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Customer Retention & Cohort Analysis | How VCs Calculate Customer Retention
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Күн бұрынWe learn the REAL way to calculate customer retention in the startup ecosystem - cohort analysis. We cover everything from user retention to net dollar retention to customer lifetime value. Downloadable template included.
✅ Download the Excel template: bit.ly/cohort_r...
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Related Startup Videos:
🚩 How to Evaluate Marketing Performance: • KPIs for Digital Marke...
🚩 How to Calculate Customer Churn Rate: • How to Calculate Churn...
🚩 Cohortized CAC Payback Period for Subscription Businesses: • How to Calculate CAC P...
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In this video, we learn about analyzing customer retention using cohort analysis tables.
The advantage of this method is that it works for all business models (subscription & non-subscription) to give a very exact view into the recurring purchase behavior of customers.
Sections:
0:57 explanation of customer cohort analysis data structure
4:11 calculating customer retention by cohort
7:14 revenue cohorts & net revenue retention (and net dollar retention)
10:14 calculating cumulative lifetime revenue by cohort
12:00 customer lifetime revenue
13:49 calculating customer lifetime value by cohort & CAC: LTV ratio discussion
Cohortizing this data allows us to view the quantities and timing of recurring purchases. With this info, we can understand how much in marketing we can afford to spend in order to acquire one new customer (customer acquisition cost).
We cover how to calculate venture capital KPIs like net revenue retention (net dollar retention), as well as the customer lifetime value (total lifetime gross profit from one customer) using our cohorts!
Long story short, cohort analysis tables tell the most important story of a company - the recurring purchase behavior of customers. With this information, we can raise funding, invest in marketing, and scale with precision.
By the end of this video, you will understand how to read and build customer retention reports using cohort analysis like a pro - I guarantee it!
If you have questions - leave a comment below and I'll try to help. Cheers!
#customerretention #cohortanalysis #startups
@eric_andrews Жыл бұрын
Questions? Let me know in the comments happy to discuss. 🚀 Also, if you want to learn how to systematically scale your startup without ending up as one of the 90% of startups that fail, have a look at this ⇒ www.ericandrewsstartups.com/financeforstartups
@vladimirdemidov6163 Жыл бұрын
Hi, can retention of the subsequent month be higher than the previous one?
@eric_andrews Жыл бұрын
@vladimirdemidov6163 yes that is called revenue expansion or 100%+ net dollar retention and is common in SaaS
@vladimirdemidov6163 Жыл бұрын
@eric_andrews thank you for the answer!
@69Lerchik 6 ай бұрын
@eric_andrews could you please tell me how we should calculate average life span of the user?
@realdarthsin 2 жыл бұрын
Oh man this was excellent. Clear and concise. Even helped me understand the level of granularity(daily, weekly, monthly) I should approach while calculating CLV over time. Signed up for the waiting list to your course too. Cheers!
@eric_andrews 2 жыл бұрын
Really glad to hear it Rahul. Awesome you are on the waiting list as well, cheers!
@nitishdhawan1297 Ай бұрын
This is one of the best videos on the interpretation of customer cohorts.
@harishsivaramakrishnan7096 3 жыл бұрын
Oh after watching the video, I have to say that you opened up my thought process! I subbed and did the notification thingy!
@eric_andrews 3 жыл бұрын
Really appreciate that Harish!!! 🙏🙏 Cheers
@Skyworld2525 2 жыл бұрын
Very well explained...one of the best cohort explanation...thank you buddy...!!
@eric_andrews 2 жыл бұрын
my pleasure, cheers!
@Charlay_Charlay 11 ай бұрын
Eric, this is extremely valuable to me. Thank you so much for sharing and explaining what Customer retention and Cohort Analysis is to me.
@eric_andrews 11 ай бұрын
You are very welcome!
@garrettmartin4131 2 жыл бұрын
Dude, I am starting a new job next week and your content has been a huge help.
@eric_andrews 2 жыл бұрын
You got it!
@Potencyfunction 11 ай бұрын
Im not having understaing in this content. I am wonder why retain if is no gain or interst in youir product? Maybe you product is not qualitaive and so people is bye the product. Maybe you shall have make in another country your product so it doesnt spread such a negative vibes for audience.
@sougaaat 8 ай бұрын
man this video is such a saviour.
@robertoricheli Жыл бұрын
Im Brasilian. I love your videos! Congratulations, you are the best!
@eric_andrews Жыл бұрын
Muito obridado amigo! I'm so happy they are helpful for you 😁
@Neeltje_Schoenmaker Ай бұрын
Thanks, ou explain it so to the point, very helpful
@Flowium Жыл бұрын
This is the best video about cohort analysis I ever see. thank you very much for sharing.
@eric_andrews Жыл бұрын
You are very welcome!
@ryanseitz3793 4 ай бұрын
loved it, watched the whole video, stopped, started to follow along several times. so helpful thanks!
@eric_andrews 4 ай бұрын
Awesome to hear
@ronbans0083 2 жыл бұрын
So well done and explained succinctly. A lot of information, explained in a simple manner and totally got it!
@eric_andrews 2 жыл бұрын
Cheers Roni!
@Potencyfunction 11 ай бұрын
I did nt got it becuze me come from Pakistan so I can not able to write in a english way. But I guess it is interesting in your busniess surrounding the retain of your call or in customers. I am also mental handicappated and I like to retain custonres that are in good quality bus and I also show good capability of understandinfg month of the year 12 month -start with december is called 0. Bery good retention , bery attractive learning book.
@SriKandarpa 2 жыл бұрын
thank you so much. so clearly explained. your pace and tone of speaking was so apt
@eric_andrews 2 жыл бұрын
Really glad to hear it, thanks!
@annashilova 7 ай бұрын
Very explicit, informative, and concise. Thank you, Eric a bunch!
@eric_andrews 7 ай бұрын
Glad it was helpful!
@oladijiwusu4556 4 ай бұрын
Thank you This is super helpful. It gave me full understanding of the most practical way to calculate the retention matrix
@eric_andrews 4 ай бұрын
glad to hear it
@charusharma8300 2 жыл бұрын
This is super helpful. Thanks Eric!
@1023am Жыл бұрын
Eric you're a lifesaver TY for this video!!!
@allanneri6096 5 ай бұрын
Amazing explanation. Excelent insights! Thank you so much. I will definitely come back here to review the content!
@BlesseDana Жыл бұрын
Thank you. I'm trying to start my career in Digital Marketing and this is helpful.
@eric_andrews Жыл бұрын
You are very welcome!
@romaricndri9087 8 ай бұрын
Very instructive Eric, see you at the next step
@matheuswronski 4 күн бұрын
Dude, awesome!
@jaggyjut 2 жыл бұрын
Though there are soo many example of cohort analysis using Tableau, Python, no one explained how to read the cohort table. Thank you Eric.
@eric_andrews 2 жыл бұрын
Haha, yes I noticed that, that's why I made this video!! Interpreting is usually harder than calculating 😎
@OmPrakash-fm7rd Жыл бұрын
Very nice analysis and very nicely explained! Thank you. Keep up
@eric_andrews Жыл бұрын
Thanks, will do!
@yogeshmishra2940 Жыл бұрын
THANK YOU! Clear and concise.
@eric_andrews Жыл бұрын
Glad it was helpful!
@aliceang3903 5 ай бұрын
That's really helpful!
@eric_andrews 5 ай бұрын
I'm glad!
@verizoncrm 2 жыл бұрын
Brilliantly explained...
@AbhilashaNarasimhan 10 ай бұрын
The explanation was spot on! Thank you so much!
@eric_andrews 9 ай бұрын
Glad it was helpful!
@IDCWoodcraft 2 ай бұрын
Excellent explanation
@trarihamza7047 2 жыл бұрын
Thank you so much Eric , great explanation !
@81003prem 2 жыл бұрын
Hey Eric, This is a superb primer on customer cohort analysis. Wanted to understand this for the first time and your video was super helpful. Liked and Subscribed. Keep up the awesome content.
@eric_andrews 2 жыл бұрын
Appreciate that prem, really glad to hear it
@monahmourad874 2 жыл бұрын
Great content, thanks for sharing
@Potencyfunction 11 ай бұрын
It is clever because he knows book. He know to apply the book, in all the circumstances and he also see the future for the retain customers.
@tusharson Жыл бұрын
Perfect
@aldypratama3779 2 жыл бұрын
This is so helpful! Thank you so much Eric
@bharadwajabhijit Жыл бұрын
Thanks
@eric_andrews Жыл бұрын
🙏
@cesaralvare5535 2 жыл бұрын
This is GOLD, thanks for this!
@lilbrusselsprout8261 18 күн бұрын
Hey Eric, very helpful, thanks. Question for you: If my product offers only 6 month and 12 month memberships, I'm assuming looking at one year wouldn't really give you a great picture of retention since each customer doesn't have the opportunity to churn every month. That being said, 1) How many years would you recommend looking back to get a good picture of the company's retention 2) Would you break these tables out separately for 6 month memberships and 12 month memberships? Any other insights on longer term contracts and how to analyze them would be extremely valuable, thank you. Edit: one more question. Since sales commission is technically an expense related to acquiring customers, would you put that expense into CAC and exclude it from gross margin calculations? In other words if I give 10% sales commission on a $100 product, I wouldn't deduct $10 from the $100 to get gross margin but would instead add $10 to my CAC, correct?
@NithinNair Жыл бұрын
great explanation !
@mgbonuzuroland394 Жыл бұрын
Great stuff- thanks for sharing
@itsmemasud 4 ай бұрын
mindblowing
@Alhelli4 2 жыл бұрын
Thank you for this amazing and beautiful beneficial information ❤❤
@eric_andrews 2 жыл бұрын
You are very welcome!!
@sibusisomani1746 3 ай бұрын
Great insights.....
@eric_andrews 3 ай бұрын
cheers!
@aakanksharai4559 2 жыл бұрын
This was really helpful! Thanks Eric :)
@eric_andrews 2 жыл бұрын
Glad to hear it!
@fethiklabi8688 2 жыл бұрын
Thank you for this interesting video, very helpful in my marketing courses
@eric_andrews 2 жыл бұрын
you are very welcome!
@Potencyfunction 11 ай бұрын
Very interesting indeed. So good to retain according to the Marketing Parametrs,.
@romario_de_souza_faria 3 жыл бұрын
Great video!! 👍
@eric_andrews 3 жыл бұрын
Thanks Hans, cheers!
@tonyhopkins2774 2 жыл бұрын
Thank you, really useful and informative info
@eric_andrews 2 жыл бұрын
Glad to hear it Tony 👍👍
@leonotonglo4461 3 жыл бұрын
Thanks, your videos are excellent!
@eric_andrews 3 жыл бұрын
Hey Leon - good to see you in the comments again! Thanks for the support and glad it was helpful
@nayanroy13 2 жыл бұрын
Mind=Blown!!
@davidjakubowicz9921 Ай бұрын
The avg number of months to profitability per customer seems like its an important metric, does it have a name? (Ie 3 months in your example ar the very end of the video)
@angelinamarch2005 24 күн бұрын
I’m having trouble building the first table from the dataset (a step back from what you’ve shown)!! can’t find the right formula!
@grwtm_datagirl 2 жыл бұрын
Gran contenido. Me ha encantado y lo recomendarè.
@eric_andrews 2 жыл бұрын
me alegra mucho!!
@stephena.8193 18 күн бұрын
Hi Eric, first of all thanks for the video, great explanation! I wonder though if the profitability you explain around 16:10 is correct? Wouldn't break even occur during month 2 as the profits cummulate vs the one time cac? 33+65+95=193>115
@user-bx1np6fq1o 9 ай бұрын
amazing
@eric_andrews 9 ай бұрын
🙌
@mayurnarayan1 2 жыл бұрын
This was helpful , but need to know how to get to that table ❗
@jeanque2130 2 жыл бұрын
Thank you so much!
@eric_andrews 2 жыл бұрын
You are very welcome
@harishsivaramakrishnan7096 3 жыл бұрын
Hey Eric, use an if function to conditionally apply zero's or blanks to the cells below the diagonal for which months or sales hasn't happened.
@eric_andrews 3 жыл бұрын
That's a good idea I'll see if I can work that into my future cohorts
@Potencyfunction 11 ай бұрын
I belive he shall use names. Like January February March is better to understand for us how lovely it is around here to see the meanaing of retaining .
@sarvottammishra3372 3 жыл бұрын
Thank You! Helped me a lot!!!
@eric_andrews 3 жыл бұрын
I'm really glad it was helpful Sarvottam
@BalanceandWonders Ай бұрын
Is the customer lifetime value always going to be the same for month zero?
@AIDACM971 3 жыл бұрын
Eric Excellent!
@eric_andrews 3 жыл бұрын
Thanks Peter! Appreciate the comment. Cheers 😎
@OOzd95 3 жыл бұрын
Awesome vid thanks Eric! How would one approach it if each customer bought in a different MRR?
@eric_andrews 3 жыл бұрын
Two different options. First would be to create a separate cohort analysis for each product / price point and split them apart. I've seen these built with a filter at the top to switch between them. Second is to just use the net revenue retention cohort table which makes the price point sort of irrelevant and just shows you how well your business does at actually retaining total dollars. Hope that helps
@OOzd95 3 жыл бұрын
@@eric_andrews thanks Eric ! I just created two different pivots, one with MRR and the other with churn, then combined them! Love your vids awesome content !
@PriyamvadaGoel 2 жыл бұрын
@@eric_andrews Hello Eric! Could you help me in understanding the question please? I'd really like to understand a new scenario. Thank you!
@jessicastevens2196 Жыл бұрын
This is really helpful, thank you! This focuses on new customers and the balance of digital acquisition spend as it relates to a customer's time with you which is eye opening. Two questions, this is a rolling twelve month view point, is there any point in looking at a longer time period? And then, do you have any videos on the health of repeat customers? What is the right balance of new to existing, etc? Thanks again!
@eric_andrews Жыл бұрын
On your first question, use the longest time periods you have data for. If you have 5 years of data, use it. That will give you a lot more info to plan your marketing. On your second question, the actual mix of new vs existing is completely irrelevant (if you are growing faster you'll have more new vs. slower, youll have less, so you can misinterpret that data easily), what matters is your LTV:CAC ratio which tells you how much money you'll make on a customer after marketing. If it's high grow as much as you can. Subscription business often have LTV:CAC ratios that are 5-10+, eComm in the 2-3 range (average ones), and marketplaces 1-3 starting out, and then 5-10+ later on.
@agustinlombardo494 5 ай бұрын
Erick, amazing video, definetly subscribing and learning from you in the future. I wanted to ask you what way do you calculate your recurring customers that are first-time buyers in the actual month? What is a way of tracking it that your expertise would recommend?
@eric_andrews 5 ай бұрын
How do you know they are recurring? Are they subscription?
@agustinlombardo494 5 ай бұрын
@@eric_andrews no, it is an allacarte business. I am managing to get the information, but it is hard to get only new customers and their recurring purchases on following months. Im working on it 🫡
@agustinlombardo494 4 ай бұрын
I was about to keep asking but I found the solution! A tough one but its done. if youre interested I can share it with you. My business is allacarte, that is why its so difficult.Thank you for your response btw!@@eric_andrews
@haldilawindisuryaputri9933 2 жыл бұрын
Hey Eric! Thank you for creating this super video that is really helpful in my work today. But maybe can you help to create a video with sales related analysis? Thanks
@eric_andrews 2 жыл бұрын
My pleasure! What exactly do you mean by sales analysis?
@Perdy258 3 жыл бұрын
Great video
@eric_andrews 3 жыл бұрын
Appreciate that Rupert!
@lucasvera2936 2 жыл бұрын
Great video, thanks for sharing! How do you manage this same information when you have a 30 day free trial?
@muhammadyusuf8541 2 жыл бұрын
Thank you m8
@PriyamvadaGoel 2 жыл бұрын
Hi Eric! This was such a great video to have gone through. I watched it a multiple times and made my own excel sheet and that taught me a lot. Thanks a ton!
@eric_andrews 2 жыл бұрын
You are very welcome! Ya these cohorts are super powerful. I use them a lot to build models and understand businesses. Good luck!
@nikhilsoni1177 3 жыл бұрын
Bro.. you are a gem I want to go more with you.. I want to grab good knowledge in business analyst with excel so it's a bit of a request to advise me from where I can learn more from you?
@eric_andrews 3 жыл бұрын
Thanks Nikhil!! If you're looking to get some broad background on finance / business / marketing, I'd recommend watching my 3 statement financial model, the finance case study, KPIs for digital marketing, and the startup metrics and KPIs video....once you watch those 4 I think you will understand a lot of different concepts and I think you can decide where you want to focus next (maybe more deep financial modeling or maybe more e-commerce strategy), just leave me another comment and I'll try to respond 👍
@Fertep Жыл бұрын
Thanks. Very concise. One question, if a customer after a few months purchases again, would his purchase be set on his month of the first purchase or is it a start again (as a new customer)
@eric_andrews Жыл бұрын
It would appear again in the original cohort (not a new one), as that is a returning customer!
@Fertep Жыл бұрын
@@eric_andrews ok. thanks for the quick reply
@eric_andrews Жыл бұрын
@@Fertep 👍
@juveloga 2 жыл бұрын
Hi Eric, nice video. I have a question, what is the difference between calculating retention rate by cohort vs by formula ((E-N)/S)*100%? as many websites explain. I compare these two methods the results are quite high different. Thanks.
@lioha88 2 жыл бұрын
thanks 👏
@hiteshjoshi3148 2 жыл бұрын
Hey what an amazing session &thanks. Basically i have 2 years experience in raw business development like lead generation,market research, team handling , sales, customer success or relationship so my question on which kind of analysis i should focua as you mentioned in video can you let me know such kind of techniques please i am in genuine need .
@yatharthmehta1259 2 жыл бұрын
Hi Eric, thank you for sharing such valuable content. On application basis how do evaluate if the customer purchased on Ecommerce marketplace instead of our own website and if it was 1st or repeat, since MP dont share Customer data.
@eric_andrews 11 ай бұрын
Without a customer ID like email or a way to track them, there is no way to calculate customer retention. You need to know who your customers are to track them. If the platform itself doesn't give you a cohort report, then it is impossible because they hide the data.
@aaronaragonmaroja557 2 жыл бұрын
Excellent video! Here, shouldn't we consider the churn rate of each month?
@eric_andrews 2 жыл бұрын
Well, the issue is that monthly churn rates only apply to businesses that sell their products on a monthly subscription. And even those businesses usually have churn rates that vary a lot for a customer that is 1 month old vs. 12 months old. So using the same "churn" every month is highly inaccurate. In addition, most businesses are not subscription based, but still retain a lot of customers. For example a social network, or a marketplace, or a consulting business, or a restaurant, or an ecommerce store - churn doesn't apply to them. The cool thing about retention is that you can use it for all business models, including SaaS, and get really accurate models.
@Potencyfunction 11 ай бұрын
I was about to shit in pants, when I understood your parrotism churn rate. It is siefe on the cherry liquior. Depends what your parrotism converastion is about. It is always good to copy the wanted and not wanted.
@user-lh7uk4vi3k 6 ай бұрын
Hi Eric! I'm doing someting similar but also trying to figure out how to model this when given a conversion rate and retention rate for users that converted from free to paid users.
@eric_andrews 3 ай бұрын
Same, just need to decide what is the conversion event that you start the cohort table, either conversion to free users, or conversion to paid. I personally might build the table with paid users and then just track the free => paid CVR separately
@rakeshchinnu8999 5 ай бұрын
Bro,how to create this table,can you please explain me
@Sivakumarpoornima 2 жыл бұрын
Awesome
@victoryu6906 9 ай бұрын
Great! Questions: Is the month 1, month 2 buyers, refer to the users purchased in the month or in/after the month? A problem I met is: some buyers came in March but didn’t do any purchases on month 1 then they came back in month 2. So, sometime the month 2 buyers could be higher than month 1.
@user-bc2cc3nq2p 9 ай бұрын
I need the formula for same month return
@prasenjitsinha5806 2 жыл бұрын
Hey Eric, I've two questions 1: How frequently should we calculate NRR and report to senior leadership? 2: How to calculate NRR for multi year contracts?
@eric_andrews Жыл бұрын
1 - ideally monthly, but at a bare minimum quarterly 2 - if you are looking at cohorts, reference the initial purchase month to see the NRR of your oldest cohorts. If you are tracking business-wide metrics, you can use YoY. Just be clear with definitiiitions when you are presenting metrics.
@tarakouattara6290 3 жыл бұрын
Wow fantastic
@eric_andrews 3 жыл бұрын
Glad it was helpful Tarak, Cheers!
@user-kz4vb6bm5g Жыл бұрын
thank you so much for the valuable content. Just a quick question, let's say an investor ask what is the retention rate of the business? From this cohort table, which is the representative one? Is it the cohort having the largest samples? (which is 26% in the net revenue cohort table)
@eric_andrews Жыл бұрын
Yes important question. If they ask, you can literally send them this table, and then specify how many times a typical customer buys over their lifetime (and the gross profit from that lifetime i.e. LTV). So, as a made up example: our typical customer buys 7 times over a 3 year period, CAC is $50, lifetime revenue is $256 and LTV is $174 and here is the cohort retention table. That is my much more instructive than "50%" which basically tells you nothing and barely makes sense
@user-kz4vb6bm5g Жыл бұрын
@@eric_andrews great! thanks again Eric.
@eric_andrews Жыл бұрын
@@user-kz4vb6bm5g happy to help
@jessegage5287 2 жыл бұрын
Great video, thanks. One thing still not clear to me: The model here is based around 12 months - but if 26% are retained in month 12, then we can assume some % will continue into month 13 and beyond. So how would you think about Customer LTV beyond month 12. Would you project forward (starting with 26% and decreasing by X%/month) beyond the 12 months to get a full account of Customer LTV?
@JoseRG619 Жыл бұрын
I think this should be done yearly because the next year can help you out to compare the different rates of spends.
@DigitalPurpleHeart Жыл бұрын
I wish I had seen this 3 days ago...I did a similar exercise for a vc but I clearly did it wrong
@marajkeee Жыл бұрын
Eric, hi! Need your help, I'm new in marketing and get not easy tasks. I need to calculate average client lifetime (not value), and CAC. Data that I have (all per week, 44 weeks total): installs, active users, retention rate (in %), weekly revenue and revenue cohort. Which formulas do I need to calculate ACL and CAC?
@eric_andrews Жыл бұрын
Is this for an actual business? Or just a case study? I would calculate CAC by looking at marketing spend / installs. For customer lifetime I would take either your revenue cohort / month 0 users, or look at customer lifetime by taking 1 / (1-retention rate i.e. churn rate). Here are some other videos of mind that might help you: CAC calculation: kzfaq.info/get/bejne/br1zm9CC2rrJfmQ.html Customer lifetime value: kzfaq.info/get/bejne/m66Za5pmttu6k3U.html User retention ratios: kzfaq.info/get/bejne/j956ed2XvdGZdIk.html
@zairahmustahsan4049 Жыл бұрын
Great video, thank you!! I've been wondering about Day 0/Month 0. If a customer joins later in the month they get less days to experience the platform. So should we instead use a rolling window from the time a customer joins? Like if they joined on Apr 21, their Month 0 will be till May 20. If so how will we still group them in Apr cohort?
@eric_andrews Жыл бұрын
Here's my thinking - yes, you could theoretically build the report. You could go even further to build rolling weekly cohorts, or even cohortize individual days. Need to draw the line somewhere. I think over longer periods of time monthly just summarizes the information into an easier-to-understand analysis. "The May 2021 cohort had great retention over the first 18 months" vs. "the rolling date cohort of 18 months ago with the start and end date constantly changing had great retention", that second analysis is a little harder to deal with.
@omarabaddi5696 2 жыл бұрын
I don't how to calculate the retention rate day 1 for month of may. I take the retained user on 2 second of may & divide them on the cohort size of the first day of the month of may .I need someone to correct me .Please
@aakashpatel7298 Жыл бұрын
Eric - thank you, this was super helpful! I was wondering, how would you typically go about interpreting monthly/annual retention from such analyses? Would you just take the average retention of all cohorts every single month and then do another average of those figures to get to an average monthly retention for the year?
@eric_andrews Жыл бұрын
Yes, it's a great question. Yes you could take an average (it's not totally incorrect) but it is still a pretty crude way of measuring it...here's why. So these retention tables sometimes eliminate the idea of "monthly" retention in the way you are thinking about it. So if you have very stable retention over time and across customer lifetimes (ex: 5% of customers return per month 6 months into their lifetime, and 5% return 3 years into their lifetime), well then yes an average is probably fine. But the issue is that usually retention behavior generally declines in a non-linear way, so taking averages of people in month 3 vs. year 3 of their lifetime ends up not telling you anything very useful because it eliminates the nuance of your customer ages (ex: 10% of customers are returning 3 months into their lifetime vs. 1% 3 years in). Averaging those numbers basically tells you nothing. Once you have the cohortized data split out by acquisition month, the best way to look at "monthly" retention is to compare the most recent month of data (the last cell in each horizontal row) across all the cohorts by comparing it to the vertical column (so that would compare June 2023 retention in every single individual cohort across the month 5, month 6, month 7, etc) so you could see if you had above average or below average retention in each cohort & lifetime month. So just look at the entire cohort table without averaging or combining anything, it will tell you the story. In terms of your retention, you would more want to be tracking your customer LTV over time (ex: wow look our oldest customers are purchasing 5 times not 4) so that you can calibrate your CAC to profitable customer acquisition. You might see that LTV is higher than you had previously estimated in your oldest cohorts because in June you had strong retention. That would be something to dig into. By the way overall % repeat revenue and your forecast for it are super important and you can build that forecast accurately with your cohort table! Anyway, hope that makes sense!
@user-shakhova Жыл бұрын
hey, Eric! Is there any chance we can make a private lesson regarding cohort analysis and my task? How could I contact you?
@fierce10 2 жыл бұрын
the faster way to not do manual deletions of future months is to use an IF statement in your formula ;) =IF(D11 = '', '', D11/$D11)
@eric_andrews 2 жыл бұрын
I'm going to try that thanks for the tip!
@kapilbonde3090 Жыл бұрын
@EricAndrews1 This was the simplest and most impactful content i have come across till date. You are doing a phenomenal job. I just had one question in this case (monthly calculation) LTV will change each month how often do you recommend one can do this analysis in context to the product lifecycle. For eg. Hypercasual games can have a short product lifecycle etc. If you can shed some light on this it will be really helpful
@eric_andrews Жыл бұрын
Hey I appreciate the comment! For your question, I'm not 100% sure what the perfect metric is to measure if you are succeeding (% progress, completion of game, number of days active, etc), but obviously you are measuring lifetime in days not months. Search "power user curves by Andrew Chen" and you will see a very powerful way of measuring this type of the type of user activity I think you're talking about. Cheers
@kapilbonde3090 Жыл бұрын
@@eric_andrews Supremely delighted will surely check this out. Again you are doing an amazing job🙌
@eric_andrews Жыл бұрын
@@kapilbonde3090 awesome thanks 👍
@simpson-design Жыл бұрын
Great video Eric! If you wanted to continue this model into a multi-year scenario, would it simply be a matter of extending the X/Y axes from 0-11 to, say, 0-23, or 0-35, etc? You should be able to extend any given cohort out forever, no? For example, would it be feasible/practical for a new customer that arrived in an Aug-2018 cohort to map out to Feb of 2023?
@eric_andrews Жыл бұрын
Yes just extend it. Being able to see a 5 year wide cohort would be extremely interesting and would give you much more confidence about customer lifetime dynamics.
@muhammadmuneebkhanafridi154 Жыл бұрын
Hi Eric, nice video. What about we take LTV to CAC ratio as well? Can you make a separate video on it?
@eric_andrews Жыл бұрын
Yes I have lots - here are a few! Unit economics for hardware, software, and e-commerce: kzfaq.info/get/bejne/d7N7msZz37Gbk5s.html 5 ways to increase your LTV: CAC ratio: kzfaq.info/get/bejne/qLqAZpynl9mclH0.html SaaS startup unit economics journey: kzfaq.info/get/bejne/pZ-lmdKY3KrWp5c.html
@muhammadmuneebkhanafridi154 Жыл бұрын
@@eric_andrews why aren't you taking retention while calculating LTV? Since generally the formula of LTV is: Customer Lifetime Value = (Customer Value* x Average Customer Lifespan) *Customer Value = (Average Purchase Value x Average Number of Purchases)
@eric_andrews Жыл бұрын
@@muhammadmuneebkhanafridi154 these cohorts show the same information you are summarizing but with more detail
@elizabethnovica8114 2 жыл бұрын
hi Eric, thank you for the video. and I've a question. what's the different Customer Retention and Customer Stickiness?
@eric_andrews 2 жыл бұрын
Same thing
@tayanchakraborty6283 3 жыл бұрын
Hey. Nicely explained. Can you suggest that the same CLV is applicable for those companies who businesses through dealers.
@eric_andrews 3 жыл бұрын
I would say yes I think it applies to any business that makes money and has customers that have the potential to pay them more than one time.
@olamartins 2 жыл бұрын
I really don't get the idea of this cohort and retention analysis. please can you break it and show your dataset. thanks
@Potencyfunction 11 ай бұрын
If you spell proper nouns with a capital letter , than maybe you could have understood from the first second.
@pqrandomness 5 ай бұрын
Hi Eric, how would you use this analysis to determine the customer churn rate? I am unsure if this is by taking the average across all the cohorts or how this is done.
@eric_andrews 5 ай бұрын
Different data, just released a video on that here: kzfaq.info/get/bejne/nKmPmq-o3qfafaM.htmlsi=xv7FMMkBzS45Sm4E
@pqrandomness 5 ай бұрын
Great stuff, am learning something from each video you make. The whole LTV and retention calculation is quite complex for a marketplace business. Perhaps a topic for your next video? Its not as straight forward as subscription where you have fixed formulas. @@eric_andrews
@lydialiu7980 2 жыл бұрын
Hello Eric thank you for the excellent teaching! My question is: when calculating LTV, the direct cost 35% (Gross Margin is 65%), what's the relationship between CAC and 35% direct cost, will any overlap exist?
@eric_andrews 2 жыл бұрын
The direct costs and CAC don't have any relationship. The 65% profit is basically the profit that comes back to the company as gross margin when they sell the product. With that 65%, they need to do the marketing. So the idea is that the CAC should be at a minimum less than the 65% GM LTV so that you know you will be profitable on the customer lifetime AFTER marketing expenses (CAC). Does that make sense?
@vimukthiamarasena6264 4 ай бұрын
What if a customer of apr cohort didn’t buy in may but then come back subscribe again in June?.. how do calculate retention
@eric_andrews 4 ай бұрын
No issue. They would just appear in the april cohort but in june, just like we showed in the video. That's why these cohort tables are great, they show inconsistent buying behavior really clearly
@vimode8992 4 ай бұрын
Hello, I subscribe but didn't get the cohort template.
@eric_andrews 4 ай бұрын
Wait 5 minutes, it will arrive
@LennyYT 3 ай бұрын
Is there a way to see spent cohort in Shopify without apps? 🍿🙏
@eric_andrews 3 ай бұрын
Shopify analytics has customer cohorts now natively, you don't see them?
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