Cohort Analysis

TechExec Week 15 - Friday Edition

Author

Gaurav Singh
July 21, 2023

(Total read time: 3 minutes)

Hey there,

Welcome to Week 15 of TechExec - the newsletter that turbocharges your growth to become a Tech Executive!

As always, we are sharing a new set of BLTs this week

  • 💼 B - a Business concept / theory / story

  • 💝 L - a lifestyle advice

  • 🤖 T - a Tech explainer

Here is the schedule:

Monday —>💼 B - a Business concept / theory / story

Wednesday —> 💝 L - a lifestyle advice

Friday —> 🤖 T - a Tech explainer

This week we covered Leveraged Buyouts on Monday and Managing 1-on-1s on Wednesday.

Today’s Tech Explainer is on Cohort Analysis!

💼 T - Cohort Analysis

Cohort Analysis is an incredibly powerful and versatile analytical tool used by businesses and marketers across the globe. At its core, it's a subset of behavioral analytics that breaks the data set into related groups for analysis. These related groups, or ’cohorts’, usually share common characteristics within a defined time-span.

Cohorts come in two flavors:

  • Acquisition Cohorts: Grouped by when users signed up, perfect for studying retention and churn rates within a specific timeframe.

  • Behavioral Cohorts: Grouped by users' actions, helping you understand why they take certain actions in your product. They're like mind-readers revealing the secrets behind user behavior.

Acquisition cohorts let you know when the magic happens, while behavioral cohorts are the wise mentors that teach you why users cast spells of loyalty or decide to move on to other adventures. Together, these cohorts form a powerful alliance, guiding you on your journey to create a spellbinding user experience that keeps your users coming back for more magical adventures!

One of the biggest advantages of cohort analysis is its ability to provide much more detailed and actionable insights than traditional methods. It's like having a microscope that can zoom in on specific user behavior over time. This allows businesses to identify trends, track changes in customer behavior, and even predict future behavior.

Another advantage is that it helps improve customer retention. With cohort analysis, you can figure out what works for certain groups and what doesn’t.

But alas! Cohort analysis isn't some magical unicorn that comes with a rainbow trail of perfect insights. It has its limitations, too. Notably, it can be quite complex to execute correctly. You need to have clear objectives and hypotheses before diving headfirst into this ocean of data. Otherwise, you may find yourself drowning in a sea of numbers and charts without any meaningful insight.

Moreover, the accuracy of your cohort analysis largely depends on the quality of your data. Garbage in, garbage out, as they say! If your data isn't clean or if you are missing important data points, your findings might be as reliable as a Texas weather forecast from a bunch of cats.

Takeaway: Cohort analysis is a potent analytical tool that breaks data into related groups, allowing businesses to gain detailed insights into user behavior. Acquisition cohorts show when specific actions occur, while Behavioral cohorts reveal the reasons behind user decisions. This technique helps predict future behavior and enhance customer retention, guiding businesses to create captivating user experiences. However, executing cohort analysis requires clear objectives and high-quality data for reliable results.

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