Shark or fish?
If you're in a marketing role, you've heard these 2 questions:
- Who is our most valuable customer?
- Where can we find more of them?
Your marketing efforts can be judged using many different metrics, here are a few commonly used amongst us. Working our way from the top of the acquisition funnel:
- Visits and bounce rate
- High level conversion rates
- Intermediary (micro) conversion rates
- Acquired customer retention and repeat rates
Ultimately, all of these metrics can be backed into a much more comprehensive view of Customer Lifetime Value.
Acquired Cohorts
Let's assume you paid for a load of visits to your site, and many indeed are converting into your success metric (paying customer, freemium trial subscriber, app download etc). Congrats. You'd like to acquire more of such visits, but how do you know which are most profitable? Your answer: cohorts.
“A cohort is a group of something(s).”
At one point, a "cohort" was a term used to describe groups of Roman soldiers. Above we have a cohort of 6 happy soldiers, and a cohort of 1 unhappy soldier about to be beheaded. Together, you could count them as a cohort of 7 soldiers wearing similar uniforms.
From a marketers point of view, a cohort is best defined by concretely constrainable characteristics. Here's a few I've used to judge my own acquisition efforts.
Digital acquisition cohort types:
- By UTM tagged acquisition source
- Source
- Campaign
- Ad type
- Link and link placement in ad
- Term (SEM specific)
- Inbound domain url
- By campaign timestamp
Both digital and above the line cohort types:
- By date & time
- By paid vs. unpaid acquisition efforts
- By location
- By device
- By browser type
The list of possible cohorts is somewhat endless, but what's important is that you base your marketing actions on meaningful data inputs. If you you have access to significant amounts of data, you don't have to constrain your cohort to a single dimension. For example, you could constrain your cohort to all the visits from a marketing campaign that ran in X date range and resulted in a specific search query.
Shark or fish?
So you're trying to quantify the value of a days worth of fishing. You'll be selling the lot come evening to the local aquarium, and want to make the largest profit given your fixed rental and pro fishing gear costs.
While I don't support shark fishing, a cohort of 1 shark will "reel in" $200, while a cohort of 10 fish will reel in $50. You calculate your chances of catching each with your pro gear. Now, which should you tell your boss you prefer to catch?
P.S. Looking for a great read on the subject? Check out Avinash Kaushik's comprehensive book on the subject.