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Find Hidden Profit with Google’s New Cohort Analysis Tool

Published: May 22, 2015

Author: Robert Cordray

E-commerce users have a powerful new tool to add to their tool box. In early February 2015, Google released the Google Cohort Analysis, a deep-analysis tool added to the Google Analytics suite. Businesses are able to look at their customers in a way that is more meaningful to long-term profits. Rather than presenting analysts with data that represents a single point in time, Google Cohort Analytics looks at the behavior of groups. The new tool can gather data on customer behavior, shows consumer loyalty, compares different consumer groups, and displays purchase frequency.
Typical website metrics count groups of activities completed as page views or sales at a given point. These numbers do provide meaningful data, but that data has little long-term value. These measurements may show the success of a company’s marketing efforts, but they provide no actionable data. They are commonly called “vanity numbers.” Cohort analysis allows companies to look at visitor data from another perspective. It tracks the actions of similar groups of users throughout their lifespan as a consumer of a company’s website. With this data in hand, firms can better identify who their best consumers are and devise campaigns to pursue them.
Google has added a new member to its analytics suite for just this purpose. Now organizations using Google’s analytics service can perform a much more valuable type of sales analytics. With Google Analytics Cohort Analysis, webmasters can track an ad campaign starting with an initial email, and follow database members actions all the way through to the sale. A tool of this nature allows actionable metrics. Now, marketing analysts can see not only how each step of the sales process is performing, but what groups are the most profitable. Armed with this information, firms can pursue similar customer groups.
Google Cohort Analysis is capable of tracking how much a consumer spends over time and how often they visit an online retailer’s website. Firms can also use the analytics suite to view average customer spending over time. These figures can help a business determine a consumer’s lifetime value, an important metric for deeply researching consumer behavior.
Marketing departments can also track customer loyalty with Google’s new tool. Users can track what percentage of a group returns over time to purchase again. This metric is important for helping to control an organization’s churn rate. The churn rate is the rate that a business loses customers over time. If businesses are losing traction with a certain group (perhaps a companion diagnostics company starts to alienate women for example – not a good idea), they can now wage a campaign to rebuild that segment of their business. It is an important metric for businesses because if a business loses customers faster than it acquires them, eventually it will not have any customers. Google cohort analysis makes monitoring this metric easy.
Now that Google cohort data is available, analysts can use the tool to compare the behavior of different cohort groups to each other. If a business sees that one of its marketing campaigns is performing poorly with a cohort, it needs to investigate why and correct the problem. Without cohort analysis, this segment of business would slip away and management would write it off as churn. With cohort analysis, they can adjust their business model to serve the slipping segment’s new needs and retain their business. A development like this is important because it costs firms much less to go after repeat business than it does to acquire new business. Also, information like this helps to improve the lifespan of a product if minor changes will make it desirable to a waning consumer segment.
Another powerful new metric available to business analysts is purchase frequency. With Google Cohort Analysis, firms can identify what groups have returned to make purchases, what spurred the repeat sales, and what territory the groups occupy. When sellers see that the purchase frequency of a product is slowing down, they try to find other value propositions to present to the public. For instance, if a business sells balloons, and they have primarily marketed them to hold air, when sales begin to slow down they could market the balloon as a tool to hold water. Now, the life of the product has increased. With cohort analysis marketers can perform this maneuver in a more focused way.
This software is a powerful new tool that will help businesses grow their most valuable asset: their existing customer base. The tool is a part of the Google Analytics toolkit; it is a natural extension of Google Analytics. Businesses can retain their customer bases and increase their long-term profits by using this deep analysis tool. The technology takes marketing to the next level and provides a new tool to help businesses stay profitable. Although cohort analysis is not new, Google’s release of this new platform addition makes this complex tool available to a larger pool of users.

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