Cohort analysis can identify trends over time, measure the impact of changes in your business, and impress investors with your sophistication.
Identify Cohort Trends Over Time
Everyone at your online business is working to improve a metric. The marketers are working to increase brand loyalty and encourage repeat purchases, the web developers are working to decrease sign-up friction, and so on. The best way to measure the payoff of all of these efforts is through cohort analysis.
Impress Your Investors
Investors are interested in businesses that have strong fundamentals, not just strong top-line growth. A favorite tool of Venture Capitalists to investigate potential investments is cohort analysis. If you are currently fundraising, have a VC on your board, or plan to fundraise in the future, RJMetrics can provide the cohort analyses you’ll need out-of-the-box.
Run a Lean Business
Experiment, measure, iterate, grow. A/B testing and cohort analysis are the two main tools for any lean business. Simple website changes are easy to A/B test, but more complex business process changes require cohort analysis to measure. If you improve your SLA on all customer support requests from 24 to 3 hours, running a before-and-after cohort analysis will show you the impact that this change has had on customer loyalty and repurchase rate.
Investigate What’s Behind Those Averages
As any statistics professor will tell you: averages lie. Cohort analysis is an incredibly effective tool for uncovering insights in your data that don’t show up when looking at averages. Is your six-month repurchase rate really 34%, or is it 41% with a particularly bad month thrown in when your marketing team ran an experiment that didn’t work? When you’re projecting next month’s’ sales, you should probably know which one.
Want an introduction to cohort analysis?
We created a website dedicated to the art and science of cohort analysis. If you’re not familiar with the practice, don’t worry, you’re not alone. Let us walk you through it step-by-step.