A cohort is a group of people banded together or treated as a group.
A segment is the division of something into separate parts or sections. GENERALLY WE WILL SEGMENT A COHORT
SUPPOSE WE HAVE A CHICKEN HATCHERY… We will create cohorts of chicks by the month they hatched. Then we can look at things like: How long did it take them to get a certain size? How much do they eat? What is their mortality rate? January February March
THEN WE CAN SEGMENT EACH COHORT… This could tell us things like: Chicks born in Jan that eat a certain type of feed have a higher mortality rate; or Chicks born in January that have blue eggs grew 2x faster; or Cohorts by birth month are the wrong measurement! Gender Color of Egg Type of Feed
But wait… You’re not a farmer?
NON-FARMING COHORT EXAMPLE Suppose we have a website/app that sells subscription access to instructional videos. We want to answer a couple common business questions: • What is my revenue per subscriber? • Which is my most profitable channel? • What type of user behavior (engagement) is likely to predict retention? • What type of user behavior is likely a precursor to churn? • Who are my most valuable users? What are they worth?
COHORT BY SUBSCRIPTION MONTH
REVENUE BY COHORT @ $10 PER SUBSCRIPTION
IF YOU WEREN’T USING COHORTS
Churn is losing customers through cancellations.
SUBSCRIBERS AND CANCELLATIONS (CHURN)
SEGMENT YOUR COHORTS TO BETTER UNDERSTAND CHURN In our example, we’ll call video views “engagement”. You could also get fancy and add other vectors like logins and video views etc. but lets keep it simple. There are 6 subscribers in March that signed up in the Jan cohort.
What’s the activity of users that churned?
Videos Viewed Date Range: March Cohort: January Of the people that were not subscribed in March from the Jan cohort (4 people): None of the users that churned viewed more than one video!
If a user does not view at least 6 videos, they have a high likelihood to churn. Watch that number! FIGURE OUT A WAY TO GET THEM ENGAGED!
You can use cohorting for lots of things!
COHORTING ATTRIBUTION You an use cohorts in your attribution model to see the effectiveness over time (and LTV) from your advertising channels.
COHORTING EMAIL If you send an email today, you’ll get half of your clicks from that email today, but an equal number over the next 30 days. Use a cohort to find out revenue by send date (rather than revenue per day).
Defining Your Cohorts
DEFINING YOUR COHORTS How you define your cohorts depends on your type of business. You can define your cohorts any number of ways: • First Time Purchasers • Trial Start Month • Subscription Start Month • Subscription Cancellation Month • Cancelled Users
Use cohorts to get “True LTV”
CALCULATING “TRUE” LTV There are lots of formulas you can use to calculate LTV.
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