In omnichannel marketing, customer retention is crucial, and it often involves targeting existing customers through SMS, WhatsApp, and email.
The key to success lies in effectively utilizing your existing customer database, but the real challenge is identifying the right customer segments to target.
While we often discuss segmentation, it’s important to understand the distinction between cohorts and segments.
A cohort is a group of customers with common characteristics who share a particular event or experience within a specific time frame, such as Gen Z or millennials.
On the other hand, segments are broader categories based on shared characteristics, like demographics, behavior, or purchase history.
It’s crucial to know the difference and target your audience accordingly to drive more meaningful engagement.
In this blog, we’ll explore how these terms differ, why they matter, and how brands can use both to craft more effective strategies.
Table of Contents
1. What Are Segments?
Segments are groups of people who share common traits or behaviors. These traits could be based on age, gender, location, shopping preferences, or even how often they interact with a brand.
For example, if a brand wants to promote a new product to women aged 25–34, they can create a segment based on that age group and gender. Similarly, if they’re running a sale on fitness gear, they might target customers who frequently browse or buy workout-related products.
Segments are particularly useful for short-term strategies, like launching a promotional campaign or sending out a seasonal newsletter. They help brands customize messages and offers to match the needs of specific groups, boosting engagement and conversions.
Read more – Scaling Up Retention Marketing with RFM: Your Key to Customer Retention Success
1.1 Types of Segmentation
Segmentation helps brands group their audience into specific categories based on different characteristics, allowing them to tailor marketing efforts more effectively.
Here are the main types of segmentation you can use to better understand and connect with your customers:
Demographic Segmentation: This is about grouping people based on observable traits like age, gender, income, family size, education, and more. For example, brands may target men and women with different products, like deodorants or cars. It’s easy to gather demographic data and can help you target brand marketing better.
Behavioral Segmentation: This divides customers based on how they interact with the brand. It includes shopping habits, how often they use the product, how loyal they are, and what benefits they seek. For example, brands can target heavy users differently from light users, or create special offers for loyal customers.
Geographic Segmentation: This focuses on where customers live. It could be as broad as targeting by country, state, or city, or as specific as region-specific preferences (like clothing ads for cold vs. warm climates). It helps brands customize marketing strategies based on location-specific needs or interests.
Technographic Segmentation: This type segments customers based on their technology usage, such as the devices, software, or apps they use. It helps businesses understand the tech preferences and digital behaviors of their audience, allowing for more targeted marketing efforts in a tech-driven world.
Psychographic Segmentation: This looks at people’s interests, values, attitudes, and lifestyles. It’s more about understanding the “why” behind their actions. For example, a furniture company may target eco-conscious buyers by emphasizing sustainable products, or market to newlyweds with content that highlights their lifestyle preferences.
2. What Is A Cohort?
A cohort is more than just a group of people—it’s a way of looking at behaviors and trends tied to a specific event or time period.
For example, Women born in 1985 form a cohort based on their shared birth year, making them ideal for analyzing generational habits or life-stage preferences.
Customers who made their first purchase in June 2023 create a cohort based on their initial interaction with your brand, offering insights into how a promotional period impacts long-term buying behavior.
Cohorts are powerful because they allow brands to go beyond surface-level metrics and dive deeper into behavior over time.
Here’s why that matters:
- Track Behavioral Trends: By following a cohort, brands can observe how customer behavior changes. For instance, are customers who signed up during a holiday sale more likely to return for repeat purchases? How does their spending evolve compared to customers acquired during non-promotional periods?
- Identify Long-Term Value: Cohorts can help determine which groups provide the most value over time. Do customers acquired through discounts stick around, or do full-price buyers have a higher lifetime value? By understanding these patterns, brands can optimize your acquisition strategy.
- Spot Patterns and Opportunities: A cohort of app users who joined after a feature launch may show different usage patterns compared to earlier users. These insights help brands refine product updates or marketing messages for better engagement.
- Help Brands Make Strategic Decisions: Unlike segments, which give a snapshot of characteristics at one point in time, cohorts let brands see how behaviors unfold. This is invaluable for planning retention campaigns, predicting churn rates, or fine-tuning product offerings.
Cohorts act as a dynamic lens for understanding the audience, empowering brands to learn not just what happened but also how and why it happened—critical for making smarter, data-driven decisions.
For instance, tracking customers who signed up during a holiday sale could reveal their lifetime value, preferences, or purchase habits. This long-term view is what makes cohorts different.
Not all segments are cohorts, but all cohorts are a type of segment.
3. Cohorts vs. Segments: What’s the Difference?
Let’s compare the main differences between customer segments and cohorts:
- Cohorts are time or event-based: Cohorts are groups of customers who share specific characteristics during a defined period or event. For example, customers who signed up or made their first purchase in the last 30 days. The key here is that cohorts are both event-driven and time-bound, with time being an important factor.
- Segments are groups that share common interests and behaviors: On the other hand, segments are groups of customers who share similar characteristics or behaviors, but are not tied to any specific time period. These characteristics can include things like company size, industry, revenue, location, or customer satisfaction scores (NPS, CES, etc.).
4. Cohort Analysis for Brands
Cohort Analysis is a method brands use to understand their customer behaviors over time. Instead of treating all customers the same, it breaks them into smaller groups (called cohorts) based on shared characteristics.
This allows brands to look at how different groups behave, especially over time, and make more informed decisions.
Read more – How Omnichannel Sales Drive Business Growth?
Types of Cohorts:
Time Cohorts: These groups are based on when customers first interacted with the brand. For example, customers who signed up in January would form a time cohort.
Behavior Cohorts: These groups are based on how customers use the product or service. For instance, users who made a purchase after a free trial are part of a behavior cohort.
Size Cohorts: These groups are based on factors like the size of the business or the volume of their orders.
Purpose and Benefits:
Understand Customer Lifecycle: Cohort analysis helps brands see how long customers stay with them and when they might stop using their product or service.
Product and Service Improvement: It helps identify areas where improvements could boost retention, like features that keep customers engaged.
Better Retention Strategies: By understanding cohort behavior, brands can create specific strategies to keep customers coming back, improving loyalty. Read more –The Ultimate Guide To Customer Retention Marketing Tools.
Challenges:
Complex Analysis: Analyzing cohorts requires advanced tools and a solid tracking system to get accurate insights.
Time-Consuming: Tracking cohorts over long periods can take time and effort, but the insights can be very valuable in the long run.
5. Final Thoughts
The next time someone mentions “cohort” instead of “segment,” you’ll know exactly what they mean!
Cohorts are more than just a buzzword—they’re a powerful tool that can help brands gain deeper insights and create strategies that truly resonate with customers.
Think about how your brand can use cohorts to drive better sales. Whether it’s targeting specific age groups, shopping behaviors, or emerging trends, understanding your cohorts can give you the edge you need.
If you’d like to discuss how we can help enhance your customer retention and optimize your strategies, we’d be happy to set up a consultation call. Feel free to reach out to us at alibha@daiom.in
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