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4 Things To Follow To Identify The Right Customer Cohorts For New Product Line

Learn about the importance of creating customer cohorts when planning to come out with a new product line and how the process can help you effectively reach the right customers and boost your conversions and business revenue.

As a product development head you no longer can afford to work with the ‘one-size-fits-all’ approach for customers of today’s marketplace. Think about it. Not all your customers are the same! They do not buy the same things, with the same spend or even with the same frequency.

Then, why would you want to develop and communicate your product to them in the exact same way?

So, if you are planning to coming out with a new product line, then the first step in the right direction is understanding your customer base. In fact, a study done by Harvard Business claimed that, each year an average of 30,000 new products enter the market place and around 85% of them failed to generate desired revenue due to poor market segmentation.

4 key things to follow to know the right customer cohorts

However, often finding the best way to sub-group your customers can be far from easy. So, consider these four key factors to ensure that you effectively create the right cohorts of your customers for your new product line, thereby accelerating your business growth. Once you are able to define these segments clearly, then it will become relatively easier for you to target those segments with the highest potential of buying your products.

  1. Understand the ways to segment your customers

When creating cohorts of your customers or potential customers, you must ensure that the segments have discernibly different needs. If one segment has no distinguishing differences from another or they all respond in a similar way, thereby you losing the purpose of creating segments. So, ensure you segment them into different and homogenous sub-groups based on shared characteristics.

There are seven primary categories – demographic, psychographic geographic, and behavioural, psychographic, technographic, need-based and values – that you can use to segregate your customers as depicted in figure given below. You can use each of these models to break down your customer base into subgroups.

Though these categories does not cover all types of customer segregation, as it can be further refined by adding necessary categories depending on your specific business, customers, and the goals you have set. Now, depending on the type of product you want to introduce into the market, you can pick a segmentation type and match these to your specific goals. This will allow you to target your preferred audience and personalize your marketing.


  1. Define needs, desires and problem areas to be solved by creating customer cohorts

Determine the exact need, desire or pain point areas / problems that you intend to solve by creating customer cohorts for your new product line. By doing this, you will be able to create new products that function the way they need in order to solve their problem or desire and fill voids in the marketplace. For example, a person who is not technology savvy may buy a costly phone such as iPhone, simply because he is not aware that his needs can be met just as well by a much economical Android phone.

  1. Establish the ideal customer segment –Another thing to consider in knowing the right customer cohorts is by dividing your target market / customers into sub-markets based on the product or service type and, subsequently further splitting into more sub-groups to finally reaching to your ideal customer profile for your new product. These ideal customers are the ones that will provide the most value to you in return. Supposedly, if you are a bicycle manufacturer, you will need to divide your market into children, men, women, and then further split into sports professional, amateur riders, etc.
  2. Use customer knowledge tools to improve your segments – Ensuring that your data or information about your customers is accurate, properly formatted, standardized, and consolidated is indispensable for defining your customer cohorts precisely. For this you can make use of advanced customer automation software, allowing you to use predetermined analytics to get market acumens and, thereby enabling you to target the right audience for your product. Remember, the more targeted your customer segment, the more strongly you can come out with a product based on your customer needs. As per a survey conducted by McKinsey, companies that extensively use customer analytics are reporting 115% higher ROI and 93% higher profits. Refer below given Fig.

Get started with creating of right customer cohorts now!

Having the right customer cohorts for your product can indisputably provide enormous returns as this will help you in getting the proper insights who all are your actual and most profitable customers, what they need, and how your new product can serve them better. According to a study by Bain & Company, 81% of executives found that segmentation was crucial for growing profits. Besides, organizations with great customer segmentation strategies enjoyed a 10% higher profit than companies whose segmentation was not effective over a 5-year period.

Not to forget, segmenting your customers is not a ‘one-time exercise’ and certainly does not end with your new product launch based on it. Rather, it should be remembered that your customer needs and characteristics change with new products getting introduced in the market. Thus, it is imperative that as a product head of your organization you revisit your customer segmentation on regular basis and react to these changes accordingly, thereby positioning your business for maximum success.

Have you created customer cohorts to improve your customer’s experience?

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