How to Perform a Customer Cohort Analysis

Cohort analysis is a valuable tool for understanding customer behavior over time, enabling teams to make informed decisions on customer focus, problem-solving, and investment strategies. By grouping customers based on a shared experience, such as the date of their first purchase, this method reveals retention trends, revenue differences, and the impact of marketing campaigns, which traditional metrics often overlook. In a practical example involving an e-commerce brand, cohort analysis was used to track first-time buyers from a flash sale, revealing insights into customer return rates and purchase behavior. The analysis showed that 70% of customers did not return, 20% revisited without purchasing, and only 10% made a subsequent purchase, highlighting opportunities for targeted follow-up campaigns and product offerings. Sigma, a business intelligence tool, simplifies cohort analysis by allowing users to work directly with live cloud data without needing complex coding, providing flexibility in exploring customer behavior and creating actionable strategies.