Ever feel like numbers and analysis are a “growth opportunity” for you? That’s where ‘Cohort Analysis’ steps in—its a superhero for the numerically challenged. Once you set it up, you can literally see what is going on in your business in a way that’s actionable. 

Cohorts are not just a jumble of figures; they are the secret code to understanding why some subscribers stay, some go, and some can’t resist an upgrade. From deciphering why users stick around to predicting who might just be eyeing the exit, let’s break down how Cohort Analysis works so you can use this crystal ball in your own business. Dive into “Decoding Cohorts” to learn how to turn you and your subscription business into an analytics powerhouse.

Part 1 of Decoding Cohorts:
The Power and Potential of Cohort Analysis for Growth and Success

First Things First: What is a Cohort?

A cohort is a group of people with a shared characteristic.

Cohort analysis is a valuable tool used to understand the behavior and characteristics of specific groups, or cohorts, of customers. It involves grouping individuals who share a common characteristic or experience within a particular timeframe.

Deciphering Subscriber Behavior: The Cohort Analysis Advantage

Cohort analysis is often underestimated for its potential to support business growth and success. By categorizing customers into groups based on common characteristics or behaviors, it unlocks a treasure trove of insights. From understanding customer behavior to predicting churn, optimizing payment processes, and even refining product offerings, cohort analysis guides decision-making in subscription businesses.

What does cohort analysis look like?
Here are three examples based on billing start dates and their learnings: 

Here are other examples of the types of cohort analysis and the related insights:

Retention Patterns: Cohort analysis unveils how different groups of subscribers behave over time. It highlights retention rates for various cohorts, identifying which cohorts exhibit higher or lower retention. Understanding these patterns helps in devising retention strategies specific to each cohort, thereby improving overall subscriber retention rates.

Churn Identification and Prevention: By tracking cohorts, businesses can identify periods when subscribers are more likely to churn. Insights from cohort analysis allow for the identification of characteristics or behaviors common among cohorts with higher churn rates. This information aids in implementing preventive measures, such as targeted interventions or improved engagement strategies, to reduce churn.

Payment Efficiency: Analyzing cohorts based on payment success allows companies to optimize payment processes, reduce payment failures, improve customer satisfaction, and enhance the overall customer experience, leading to increased revenue and improved retention rates.

Subscription Lifecycle and Value: Cohort analysis helps in understanding the lifetime value of subscribers from different cohorts. It provides insights into the revenue generated by each cohort over their subscription period. Understanding which cohorts have higher lifetime value guides decisions related to customer acquisition costs, marketing strategies, and service improvements to enhance the overall subscriber value.

Optimizing Product or Service Offerings: Analyzing cohorts can reveal how different groups of subscribers engage with various features or services. It helps in understanding feature adoption rates among cohorts and identifying which offerings resonate best with specific subscriber segments. This insight guides product development or service enhancements to cater to subscribers’ preferences more effectively.

Segmentation and Personalization: Cohort analysis facilitates segmentation based on subscriber behavior, preferences, or acquisition sources. This segmentation allows for personalized marketing campaigns, targeted offers, and improved customer experiences tailored to the specific needs of each cohort, ultimately leading to higher engagement and retention rates.

Operational Intelligence: Conducting time-based cohort analysis focused on expected versus actual automated message delivery helps companies pinpoint instances where automated messages failed to reach subscribers, understand the causes, and implement improvements to ensure consistent and reliable message delivery.

As we’ve seen, it’s not just about the numbers; it’s about deciphering the behavior patterns that drive your business success. 

For those beginning their cohort analysis journey, our recommendation is to start with one or two specific cohorts that align with your business’s unique needs and objectives. You might already have a clear idea of which type of cohort analysis and insights matter most to you.

However, if you’re seeking a starting point, we recommend focusing on billing start date and acquisition source cohort analysis. These two cohorts often unveil foundational insights into customer behavior, retention patterns, and the effectiveness of acquisition strategies. They provide a solid stepping stone to understanding your subscriber dynamics and shaping targeted strategies for growth.

Next up, in the ‘Decoding Cohorts’ series, let’s delve into the practicalities: ‘Learning How to Calculate Cohorts.’ Stay tuned for a step-by-step guide to unlocking the power of cohorts in your subscription analytics journey.