Introduction to Funnel Cohort Reporting

Cohort reporting in marketing is one of the least understood and underutilized aspects of marketing reporting, yet it is extremely valuable to make the right decisions about spending, headcount, and resource allocation.

What is a cohort? Basically it is watching what happens to a group of leads, opportunities or accounts that are defined by time frame, offer, action or other criteria. A cohort of leads, for example, could be all the leads that came in during a particular. Perhaps you are looking at the cohort of the leads that came in from a particular trade show, or maybe leads that took a particular action. In cohort based reporting, you following this group through the entire funnel process from start to finish, always reporting out how this particular cohort did through the process.

Figure 1 – In cohort reporting, the 1,000 leads dumped into the sales funnel in March are tracked as they go through the sales process. Each month, the opportunities from these leads are recorded. When all the leads are through the funnel, the yield is calculated. In this case, the 1,000 leads took until June to get processed, with each month yielding fewer and fewer opportunities. The overall result was 176 opportunites from the 1,000 leads or 17.6% yield

But isn’t this what we always do? For leads, in some cases, yes. If you assign a campaign to a group of leads, you have tagged them as a cohort and you can measure what happens to them. Trade show leads are good examples. Things get dicier with ongoing campaigns like Adwords. Unless you are creating new campaigns each month, using campaigns doesn’t work. In addition, leads aren’t the only items to report in the sales funnel. Opportunity creation and deal closure, for example, are all key items to cohort that don’t lend themselves to campaigns.

When working with the sales team, it is classic to not use cohorts, and to therefore stop using cohort reporting all together. A typical marketing and sales report will list for example, leads and opportunities created in a given month. From this, you will conclude that the opportunity creation rate for a given month is simply opportunities created divided by leads provided.

Figure 2 – Same example as above, except this time a non-cohort report. One thousand leads in March are dumped into the funnel, and it is assumed that all the opps created, came from these leads. In fact they didn’t, because as we saw above, it takes time for the leads to get processed. Many of the opportunities are coming from leads created in prior months, which actually have a lower conversion rate. By assuming in March that the opps created in March came from March leads, you are artificially lowering the actual yield of the March leads to 12.7%.

This type of analysis, however is super sloppy and can hide all kinds of complexities and issues in you funnel. What if the opportunities created didn’t even come from your leads? Or, if the opportunities created are actually from leads 3 – 6 months old? Let’s assume you dumped 1,000 leads into the business development team’s queue. What happened to them? Have they even been touched? With a cohort view of the world, marketers maniacally track what happens to the groups of things they provide. The result is a level of analysis an order of magnitude greater than what typical non-cohort reporting allows.

But doesn’t cohort reporting level eventually equal non-cohort reporting? Maybe is the answer. As the time frame for reporting opportunity creation increases, the “rate” of opportunity creation from leads to opps should normalize around a number. But unless you are looking at the opportunity creation from leads provided, you are making a false assumption that there is causation and not correlation between the two. Cohort reporting is caustion reporting, non-cohort reporting is correlation. In marketing, you want to be in causation reporting as much as possible.

Cohort reporting will help you detect:

  • Changes in specific programs – bad Adwords campaigns that come on line, georgraphic changes in lead sources
  • Changes in sales pipeline efficiency caused by new hires, reduction in headcount, or other distractions
  • Changes in actual close rates
  • Poor data quality and hygiene

Cohort reporting done correctly can also help directly drive lead, opportunity and revenue forecasting.

In the next blog post, we will talk about the five key cohorts in the sales pipeline.

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