
Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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Join companies like Zoom, DocuSign, and Twilio using our systematic pricing approach to increase revenue by 12-40% year-over-year.
Cohort analysis is a powerful analytical method that segments customers into related groups (cohorts) and tracks their behavior over time. Rather than examining all user data in aggregate, cohort analysis enables SaaS leaders to understand how specific customer segments perform throughout their lifecycle. These cohorts are typically formed based on shared characteristics or experiences within a defined timeframe, such as customers who subscribed during the same month or who adopted a particular feature.
For SaaS executives, cohort analysis transforms raw user data into actionable insights by revealing patterns that would otherwise remain hidden in aggregate metrics. It answers critical questions about customer behavior, retention, and lifetime value that directly impact strategic decision-making and growth initiatives.
Traditional KPIs like total revenue or user count provide a snapshot of business performance but fail to capture the dynamics of customer behavior. According to a study by McKinsey, companies that use customer analytics extensively are 23 times more likely to outperform competitors in customer acquisition and 19 times more likely to achieve above-average profitability.
Cohort analysis reveals these deeper behavioral trends and allows executives to:
Hubspot, a leading marketing automation platform, utilized cohort analysis to discover that users who imported their contacts during onboarding had significantly higher 90-day retention rates. This insight allowed them to redesign their onboarding flow, resulting in a 30% improvement in new customer retention, according to their internal case study.
In today's competitive SaaS landscape, the ability to make data-driven decisions quickly provides a substantial advantage. A ProfitWell study indicates that companies leveraging cohort analysis are able to reduce customer churn by 15-30% compared to those using only aggregate metrics.
The first step is identifying which cohorts will provide the most valuable insights:
Once cohorts are established, determine which metrics will reveal the most useful patterns:
Effective cohort analysis relies on clear visualization methods:
Retention analysis is perhaps the most common application of cohort analysis in SaaS. A basic retention cohort analysis follows these steps:
For example, a cohort retention table might reveal that customers who signed up during a product launch have a 15% higher 6-month retention rate compared to those who joined during regular periods.
Cohort analysis provides a more accurate way to calculate LTV:
This approach yields more precise LTV estimates than simple averages across all customers. According to Amplitude Analytics, companies that track cohort-based LTV can optimize acquisition spending with 40% greater efficiency by identifying which customer segments deliver the highest long-term returns.
Several approaches exist for implementing cohort analysis:
To maximize value from cohort analysis:
Cohort analysis transforms how SaaS executives understand their business by revealing patterns in customer behavior that directly impact growth, retention, and profitability. By segmenting customers into meaningful cohorts and tracking their evolution over time, leaders can make more informed decisions about product development, marketing strategies, and customer success initiatives.
In the increasingly competitive SaaS landscape, the companies that thrive will be those that can effectively harness their customer data through techniques like cohort analysis. The insights gained don't merely explain past performance but provide the foundation for predictive modeling that can guide future growth strategies and create sustainable competitive advantage.
As you implement cohort analysis in your organization, focus first on the questions most critical to your current business challenges, whether that's improving retention, optimizing acquisition channels, or increasing customer lifetime value. The resulting insights will provide a clearer roadmap for sustainable growth based on deep understanding of your customers' behavior patterns.
Join companies like Zoom, DocuSign, and Twilio using our systematic pricing approach to increase revenue by 12-40% year-over-year.