longer you have customers. A popular deal site recently featured a Black Friday section. You’re curious to see if it should be repeated.

Below is an example of a quick analysis that you could do in order to measure your marketing effectiveness. This chart shows how many customers were added to each month and the clear increase in November after the Black Friday sale. It looks good at first. You brought in nearly twice the number of monthly customers in November than you did in October.

Image Credits: Sagard & Portage Ventures

Before you book the Black Friday promotion again, it is worth asking if they are really as valuable as you think. It is possible to compare monthly customer percentages.

Here is a monthly analysis of the new customers’ cohorts between September 2020 to February 2021. We’ve included, as in the previous chart, the monthly cohort size. However, the customer engagement rate has been added. This is calculated by subtracting daily active users from monthly active users, or DAU/MAU, for each month. (M1 refers to month 1, and M2 refers to month 2, respectively).

This allows us to compare the monthly customer engagement for each cohort.

Image Credits: Sagard & Portage Ventures

The above figures show that the majority of cohorts experience a high customer engagement rate within their first month. This means 42%-46% new customers are using the coffee composer every day. However, the November cohort has a significantly lower engagement rate (M1, 30%). This is despite it remaining lower over subsequent months (M2, 26%) or (M3, 27%). The customer engagement rate drops only with the November cohort. It returns to normal with December’s cohort (M1, 45%).

Publited at Thu, 2 Sep 2021 08:11:11 +0000

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