Grouping by when they started.
WHAT A COHORT IS
Customers grouped by when they first bought.
WHY IT IS USEFUL
It shows whether newer customers behave differently from older ones.
WHAT IT REVEALS
Whether retention is improving or worsening Whether recent customers are worth less Whether a change actually affected behaviour
WHY A SIMPLE AVERAGE HIDES THAT
Mixing all customers together conceals that this year's are leaving faster.
HOW TO DO IT SIMPLY
Group customers by the month they first bought For each group, count how many were still buying after three, six and twelve months
WHAT THAT PRODUCES
A pattern you can read directly.
WHAT TO LOOK FOR
Cohorts retaining worse than earlier ones A cohort behaving unusually, and what changed then
WHAT IT ANSWERS
Whether the business is improving, rather than merely growing.
WHAT TO BE CAREFUL WITH
Cohorts too small to mean anything.
WHAT TO REVIEW
Annually, or after any significant change.
