Churn Cohort Analysis

What is it?

Churn cohort analysis examines groups of customers (cohorts) who started using your product or service during a specific period to track how many stopped using it (churn) over time. This method helps identify trends, patterns, or issues causing customer loss and offers insights into how retention changes across different customer segments or timeframes.

How is it calculated?

Churned revenue

Churned revenue refers to the revenue lost when customers stop generating income. A customer is considered churned if they have no positive revenue for two consecutive months. The churned revenue is calculated as the last recorded positive revenue before the customer churned.

Cohort analysis

Cohort analysis groups users based on their sign-up month, allowing you to observe and compare their behavior over time. For example, you can track how many users in each cohort are active after 1, 3, or 6 months. This analysis helps you understand customer retention, identify patterns in churn, and monitor returning customers. Note: if a churned customer returns, they remain part of their original cohort.

What does it tell me about my company?

Churn cohort analysis provides actionable insights into your company’s customer retention dynamics and overall health:

1. Retention patterns: it shows how long customers stay engaged and when churn typically occurs, helping identify weak retention points.
2. Customer behavior: highlights differences in churn across customer segments, revealing which groups are most loyal or at risk.
3. Product-market fit: a high churn rate in early cohorts may suggest issues with onboarding, product value, or alignment with customer needs.
4. Impact of changes: measures the effectiveness of updates, pricing changes, or new features by comparing churn before and after implementation.
5. Revenue stability: offers a clearer picture of recurring revenue trends by separating long-term customers from those likely to churn early.

By understanding who churns and why, you can fine-tune your strategies to reduce churn, improve customer satisfaction, and drive sustainable growth.

What are the underlying data sources?

The churn cohort analysis is based on revenue and customer data.