by Trey Pruitt
You have probably seen this chart before. Whether you are a board member or operating executive, it's worth understanding the structure of this table and how to interpret the information it contains.
In a business context, a cohort is a group of users or customers that have similar characteristics. The most common way to group a cohort is by "tenure", or the length of time that a user or company has been a customer. For example, this could be grouping customers by week of account creation, month of first transaction, or quarter of first subscription start date.
The cohort table answers the following question for each cohort: what percent of the cohort is "retained" (i.e., still doing the thing we are measuring) in each period when measured by cohort tenure?
In this example, customer cohorts are grouped by their first subscription month. Along the Y-axis (i.e., vertical axis), the chart shows the name of each cohort. The table is usually triangle-shaped since more recent cohorts have fewer periods of data.
The chart typically also shows the count of new customers in each cohort in the starting period for each cohort. This gives us context for the relative size of each cohort. It also shows the trend of new customer acquisition.
Along the X-axis (i.e., horizontal axis), we have cohort tenure. This is measured as a period index, usually starting at 0 for the first period of the cohort. The number 1 represents the next period, 2 the period after that, and so on.
For each cohort, the table is read left-to-right where period 0 is usually 100% (representing all members of each cohort) and the percentages decline over subsequent periods. Reading top-to-bottom shows how subsequent cohorts are trending over time.
Reading down each column tells us how cohorts are trending at each period in their lifecycle. In this example, we see that cohort retention is declining over time with the more recent cohorts showing lower retention at each period.
Do you know what your cohort table looks like and what the analysis implies about your business? Book a call with me to discuss.
