
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.
In the competitive SaaS landscape, growth isn't just about acquiring new users—it's about keeping them. While many executives focus on top-line acquisition metrics, the most successful software companies understand that sustainable growth comes from retaining customers over time. User retention by cohort stands as one of the most powerful analytical frameworks for understanding your product's stickiness and predicting long-term business health.
Cohort retention analysis examines how well your product retains groups of users who started using your service during the same time period. Unlike simple retention metrics that look at overall user retention, cohort analysis segments users based on when they first engaged with your product (their "cohort"), then tracks their ongoing engagement over subsequent time intervals.
For example, a January 2023 cohort would include all users who joined that month. Cohort analysis then measures what percentage of those specific users remained active in February, March, April, and beyond.
According to research by Amplitude, SaaS products with strong product-market fit typically retain at least 25% of users after eight weeks. Cohort retention provides the clearest signal of whether your product delivers sustainable value. When retention curves flatten after an initial drop, it suggests you've found a core audience who finds ongoing value in your solution.
A study by ProfitWell found that a 5% increase in retention can increase profits by 25-95%. Cohort retention directly correlates with customer lifetime value (CLV) and helps forecast recurring revenue with greater accuracy than acquisition-focused metrics alone.
By comparing retention across different cohorts, you can measure how specific product updates, pricing changes, or onboarding improvements affect user retention. This provides a more precise view than overall retention metrics, which blend all user behaviors together.
As David Skok of Matrix Partners notes, "The true growth engine of a SaaS business isn't customer acquisition but customer retention." Understanding retention by cohort helps executives make more informed decisions about where to allocate resources—whether to focus on fixing retention issues or accelerating acquisition.
Start by determining:
For B2B SaaS, monthly cohorts often work best, while consumer apps may benefit from weekly analysis.
A cohort retention table displays:
Transform your retention data into line graphs where:
This visualization makes patterns immediately apparent. Healthy retention curves will show an initial drop followed by a flattening "retention plateau."
Go beyond basic cohort analysis by segmenting users based on:
According to research by Andrew Chen, partner at Andreessen Horowitz, the shape of your retention curve matters more than specific numbers. Look for:
Retention benchmarks vary significantly across SaaS categories:
One of the most positive signals is seeing newer cohorts retain better than older ones. This indicates your product and onboarding are improving, and potentially signals accelerating growth.
For true executive insight, tie retention analysis to:
Several platforms make cohort analysis accessible:
To maximize the value of cohort retention analysis:
User retention by cohort represents one of the most powerful frameworks for understanding product success and predicting business outcomes. While acquisition metrics might tell you how quickly you're growing today, retention cohorts tell you whether that growth is sustainable and where to focus your improvement efforts.
For SaaS executives, mastering cohort retention analysis isn't just about tracking another metric—it's about developing a fundamental understanding of your product's value delivery and your business's long-term health. In an industry where the cost of acquisition continues to rise, the companies that win will be those that excel not just at bringing users in, but keeping them engaged and successful over time.
Join companies like Zoom, DocuSign, and Twilio using our systematic pricing approach to increase revenue by 12-40% year-over-year.