How to Leverage Shopify Cohort Analysis for Maximized ROI
Cohort analysis can help you pinpoint which groups of customers are most valuable to your business while tracking retention over time.
Updated December 9, 2024.
Shopify’s Cohort Analysis involves grouping customers based on shared characteristics (such as the month of their first purchase) to track their behavior over time. Unlike funnel analysis, which focuses on customer actions within a single session (add to cart, checkout, etc.), cohort analysis looks at trends across customer lifetimes. It’s also different from segmentation, which categorizes customers by demographics or behavior without the time-based layer.
Here's our guide to the importance of Shopify cohort analysis and how to leverage this technique to maximize your return on investment (ROI).
» Maximize the effects of cohort analysis with e-commerce automation
Meet the Expert
Courtney Sharp is a marketing and e-commerce expert. Her marketing agency, Sharp Media Agency, specializes in digital marketing, branding, ads, and social media, with a strong focus on fashion, retail, and beauty commerce.
Importance of Shopify Cohort Analysis
For example, you can see if customers acquired during a Black Friday sale return more often than those from regular campaigns, which can help you refine your retention strategies.
Another significant advantage of cohort analysis is that you can use it to pinpoint which groups of customers are most valuable to your business. For example, you might notice that customers who first purchase a subscription box have a higher lifetime value than one-time product buyers. You could then use this information to focus more on subscriptions in your top-of-funnel marketing campaigns.
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3 Best Scenarios for Shopify Cohort Analysis
- If your Shopify store runs seasonal promotions, Cohort analysis shows how well these customers retain compared to regular shoppers, helping you decide if these promotions bring long-term value or just short-term revenue spikes.
- If you’re launching a new product/product line: After a product launch, cohort analysis helps track whether customers who buy the new product return to buy other items. For example, if customers who bought your latest skincare line continue purchasing related products, you know the launch is effectively driving repeat business.
- If you sell a subscription: Cohort analysis is essential for subscription businesses to track renewal rates over time. For example, businesses can see if customers who subscribe during holiday promotions are more likely to churn than those who subscribe organically, allowing you to adjust acquisition and retention strategies.
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Key Metrics to Focus on for Shopify Cohort Analysis
- Retention rate: This metric tracks the percentage of customers in a cohort who make repeat purchases over time. It reveals how well your store retains customers and highlights opportunities to improve loyalty strategies.
- Lifetime value: Measures the total revenue generated by a cohort over its lifetime. Higher LTV indicates that customers are staying engaged and making valuable purchases, helping you prioritize high-value cohorts.
- Average order value (AOV): Analyzes the average spend per order within a cohort. If one cohort has a significantly higher AOV, it could signal opportunities to replicate marketing strategies for similar customer groups.
To gain the most actionable insights, segment data by acquisition date, purchase frequency, or product category. Combining these layers offers a comprehensive view of your customer base:
Acquisition Date
Helps identify which campaigns drive long-term customers.
Purchase Frequency
Helps you understand which cohorts are most loyal vs which need nurturing.
Product Category
Shows trends, like whether customers buying premium items have a higher lifetime value.
» See these successful marketing incentives to retain customers
Step-by-Step Guide to Leveraging Shopify Cohort Analysis
1. Log into your Shopify Admin.
2. From the left-hand menu, click on Analytics and select Reports from the dropdown.
3. Click the “Category” drop-down and select “Customers.”
4. Find and click on Customer Cohort Analysis. This will open a report that groups customers by their first purchase date or another shared characteristic.
5. In the report settings at the top, define the date range for your analysis
6. Choose how to group customers, such as by acquisition date. This creates cohorts based on when customers made their first purchase.
7. Within the cohort table, review metrics like retention rate and lifetime value
8. Look for patterns like a higher retention rate during holiday campaigns versus regular periods or spikes in LTV tied to specific events
9. You can click on a specific cohort row to view more detailed data, such as repeat purchase behavior, top products purchased, and revenue contributions.
10. Use the report filters to compare cohorts from different periods or campaigns (IE you can compare customers acquired during a Black Friday sale versus a back to school promotion)
You can then use this data to identify which strategies led to better retention and revenue outcomes and adjust your marketing and retention strategies. For instance, if you see a certain cohort tends to drop off after two months, you can create a targeted win-back email or push loyalty incentives to them.
Best Tools to Complement Shopify Cohort Analysis
1. Shopify’s Built-in Analytics
Shopify’s built-in reports, like Sales Reports and Product Performance Reports, complement cohort analysis by offering additional insights into overall store performance.
For example, Sales Reports help identify peak purchasing periods, while Product Performance Reports reveal which items drive the most revenue. By combining these insights with cohort data, store owners can better understand how customer behaviors align with product trends and seasonal patterns, enabling more informed decisions.
2. EGNITION's Auto Rewards Toolkit
Egnition’s Auto Rewards Toolkit enhances cohort analysis by automating loyalty rewards based on customer behavior. By using Shopify cohort data, you can create automation rules that generate personalized discounts tied to a customer’s purchase history or order value. Its email templates streamline follow-ups, ensuring that rewards are sent quickly and effectively, driving retention and repeat purchases.
Leverage Cohort Analysis for Better Loyalty Rewards
Auto Rewards Toolkit saves time and delivers an engaging and automated loyalty experience for high-value customer cohorts.
Target customer cohorts with enticing win-back loyalty offers
Define automated rules for order-based rewards
Streamline the personalization process
» Don't forget to combine discounts in Shopify
How to Maximize ROI From Shopify Cohort Analysis
1. Launch Targeted Email Campaigns
After looking at your cohort data, set up email campaigns that match how your customers behave. If you notice that a group of customers stops buying after three months, send them a friendly reminder email with a small discount at the two-month mark to bring them back. Emails can also share updates about new arrivals or items they’ve purchased before to keep them interested.
» Don't forget to leverage post-purchase emails
2. Offer Personalized Product Recommendations
Cohort data can help you determine what your customers are most likely to buy next. For instance, if one group buys yoga mats, you can suggest related products like straps, blocks, or even yoga apparel.
3. Leverage the Store’s Loyalty Program
Use cohort insights to reward your most loyal customers and bring back those who are slipping away. If one group tends to shop a lot during the holidays, offer them extra loyalty points or an exclusive discount before the holiday season starts. Little rewards can make customers feel appreciated and encourage them to stick around.
» Here's how to use Shopify automated rewards apps
4. Don't Misinterpret Data Trends
Many store owners mistake short-term spikes (like seasonal promotions) for long-term customer behaviors, leading to misguided decisions. For example, a cohort acquired during Black Friday may initially appear highly engaged but could churn quickly compared to regular customers.
To fix this, it’s important to evaluate cohorts over different time periods (like monthly or quarterly) to see how customer behavior changes after their first purchase.
For example, a Black Friday cohort might show strong initial sales due to discounts but may not return later, revealing a lower lifetime value compared to a cohort acquired during regular pricing periods. By tracking these groups over time, you can identify patterns, such as when customers are most likely to make repeat purchases or when they tend to drop off.
5. Measure the Effectiveness of Customer Support Interactions
An oftentimes overlooked benefit of using cohort analysis is the ability to measure the effectiveness of customer support interactions. We see this with our clients who have high customer inquiries (10-30/day).
For example, one of our clients at Sharp Media is a luxury fashion retailer in Ireland, and customer support is extremely important for them. They receive a significant number of customer inquiries daily about sizing across their platforms (website, social media, email, and phone calls).
Businesses can segment cohorts based on customers who reached out for support versus those who didn’t and compare retention or lifetime value. This insight helps fine-tune customer service strategies and demonstrates how support impacts loyalty.
Our fashion client has seen a direct correlation between the customers who reach out to customer support and LTV, with those reaching out to support having more frequent purchases and a higher lifetime value.
Because of this, our luxury fashion client decided to hire a full-time dedicated customer support agent whose sole purpose is to answer customer inquiries. This allowed them to update their response time from 24 hours to 2 hours during business hours, and they have seen a 22% increase in conversion rates among customers who reach out to customer support.
Shopify Cohort Analysis Success Story
An example of Shopify cohort analysis working effectively can be seen with Snugabugz.
We rely on Shopify’s Cohort Analysis heavily in the following ways for this client:
1. Comparing Customers Acquired Via Organic vs. Paid Social
By using Shopify’s cohort analysis tools, we helped Snugabugz identify and optimize key customer groups based on acquisition channels, product categories, and seasonal promotions. This allowed us to create targeted strategies that increased customer lifetime value and boosted retention.
Strategies implemented:
- Loyalty offers: For organic social customers, we introduced a personalized email campaign encouraging sign-ups for Snugabugz’s loyalty program. These emails offered referral bonuses to capitalize on their existing brand affinity. For paid social cohorts, we designed a “VIP Parent Club” offering exclusive early access to new designs and promotional discounts to build repeat purchase behavior.
- Win-back emails: For paid social customers who hadn’t purchased again after three months, we developed a targeted win-back campaign highlighting Snugabugz’s growing size range and offering a 10% discount on their next purchase.
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2. Baby Socks vs. Baby Booties Buyers
We discovered that booties buyers had a higher average order value (AOV) and were more likely to purchase matching socks, whereas socks buyers tended to purchase single items.
Strategies implemented:
- Cross-selling campaigns: For booties buyers, we created automated follow-up emails showcasing complementary sock designs and offered bundle discounts to increase AOV. For socks buyers, we launched “Complete the Look” campaigns featuring booties as a perfect pairing for their previous purchase.
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3. Seasonal Promotion Shoppers
Customers who purchased during our promotions around Mother’s Day, Grandparent’s Day, and Black Friday had lower retention rates compared to those acquired organically or during non-promotional periods.
Strategies implemented:
- Subscription service: To retain seasonal buyers, we are planning to launch a subscription service soon, which is going to offer automatic delivery of new sizes as their babies grow. We plan to offer incentives for purchasing the subscription service, such as a 10% discount and free shipping on all deliveries throughout the subscription’s lifetime. We believe this will help convert one-time buyers into loyal, long-term customers and drive more consistent revenue per month for the business.
- Loyalty points: Seasonal shoppers were incentivized to join the loyalty program with points earned during promotional events. These points were redeemable for discounts on future purchases, keeping them engaged year-round.
» Here's how to create one-time discount codes
Maximize the Benefits of Cohort Analysis With Automation
Shopify cohort analysis is a useful tool for understanding how to get the most value from each customer, but it doesn't help if you don't use the data to improve your store. Thankfully, there are many automated tools for Shopify that can get the most out of your data with minimal effort from you.
» Learn more about automation through Auto Rewards Toolkit
