Cohort Analysis
Analyze customer groups over time to understand retention, lifetime value, and segment performance.
Advanced12 min readUpdated 2025-01-02
Cohort Analysis helps you understand how groups of customers behave over time, revealing insights about retention, lifetime value, and customer quality.
Overview
Navigate to Analytics > Cohorts to access cohort analysis.
| Feature | Description |
|---|---|
| Retention Matrix | Track retention over time periods |
| LTV Analysis | Lifetime value by cohort |
| Customer Segments | Group customers by behavior |
| Churn Prediction | Identify at-risk customers |
Cohort Types
Acquisition Cohorts
Groups customers by when they first purchased:
| Cohort | Customers |
|---|---|
| January 2025 | Customers who first purchased in January |
| February 2025 | Customers who first purchased in February |
| March 2025 | Customers who first purchased in March |
Use for:
- Comparing customer quality over time
- Measuring marketing effectiveness by period
- Tracking retention changes
Behavioral Cohorts
Groups customers by actions they take:
| Cohort | Definition |
|---|---|
| High Frequency | Purchases 3+ times per month |
| Browser | Many page views, few purchases |
| One-Time | Single purchase only |
| Repeat | 2+ purchases |
Use for:
- Understanding behavior patterns
- Targeting specific actions
- Creating custom audiences
Revenue Cohorts
Groups customers by spending level:
| Cohort | Definition |
|---|---|
| VIP | Top 10% by lifetime spend |
| High Value | Top 25% by lifetime spend |
| Mid Value | Middle 50% by lifetime spend |
| Low Value | Bottom 25% by lifetime spend |
Use for:
- Identifying best customers
- Tailoring offers by value
- Prioritizing retention efforts
Retention Matrix
Understanding the Matrix
The retention matrix shows what percentage of customers return each period:
| Cohort | Month 0 | Month 1 | Month 2 | Month 3 |
|---|---|---|---|---|
| Jan | 100% | 45% | 35% | 30% |
| Feb | 100% | 50% | 40% | 32% |
| Mar | 100% | 55% | 42% | - |
Reading the matrix:
- Month 0: First purchase month (always 100%)
- Month 1: % who purchased again in month 1
- Month 2: % still active in month 2
- And so on...
Retention Metrics
| Metric | Description |
|---|---|
| Cohort Size | Number of customers in cohort |
| Period Retention | % retained in each period |
| Cumulative Retention | Total % still active |
| Average Retention | Mean across all cohorts |
Period Options
| Period | Use Case |
|---|---|
| Daily | Short purchase cycles |
| Weekly | Frequent purchases |
| Monthly | Standard retention tracking |
Interpreting Results
| Pattern | Meaning |
|---|---|
| Declining slowly | Good retention, healthy business |
| Sharp drop Month 1 | Poor first experience or product fit |
| Flat after Month 3 | Loyal core customer base |
| Improving cohorts | Marketing/product getting better |
LTV Analysis
Lifetime Value by Cohort
Track cumulative revenue per cohort:
| Cohort | Month 1 | Month 3 | Month 6 | Month 12 |
|---|---|---|---|---|
| Jan | $50 | $95 | $140 | $200 |
| Feb | $55 | $100 | $150 | - |
| Mar | $60 | $110 | - | - |
LTV Metrics
| Metric | Description |
|---|---|
| Avg LTV | Average lifetime value |
| Cumulative LTV | Total revenue to date |
| Projected LTV | Predicted future value |
| LTV:CAC Ratio | Value vs acquisition cost |
LTV Benchmarks
| LTV:CAC | Interpretation |
|---|---|
| < 1:1 | Losing money on acquisition |
| 1:1 - 3:1 | Break-even to moderate |
| 3:1 - 5:1 | Healthy and profitable |
| > 5:1 | Strong - consider scaling |
Customer Segments
By Lifetime Value
| Segment | Criteria | Strategy |
|---|---|---|
| Champions | High LTV, frequent purchases | VIP treatment, exclusives |
| Loyal | Consistent purchases | Loyalty rewards |
| Potential | Recent high-value | Nurture to champions |
| At Risk | Was valuable, declining | Win-back campaigns |
| Lost | No recent activity | Reactivation offers |
By Churn Risk
| Risk Level | Indicators |
|---|---|
| High Risk | No purchase in 60+ days, declining frequency |
| Medium Risk | Purchase gap increasing |
| Low Risk | Regular purchase pattern |
Segment Actions
| Segment | Recommended Action |
|---|---|
| Champions | Exclusive access, referral program |
| At Risk | Personalized win-back email |
| Lost | Deep discount reactivation |
| New | Onboarding sequence |
Using Cohort Insights
For Acquisition
| Insight | Action |
|---|---|
| Recent cohorts perform better | Current marketing is effective |
| Certain channels have higher LTV | Shift budget to those channels |
| Seasonal cohorts vary | Adjust expectations by season |
For Retention
| Insight | Action |
|---|---|
| Sharp Month 1 drop | Improve onboarding experience |
| Consistent Month 3 drop | Add retention touchpoint |
| Segment X churns faster | Investigate and fix issues |
For Monetization
| Insight | Action |
|---|---|
| VIPs drive 50% of revenue | Create VIP program |
| LTV plateaus at Month 6 | Test upsell at Month 5 |
| Second purchase crucial | Focus on repeat purchase |
Building Audiences
Use cohort insights to create targeted audiences:
| Audience | Based On |
|---|---|
| Lookalike of Champions | Your best customers |
| Win-Back | At-risk or lost segments |
| Upsell | High potential, mid-value |
Recap
Cohort Analysis provides:
- Retention Tracking - See how customers stick around
- LTV Understanding - Know customer value over time
- Segmentation - Group customers by behavior
- Churn Prediction - Identify at-risk customers
- Actionable Insights - Drive retention and growth
Use cohorts to focus on customer quality, not just quantity.
Key Takeaways
- 1Track customer retention over time
- 2Understand lifetime value by acquisition date
- 3Segment customers by behavior and value
- 4Identify at-risk customers before they churn
- 5Compare cohort performance month-over-month
Frequently Asked Questions
How much data do I need for cohort analysis?
For meaningful insights, you need at least 3 months of data with 100+ customers per cohort. More data provides more reliable patterns.
What is a good retention rate?
This varies by industry. For e-commerce, 20-30% Month 1 retention is typical. For subscriptions, 80%+ is expected. Compare to your historical benchmarks.
How do I improve retention?
Focus on the biggest drop-off points. If Month 1 retention is low, improve onboarding. If it drops at Month 3, add retention touchpoints like emails or offers.
Can I export cohort data?
Yes, you can export retention matrices and customer segment lists in CSV format for further analysis or use in other tools.
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