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What is cohort analysis and what business questions does it answer?
Cohort analysis groups customers by a shared starting point, such as the month they first bought, and tracks how each group behaves over time. It answers questions about retention, repeat purchase and whether newer customers are better or worse than older ones.
Overall averages can hide changes. A business may appear stable while recent cohorts retain less than earlier ones.
Typical uses:
- Retention curves by signup month
- Revenue per cohort over time
- Effect of an onboarding or pricing change
It needs customer-level history with consistent identifiers, which is another reason data foundations matter. Keep cohorts large enough to be meaningful, and compare them at the same age, such as the first three months after joining, rather than at the same calendar date.
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