'Cohort analysis is vital for startups to experiment and find their sweet spot'

"Startups improve the odds of recovering their customer-acquisition costs by cultivating a data-based understanding of user behaviour," says Ankur Gattani, Vice President - Growth and Marketing, WebEngage, in a Masterclass that went live on day 5 of TechSparks 2021, Asia's largest and most influential startup-tech conference hosted by YourStory.

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Ankur, who has previously headed customer relationship management (CRM) for Foodpanda globally, asserts that startups need to grow a strong relationship with their users.

"Cohorts will tell you much better if your startup is on the right path," he asserts, in a Masterclass on 'The cohort-based insights hiding in plain sight’.

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'Cohort' refers to a group of people who share a set of characteristics. In the context of a growing business, cohort analysis helps develop a better understanding of how it is engaging with users.

It allows startups to be constantly experimental, and see what works well in the initial period, when entrepreneurs don't know enough about their customers, categories, 'what is going to work?' versus 'what is not going to work?'.

They can apply cohort-based insights over time periods to track behaviours, such as repeat purchase, category penetration, channels of acquisition, and category of acquisition.

"Cohort analysis can be used to compare people who bought shoes for the first time versus people who bought shirts for the first time—and see how they behave differently over time," Ankur says.

Unless companies run their engines well to retain customers, they will only continue to work on acquiring new customers, and increase marketing spends, he warns.

It is important to focus on lifetime value of a customer. “The overall impact of doing a better job at retention is the fun part of watching these cohorts, and the outcome of your efforts,” Ankur says.

Businesses will lose customers. So the ideal thing to do is to improve the revenue from a customer, and expand across categories. That allows a business to cross-sell, up-sell, or at least get customers to subscribe to more categories.

“By having multiple sets of categories that are well priced, you can see the customer cohorts that transact frequently,” Ankur reiterates, while explaining category-based consumption.

Similarly, a channel cohort can help a business track which channel of customer-acquisition works better, and doubling down on that helps manage resources better, and know how to apply investments.

"If you have figured your cohorts out, as to which channel, category and price points are giving you the best outcomes, this becomes an amazingly repeatable growth curve," Ankur says.

After all, the ultimate panache for a marketer—or a startup CEO—is to have an equation where the customer lifetime value is more than the cost of acquiring customers.

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For a line-up of all the action-packed sessions at YourStory's flagship startup-tech conference, check out the TechSparks 2021 website.