What Are Cohorts in Marketing?
Originally used to describe a military unit in ancient Rome, the word cohort retains some of its original meaning by describing a group of people that shares a common statistical or demographic trait. The word is widely used in academia in a variety of disciplines that study groups of people based on shared characteristics, such as economics, health sciences and sociology. Cohort in marketing, however, is commonly accepted to mean "age-based marketing."
Your target market consists of customers having the greatest likelihood of buying your products or services. Prior to developing products or marketing communication programs, marketers go to great lengths to identify precisely who those customers might be. Marketers typically segment markets by geography, demographic and by psychographics profiles. Demographics are the observable, quantifiable characteristics of target markets, such as age, education and household income, which help identify who target customers are. Psychographics are the qualitative, emotional traits of target customers that help explain the "whys" of their shopping behavior.
Similar to demographics, cohorts use quantifiable descriptors to identify target markets. Demographics, however, are the quantifiable descriptors themselves, such as the aforementioned age and household income. Cohorts in marketing use age descriptors as demographic markers to make inferences about attitudes and behavior of people in the same age group based on common experiences. The basic premise is that people are profoundly influenced by seismic experiences and events remembered from late adolescence and early adulthood—their coming-of-age years. These "defining moments" tend to inform people's attitudes, preferences and shopping behavior for the remainder of their lives.
Charles Schewe, Geoffrey Meredith and Janice Karlovich identified seven generational cohorts in their year 2000 book titled "Defining Markets, Defining Moments." These include the Great Depression Cohort with people born between 1912 and 1921, the World War II Cohort born between 1922 and 1927, the Post-WW II Cohort born between 1928 and 1945, the Baby Boomers I born between 1946 and 1955, the Baby Boomers II born between 1956 and 1965, Generation X born between 1966 and 1976, and N-Gens born between 1977 and 1987. Generational cohorts do not suggest "generations," which are typically 20 to 25 years. Cohorts vary in the number of years covered. For marketing purposes, the relevance is in the years when the cohorts came of age.
Cohorts are shaped by significant defining moments that affect their attitudes and behavior for the remainder of their lives. For instance, the Great Depression Cohort came of age during the Great Depression, 1930-1939. As a defining moment, the Great Depression, defined by financial insecurity, had a profound effect on this group in terms of frugal spending, saving as a priority and a high premium on financial security. Each cohort group has its defining moments that translate into hot buttons in terms of attitudes, tastes and preferences.
Understanding and using cohort analysis can help you identify target markets with greater precision to get new customers. It requires a bit of extra effort, but small-business owners typically increase their chances of coming up with winners when they aim for smaller target markets, such as those associated with a specific cohort.