
Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Join companies like Zoom, DocuSign, and Twilio using our systematic pricing approach to increase revenue by 12-40% year-over-year.
In today's data-driven SaaS landscape, understanding how different groups of customers behave over time isn't just helpful—it's essential for sustainable growth. While many executives track overall metrics like MRR and churn, these aggregate numbers often mask critical patterns that could inform strategic decisions. This is where cohort analysis comes in.
Cohort analysis allows SaaS companies to group customers based on shared characteristics and analyze how their behaviors evolve over time. This analytical approach has become a cornerstone for subscription-based businesses seeking to optimize customer acquisition costs, improve retention strategies, and maximize lifetime value.
Cohort analysis is a subset of behavioral analytics that groups users based on shared characteristics (cohorts) and tracks their collective actions over time. Unlike traditional metrics that provide snapshot views, cohort analysis reveals how specific customer segments behave throughout their lifecycle with your product.
Acquisition Cohorts: Groups users based on when they first subscribed to your service (e.g., all customers who signed up in March 2023).
Behavioral Cohorts: Groups users based on actions they've taken (e.g., all customers who upgraded from a free trial to a paid plan).
Segment Cohorts: Groups users based on demographic or firmographic attributes (e.g., enterprise customers with 1000+ employees).
While overall retention rates provide a general health indicator, cohort analysis shows how retention varies across different customer segments and acquisition periods.
According to OpenView Partners' 2022 SaaS Benchmarks report, companies that regularly perform cohort analysis are 26% more likely to maintain net revenue retention above 110% compared to those that don't.
Not all customers are created equal. Cohort analysis helps identify which customer segments deliver the highest lifetime value, allowing you to focus acquisition efforts on the most profitable prospects.
By tracking how cohorts acquired through different campaigns perform over time, you can determine which marketing channels deliver customers with the highest long-term value—not just the lowest acquisition cost.
Cohort analysis can reveal degradation in product engagement or value delivery before it impacts your top-line metrics. For example, if newer cohorts are churning faster than historical cohorts, this signals a potential product-market fit issue that requires immediate attention.
Understanding which features drive retention across different cohorts helps prioritize your product roadmap to focus on enhancements that will have the greatest impact on customer lifetime value.
Start by identifying the specific questions you want to answer:
Select the cohort type that will best answer your questions:
Common metrics to track in SaaS cohort analysis include:
Retention Rate: The percentage of users from a cohort who remain active after a specific period.
Revenue Retention: The percentage of revenue retained from a cohort over time (includes effects of downgrades, upgrades, and expansion).
Feature Adoption: The percentage of users engaging with specific features over time.
Expansion Revenue: Additional revenue generated from a cohort beyond their initial subscription.
The appropriate time interval depends on your business model:
The most common visualization for cohort analysis is a cohort retention table, which shows retention percentages across time periods for each cohort.
Modern analytics tools like Amplitude, Mixpanel, and even advanced features in Google Analytics provide built-in cohort analysis capabilities.
Let's examine how a B2B SaaS company might use cohort analysis to improve their business:
Scenario: A project management software company notices their overall monthly churn rate has increased from 3% to 5% over the past quarter.
Cohort Analysis Approach:
Findings:
Action Taken:
Based on this analysis, the company conducts customer interviews with recently churned Pro customers and discovers that a newly launched competitor is offering similar features at a lower price point. In response, they enhance their Pro plan's value proposition by adding advanced reporting features highly valued by this segment.
Within two quarters, new Pro cohorts return to historical retention levels, demonstrating the power of cohort-specific insights and targeted interventions.
According to research firm Gartner, over 80% of analytics initiatives fail to deliver business value—not from lack of data, but from lack of actionable insights. When conducting cohort analysis, always tie findings to specific actions your team can take.
Some businesses experience natural seasonal fluctuations. Ensure you're comparing cohorts in a way that accounts for these patterns to avoid misinterpreting seasonal effects as product or market trends.
While micro-cohorts can reveal nuanced insights, ensure each cohort contains enough customers to be statistically significant. For smaller businesses, quarterly cohorts may provide more reliable data than monthly ones.
Cohort analysis tells you what's happening, but not always why. Pair quantitative cohort data with qualitative feedback from customer interviews to develop a complete understanding of behavior patterns.
Cohort analysis provides SaaS executives with powerful insights into customer behavior that aggregate metrics simply cannot reveal. By understanding how different customer segments engage with your product over time, you can make more informed decisions about product development, marketing allocation, customer success initiatives, and pricing strategies.
In an increasingly competitive SaaS landscape, companies that master cohort analysis gain a significant advantage—they can identify problems earlier, recognize opportunities faster, and allocate resources more effectively than competitors relying on surface-level metrics alone.
Implementing cohort analysis doesn't require sophisticated data science capabilities. Start with simple time-based cohorts focusing on retention, then gradually expand your analysis as you develop a better understanding of what drives value for different customer segments. The insights gained will provide a powerful foundation for sustainable growth and competitive advantage.
Join companies like Zoom, DocuSign, and Twilio using our systematic pricing approach to increase revenue by 12-40% year-over-year.