The Power of the Collective – Cohort-Based Advertising Decoded

Ever since GDPR regulations took effect in the EU, countries around the world have turned their attention to data privacy. From North America to Asia, nations have been doing their studies and implementing similar regulations that put checks on how large corporations leverage their citizen’s data. While this is an excellent move with regard to protecting privacy, it has had a significant impact on the global marketing landscape.

Marketers and advertisers are now faced with the difficult proposition of personalizing their outreach campaigns without having access to first-party data sources that traditionally supplied them with elements to target customers with precision. As walls become constructed over first-party data and cookies being destined for retirement soon, marketers are focusing their attention on the next best alternative – cohort-based advertising.

What Is Cohort-Based Advertising?

In simple terms, cohort-based advertising refers to marketing or advertising campaigns that are driven based on insights obtained from analysis conducted on a set of customers in cohorts rather than individually. 

Cohort-based advertising enables marketers to engage with a cluster of customers who are grouped into segments or cohorts based on their common preferences or interests. For example, when preparing for a campaign to sell a smartphone, a potential cohort that can be targeted would be the customers who have spent a similar budget on their smartphone purchases a couple of years ago. These customers are more likely to be interested in an upgrade, and they are more likely to spend the same amount or slightly more on the new purchase.

In the above example, individual traits or identifiable information of any specific customer is not acquired anywhere. Cohort-based advertising works by targeting a persona that reflects common characteristics found in a large number of potential customers. Some other cohorts would be clusters of customers grouped by age, gender, etc.

How Is Cohort-Based Advertising Done?

The two primary steps in cohort-based advertising are building or creating the right cohorts and targeting them with the right content.

Creating Cohorts

Segmenting potential customers into groups requires marketers to understand some of the core behavioral traits or motivating aspects that trigger purchase decisions. Popularly known as cohort analysis, data related to behavioral traits like financial status, lifestyle choices, demographic character traits, etc., are analyzed to build a set of personas. This could be done either through anonymous surveys, which collect information on preferences or by analyzing data from past purchases or interactions, or even through sentiment analysis on digital channels and social media. 

The key difference from traditional data aggregation methods here is that no individual data is stored anywhere. Only insights obtained from a group are used to segment audiences into cohorts. Every technology involved in cohort analysis follows this principle.

Targeting with the Right Content

Once the cohort is identified in the analysis stage, the next step for marketers is to generate content that aligns with the interests of each cohort. Traditional advertising approaches used individual preferences to sharpen content outreach. However, in cohort-based advertising, the message, which could be text, images, video, or any combination of them, is created for each cohort. 

For example, if we look at cohort-based advertising for a smartphone, one cohort will be for business users who can be targeted with content focusing on productivity features like in-built work apps, increased data security, etc. Another cohort can be built for gaming consumers. They can be targeted with content related to performance or support for high-end graphics, optimized operating systems, etc.

Benefits of Cohort-Based Advertising

Cohort-based advertising opens the door to several possibilities while at the same time bringing a sigh of relief to marketers by assuring them of a superb alternative to traditional methods with low risks. Let us explore some of the key benefits:

Lower Cost

Cohort-based advertising provides marketers an opportunity to target more people within a cohort with specific campaign content. In the past, the need to build personalized content was extremely high as campaigns targeted individuals rather than groups. With cohort-based advertising, the cost of marketing becomes significantly lower in the long term.

Superior Privacy Compliance

At no stage does cohort-based advertising store individual identifying information. Thus it allows organizations to stay compliant with data privacy laws and protocols with ease.

Predict Buying Patterns

One of the major advantages of cohort-based marketing is that enterprises get insights into deeper operational and consumer behavior as vetted by a group rather than individual surveys. By measuring the impact of campaigns done on cohorts, it becomes easier to forecast sales of a product among different target audiences easily. 

For example, marketers can identify the average time frame between repeat purchases of a large group of customers. They can then instruct production and logistics departments to prepare their operational roadmap to meet this timeline.

Increased ROI

Cohort-based advertising brings a great deal of change not just on the marketing front but also on how well the business understands its market position. It can influence branding and other promotional aspects and supply insights to key operational departments like production, finance, etc. This adds significantly to the ROI component of cohort-based advertising when compared to the old cookie-based or individual targeting approaches.

Concluding Thoughts

Cohort-based advertising opens a sea of possibilities for organizations looking to stay competitive in their advertising programs amid the increasing data privacy challenges. Navigating this journey requires not just a good understanding of how cohorts work but also the need to access technology that allows marketers to gain marketing intelligence and launch targeted campaigns. This is where a partner like Aroscop can make a huge impact. Get in touch with us to know more.