Cohort Analysis: What It Is and How to Use It in B2B Marketing (Excel Template)
Cohort analysis is a great way to understand the true impact your demand generation campaigns are making on the sales pipeline over time. It’s particularly useful for B2B marketers since the average sales cycle in B2B space takes weeks, and sometimes months and years (i.e. enterprise software). So, what’s the benefit of the cohort analysis and why is it so powerful?
Let’s take a look at this simple example together. Let’s say you are a lead generation marketer at ACME company, which is an enterprise software business. Your sales team is top-notch as on average they are converting 25% of all of the leads you’re generating into sales opportunities (pipeline) and the average sales cycle is 60 days. Eight weeks ago you launched a new advertising campaign, that’s been bringing you around 10 leads every week. After a month of spending marketing budget on this campaign your boss wants to know how the campaign’s been performing and is it wort it to keep your campaign running. How do you report the results to your boss, prove the campaign effectiveness and get promoted? This is a perfect use case for a simple cohort analysis!
Your challenge is that the leads keep coming every week and it’s impossible to calculate the conversion rate, because at any point in time there will be leads who had very little time to got converted.
So, let’s reiterate what we already know:
- The campaign’s been running for 8 weeks
- 10 leads are being generated every week
- You need to hit 25% conversion rate on your leads to be able to proclaim this campaign successful
In order to solve your puzzle you need to treat the leads from each week as a separate cohort and look at its progression through the sales funnel on a weekly basis.
To run a proper cohort analysis you need to have at least some basic lead-to-opportunity attribution set up to be able to see when an opportunity gets created for any specific lead.
Now, what you’re seeing on this picture above is an example of the report that addresses the question you got from your boss in the best-possible way. You can build the same report in Excel in about just a few minutes. To the left you’re seeing that each week has 10 new leads being generated, and to the right you’re seeing how these leads are turning into the opportunities week over week. The trick is that since we’re looking at each cohort individually, we’re getting the precise picture of the campaign performance. Here’s what can be inferred from the cohort analysis above:
- It took 6 weeks for the campaign to get to demonstrate the desired conversion rate (25%)
- After 6 weeks the campaign delivers an above-average conversion rate (33% vs. 25%)
- Out of 80 leads delivered by the campaign to date, 26 opportunities have been created