Why Cohort Retention is The One Metric to Rule Them All.
There are many reasons why your brand should focus on a strong retention strategy. New customer acquisition is five times more costly when compared to the cost of retaining existing customers, also businesses with low customer stickiness soon run out of new customers and ultimately slip into a downward spiral of negative returns.
A cohort is a group of users who share a common characteristic over a certain period of time. Cohort analysis is the study of the common characteristics of these users over a specific period. There are two types of cohort analysis, acquisition and behavioral.
Acquisition cohorts divides users based on when they were acquired or signed up for a product. This could be tracked daily, weekly or monthly. For example, a consumer mobile app for productivity can track its acquisition cohorts on a daily basis. On the other hand, a B2B mobile app with a focused user group would focus on monthly acquisition.
Behavioral cohorts group users based on the activities that they undertake within the app during a given period of time. For example, users who share photos using Google Photo links on a given day.
Why Use Cohort Analysis
Cohort analysis is a better way of looking at data. Cohort analysis is widely used in the following places:
- ecommerce
- mobile apps
- cloud software
- digital marketing
- etc.
these industries often use it to identify reasons why customers leave and what can be done to prevent them from leaving. We can also use cohort analysis to measure the engagement over time which helps us no whether user engagement is getting better or worse allowing us to make changes necessary to keep and retain customers.
If we increase customer retention it increases the customers lifetime value and boosts your revenue, which is never a bad thing. It also helps one build relationships with customers, and from experience having a relationship and networking is almost just as important if not more important to a company or business.
