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Customer Cohort Analysis

Cohort analysis is a subset of behavioral analytics that takes the data from a given data set (e.g. an EMRS, an e-commerce platform, web application, or online game) and rather than looking at all users as one unit, it breaks them into related groups for analysis. These related groups, or cohorts, usually share common characteristics or experiences within a defined time-span.

Why is cohort analysis important?

Cohort analysis allows a company to “see patterns clearly across the life-cycle of a customer (or user), rather than slicing across all customers blindly without accounting for the natural cycle that a customer undergoes.” By seeing these patterns of time, a company can adapt and tailor its service to those specific cohorts. See full article for more details.

How to calculate customer lifespan?

For an e-commerce or subscription business, the customer lifespan is found by dividing 1 by your churn rate. To figure out your churn rate, you need to track how many customers purchased in two sequential periods and divide that by the total number of customers who bought in the first period.

How to calculate retention for a cohort?

User retention is the ability of a company or product to retain users over a specific period of time. The best method to measure retention is Cohort Analysis. A cohort is a group of people with a common characteristic. In cohort analysis, we group users based on a common action that they have performed and analyze their actions over time.