Questions

For example, lets say I'm currently spending $10K a month on advertising; how can I use my cohort analysis revenue data to see if my advertising spend is worth spending?

You'll find that looking at top line revenue alone won't provide much value to you if you are asking the question "Is my advertising spend worth it?"

Typically, in advertising I want to know the Lifetime Value of the customer or the Average Revenue Per User (ARPU).
Then, it boils down to : If I spend $100 to acquire this new customer and he spends $150 over the lifetime of his paid relationship with me then, yes--- my ad spend is worth it.

On the other hand:
I could spend 10K this month in ads.
I could sign up 20K in users/customers/top line revenue.
But my data will tell me I spent MORE per customer/user than they are actually worth over the average lifetime.

So that's what usually answers the "Is it worth it" question in any advertising scenario.
1. How much to acquire the user?
2. How much does the user spend over the avg lifetime?
If it doesn't make sense, it's not worth it, regardless of what your top line revenue tells you.

You might find this blog post on cohort analysts valuable as it goes into more detail. (I have no affiliation.)
https://apsalar.com/blog/2012/01/how-to-use-cohort-analysis-to-improve-revenue/


Answered 5 years ago

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