Contributors
@paul-boag
Business Benefits
Understand buyers’ needs and boost profit.
Combine data from individual customers using metrics such as Average order value (AOV), Number of orders per customer, and Lifetime Value (LTV) to help identify the most valuable cohorts (groups of customers).
Divide and monitor your customers based on their first purchase (what item did they buy), time of purchase (when), traffic source like direct search, and campaign or special offer like social media, ads, and coupons, to see which groups are the most valuable in terms of profit.
For example, the first item the customer purchases often determines the relation they forge with your brand. Looking at which campaigns generated the most purchases is obviously a telltale sign of a valuable group. Looking at which coupon codes converted people into buyers is evidence of influencing buyers’ behavior.
If you use Shopify, you can calculate these metrics easier with a tool like Reveal.
Ask questions such as “When do the second, third, or fourth orders happen in your store?” and “When do most people in the cohort reach the end of their customer lifecycle?” to obtain insights into the purchase habits of customers.
Map out the customer cycle to identify how repeat purchases are naturally occurring. Look at factors such as:
- The gap between first contact and placing their first order.
- The length of time between subsequent orders.
- The channels customers favour through their interactions with the company.
Reach out to customer groups according to their buying habits for example, sending personalized emails or better-timed emails instead of spamming them with promo emails.
For example, you may discover that customers tend to place a second order 6-8 months after their first. That would be a good time to reach out to them via email.
Analyze how much money people spend on each consecutive order. For example, does the amount change over time, and do they spend a lot at once or chunk their order in numerous smaller purchases.
Some cohorts accumulate huge lifetime values over just a few weeks. Others will spread out equal-order values over an extended time. Use the information on how customers spend to tailor your communication with non-intrusive reaching out and prolong their lifetime as your customers.
Measure your products’ performance, test out different marketing strategies, and learn the long-term effects of each promotion you run to determine what drives customer loyalty.
Detect underperforming products as quickly as possible to save your reputation, marketing budget, and customers. For instance, in categories like food, clothing, and beauty, look for items with mostly one-time buyers and low repeat rates. In categories like bikes or baby gear, also measure if they use add-ons like maintenance or upgrades.
Focus on products that consistently bring repeat purchases and good reviews. For example, if a retention analysis shows that 40% of your products don’t drive any repeat purchases, scrap those from the store and give more visibility to the others that work well.
Improve your site SEO, test out new social media content, introduce lower shipping costs or tweak your product line like with a minor color change, as methods to bring in new customers.
Monitor how people who bought in the same month behave afterward, to shed light on the long-term effects of your changes.
Put your money where loyal customers come from on social media, ad placement, partnerships, affiliate links, and media features. For more post-purchase conversions, double down on the ones that bring healthy cohorts with high retention rates.
Do a retention analysis of coupon codes to reveal not just the revenue a coupon brings, but assess which messaging and discounts work, where it should be placed, whom to target, and which products to include. People in the “Last chance, 70% discount” cohort will have entirely different behavior than those in the “New collection, early bird” cohort.
Engage first-time customers by collecting feedback from them, giving useful tips on your product, inviting them into social media groups, or targeting them with offers and campaigns to make them buy again and keep them as customers.
- Automate collecting feedback from customers after the first product purchase and engage customer service to respond to positive and negative product reviews in person. Fix the problem where you stumble on negative ones. Give usage tips for your product to encourage more frequent use and get people more involved with your brand.
- Create a separate social media group for users of various products and invite them to join a relevant one. Craft specific content to share with each group and highlight user-generated content to grow a community.
- Offer add-ons when you see a drop in the cohort repurchasing rate. For example, when you notice that fewer people place a third order, that would be a good time to upgrade your product with an accessory or to replace the old item at a special price.
- Send just-in-time emails for replenishable products like cosmetics or food, and time communications to arrive before consumers run out. Use the average time between orders as your guide the first few times.
- Sub-segment each cohort even deeper and send almost one-on-one emails to match individual repurchase times. This is convenient for consumers and keeps you top-of-mind at the perfect moment.
- Offer recycling or a replacement service if the product has an estimated product lifecycle like life jackets on boats.
Engage customers with time-specific campaigns such as major holidays, by sending special offers and relatable content.
Holiday shoppers, who make nearly every store’s most significant cohort, often shop for gifts and are incentivized by special offers. Look for changing seasons and major holidays to send those offers proactively for example, two weeks before Mother’s Day.
Replicate your most successful campaigns, such as those that brought in the most loyal customers, to attract as many similar customers as possible.
Reward the most loyal customers with early bird offers, limited edition items, and a premium service. Maintain the leitmotif for niche campaigns by keeping the post-purchase experience consistent with preserving the connection. Create a different style of communication for niche customer groups.
Don’t expect high customer retention among customers who came through your deep-discount campaigns. Those customers are not brand loyal and will be stimulated to buy again only with more discounts. Target deal-hunting cohorts to only those you identify as deal-hunters. Don’t eat your margins with the rest.
Don’t waste budget or effort on trying to change behaviors. For example, target new product campaigns to customers you identify always to be interested in your latest offer.
Target buyers via the traffic sources they came from like Google search, social media, referral, and affiliate, to stimulate them to buy again via the same route.
For example, optimize your website with long-tail keyword searches if these keywords work better in bringing high-value customers via direct Google searches.
Work on your reputation and brand image if direct traffic doesn’t increase customer loyalty. People clicked away because they were, for some reason, disappointed. Tailor the content for social media customers based on their product preferences.
Measure cohort lifetime ROI against the cost when you deal with referral sources such as affiliates. Continue to monitor behavior for drops in sales and reach out to the referrer for help on engagement.
Deal with customers that don’t buy again by dropping products that lead to one-time purchases, collecting feedback, and reaching out via email.
Remove products that fail to stimulate loyalty or below average loyalty. Ask for feedback when a cohort looks dead, but AOV or LTV is quite good for example, accumulated in a few big orders, to get the information you need to revive a potentially high-rewarding cohort.
Proactively reach out via email around the time for reordering, average time between orders, to activate dormant groups of one-time buyers.
Use ecommerce analytics tools such as Custora, Glew.io, Kissmetrics, Metorik, Metrilo to speed up and deepen cohort analysis.
Google Analytics or spreadsheet calculations can sometimes be limiting, therefore consider providers that master cohort analysis.
Last edited by @hesh_fekry 2023-11-14T12:10:49Z