Increase Repeat Purchases with Cohort Analysis
In my daily work with ecommerce brands, I see two types of companies:
- The first type focuses on acquisition and conversion.
- The second relies on retention.
The second type is winning. Why?
Overall acquisition costs for both B2C and B2B have gone up by 50% in the past five years. Sooner or later, relying on new customers will break you. To offset these costs, you need to earn more repeat purchases from existing customers.
Repeat purchases are often cheaper because people already know the brand. As a result:
- They’re converted via email.
- They’re converted via organic or direct traffic.
Thus, with the same ad budget, you get more orders—three times more, according to research. That means better margins, more profitability, and cost-efficient scaling.
This post gives you a data-backed approach to win more repeat sales. The key is to identify and persuade your most valuable cohorts.
Why to monitor the post-purchase experience by cohort
Cohorts vs. segments: What’s the difference?
In marketing, cohorts are groups of customers who exhibit similar behaviors during a certain time span (e.g. buyers during a holiday promotion). Segments include any “subset of your Analytics data” (e.g. mobile purchasers).
As Alistair Croll and Benjamin Yoskovitz detail in their book, Lean Analytics, cohort analysis has special relevance for the customer lifecycle, enabling marketers
to see patterns clearly against the lifecycle of a customer, rather than slicing across all customers blindly without accounting for the natural cycle a customer undergoes. Cohort analysis can be done for revenue, churn, viral word of mouth, support costs, or any other metric you care about.
This post uses the broader definition of “cohort”—“a group of persons sharing a particular statistical or demographic characteristic”—to avoid toggling between “cohort” and “segment,” even though some “cohorts” listed below are not explicitly time-bound.
Benefits of cohort analysis
When it comes to increasing repeat purchases, cohort analysis provides three key insights:
- The post-purchase behavior is directly influenced by the initial experience, so the motivation for the first order—incentive, timing, product, exposure—is a strong unifying factor for the cohort.
- Also, cohort behavior often reflects the use of the product over time. For replenishable products, if most people place their next order on the fifth week, that’s when they run out of it. Or for products like clothing, shopping every three months suggests when people get ready for the new season. Such details help identify when it makes sense to push marketing and when there’s no point.
- Lastly, cohorts provide buying behavior insights to adjust your marketing so every customer feels the communication is personal. Since one customer inevitably falls into more than one cohort, the analysis gives meaning to their lifecycle behavior from different perspectives—the product they bought, the campaign that converted them, when they ordered, and so on.
So which are most important?
Which cohorts to monitor
You can probably come up with dozens of characteristics by which to segment your customer base, but start with these five: