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COHORT RETENTION ANALYSIS

Cohort retention analysis is a method used in marketing and analytics to understand and measure how well a group of customers or users is retained over a specific period of time. It involves grouping customers or users based on a common characteristic or behavior and then tracking their ongoing engagement or retention rates.

Here's how cohort retention analysis typically works:

Cohort Formation​

Customers or users are grouped into cohorts based on a specific characteristic or event. For example, you might create cohorts based on the month they first signed up, the geographic location, or the marketing campaign that brought them in.

Measurement Period​

A specific time period is chosen for analysis. This could be weeks, months, or even years, depending on the business and the specific analysis goals.

Tracking Engagement​

Throughout the measurement period, the behavior or engagement of each cohort is monitored. This could include metrics such as the number of purchases, app usage, website visits, or any other relevant actions.

Retention Calculation​

The retention rate for each cohort is calculated by determining the percentage of customers or users from the initial cohort that remain engaged or active over time. This is typically done by comparing the number of active users in each subsequent period to the initial cohort size.

Visualization and Analysis​

The retention rates are often visualized using a cohort retention curve or a retention table, which shows the percentage of retained users over time for each cohort. This allows for easy comparison and identification of trends and patterns.

The insights gained from cohort retention analysis can be valuable for businesses in several ways. It can help identify which cohorts of customers or users are most likely to remain engaged over time, understand the impact of specific marketing campaigns or product changes on retention, and guide decision-making in customer acquisition and retention strategies.

Overall, cohort retention analysis provides a powerful tool for understanding customer or user retention dynamics and optimizing business strategies to improve long-term engagement and profitability.