Cohort analysis

A cohort is everyone who started in the same period. Following them separately is the only way to tell whether the product improved or the mix changed: a company that starts buying cheaper traffic will show worsening blended retention even if every cohort behaves exactly as before, and a company that improved its onboarding will show it in the newest cohorts first while the blended number lags for months.

The table is read in two directions. Down a column is the effect of tenure — how any cohort behaves at month three. Across a row is the effect of calendar time — what happened to everyone in March. A number that moves down a column is a product fact; a number that moves across a row is usually an operational one.

Reading the blended average and calling it a trend

Blended metrics change whenever the mix changes, which on a growing business is constantly. Most reported improvements in retention are composition effects, and most reported declines are the arrival of a cheaper channel rather than a worse product.

Retention rate

The share of a cohort still active after a given interval — the same fact as churn, read from the surviving side.

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Churn rate

The share of customers who stop buying in a period, and therefore the reciprocal of how long a customer lasts.

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LTV

The contribution a customer produces across their whole relationship with the business, discounted for the fact that it arrives later.

All forty-five termsWhat this is regulated by in the UAE

Is this one right in your own numbers?

The definitions are the easy part. Whether the figure on your dashboard was computed this way is a different question, and usually the more expensive one.