Retention Cohort Analysis: Four Simple Ways
There are four ways to analyze a churn or retention cohort chart. Vertically, horizontally, diagonally, and by monitoring outlier events.
This is a simple yet actionable blog post that promises not to drown you in information.
You need accurate answers fast — and that's what this post will do.
This is a retention cohort chart
Since churn is the opposite of retention, your churn cohort would look 100%-x for each of those cells. Once you know how to analyze a retention cohort, you'll know how to do it for churn cohorts as well.
There are four ways to analyze a retention cohort chart
1. Vertical stripes
Look for events affecting each cohort at the same time, such as a paywall, which causes a drop in retention.
2. Horizontal stripes
Identify cohorts with particularly good or bad retention. Investigate what makes these cohorts different.
3. Diagonal stripes
Detect events impacting all cohorts simultaneously, like a server outage.
In this example, you'd see an improvement. That could be due to an improvement in UX, installing a retention automation software like Churnkey, or the addition of a new feature.
4. Outlier events
Spot events affecting only certain cohorts, such as a successful retention experiment.
Segment and compare to analyze cohort charts
Revenue retention cohorts can be viewed in two ways.
- New revenue cohorts
- Repeat revenue cohorts
In this chart, we can see that the cohort generated 51k in new revenue when they first transacted with us. By Month 9, that cohort generated 40k, while retaining at 79%.
Revenue cohort charts understand how much revenue a cohort generated over a period of time vs when they first transacted with us. This chart measures customer loyalty.
How to analyze retention cohort charts?
Segmentation
Continue segmenting your cohort charts in different ways. Look at trends and cohorts. Analyze by:
- plan name
- order value
- profiling data: are they an ideal customer profile or not
- size: is it an individual account or a team account
- acquisition method: were they acquired self-serve or via a sales-led method
Retention curves
To better analyze repeat revenue cohorts, learn about retention curves.
Retention curves are either a flat, declining or a smile curve. You might even want to create cake charts.
Gap analysis
Understand where the gap is? Is revenue not growing because it's contracting or churning? Are you losing revenue from existing customers or new customers? Is the Month 2 or Year 2 churn the highest (ie, people not renewing)?
How to create retention cohort charts?
There are a few different ways to get to your retention cohort charts.
Payment providers
The simplest way to create retention cohort charts is to look at your payment provider such as Stripe. If they have a billing section with metrics, you might find this pre-built for you. They won't be advanced but could be a good starting point.
3rd party billing analytics
Look for a billing tool like Chartmogul. These tools should offer a 1-click integration with your payment provider and offer more segmentation capabalites.
Product analytics tools
Use tools like Mixpanel, Amplitude, or Heap to create these graphs. You can integrate your data warehouse with these tools and visualize data pretty easily. The advantage is that you can look at free user retention and not just paid user retention. Setting up these tools is usually time-consuming.
Data tools
All data tools like Power Bi should have the ability to create these graphs for you. This requires a data analyst.
Retention software
Churnkey is a retention automation software. It has a native, 1-click integration with most payment providers. You can see a breakdown between voluntary and involuntary churn, revenue vs logo churn, and lots of other retention specific metrics that other tools might not easily surface. Reach out to our team to request your free invite. Unlike other tools, Churnkey lets you act on your data and drive results directly.
Thanks for reading!
