> ## Documentation Index
> Fetch the complete documentation index at: https://docs.saletides.com/llms.txt
> Use this file to discover all available pages before exploring further.

# What is Cohort Analysis?

> An introduction to cohort analysis and why it's the most powerful tool for understanding customer retention and lifetime value.

## The problem with averages

Your overall repeat rate is 25%. Is that good or bad? Getting better or worse? Are customers you acquired last year more loyal than those from two years ago?

Averages hide the answer. Cohort analysis reveals it.

## What is a cohort?

A **cohort** is a group of customers who share a common starting point — typically the month they made their first purchase.

<Frame>
  <img src="https://mintlify.s3.us-west-1.amazonaws.com/saletides/images/cohort-heatmap.png" alt="Cohort retention heatmap" />
</Frame>

By tracking what each group does *over time*, you can see whether retention is improving, which acquisition periods produced your best customers, and exactly when customers tend to stop buying.

## How to read a cohort heatmap

SaleTides displays cohort data as a color-coded table:

```
           Month 0  Month 1  Month 2  Month 3  Month 6
Jan 2024    100%     32%      18%      12%       9%
Feb 2024    100%     29%      17%      11%       —
Mar 2024    100%     35%      20%       —        —
```

<CardGroup cols={3}>
  <Card title="Rows" icon="arrow-down">
    Each row is one cohort — customers who first purchased in that month
  </Card>

  <Card title="Columns" icon="arrow-right">
    Each column is months since their first purchase
  </Card>

  <Card title="Color" icon="palette">
    Darker = higher retention. Lighter = more customers have dropped off
  </Card>
</CardGroup>

The diagonal edge of the table (bottom-right) represents the most recent data — these cells fill in as time passes.

## What cohort analysis reveals

<AccordionGroup>
  <Accordion title="Is my retention improving over time?">
    Compare the Month 3 column across rows. If each new row is darker than the previous one, your retention is improving — customers acquired recently are staying longer than those acquired earlier.
  </Accordion>

  <Accordion title="When do customers typically stop buying?">
    Look across any row. The drop-off between Month 0 → Month 1 is usually the steepest. If you can improve that single transition, you'll have a disproportionate impact on overall LTV.
  </Accordion>

  <Accordion title="Which acquisition period produced my best customers?">
    Find the row with the darkest shading in later columns. That cohort has the best long-term retention — worth investigating what was different about that period (campaign, product launch, promotion, etc.).
  </Accordion>

  <Accordion title="How much is a new customer actually worth?">
    The LTV cohort tracks cumulative revenue per customer over time. At Month 12, you'll see the average total spend per customer acquired in each period — the number that tells you how much you can afford to spend on acquisition.
  </Accordion>
</AccordionGroup>

## Cohort reports in SaleTides

<CardGroup cols={2}>
  <Card title="Retention Cohorts" icon="rotate" href="/advanced/cohort-analysis/retention-cohorts">
    What % of each cohort returns to buy again month by month
  </Card>

  <Card title="LTV & AOV by Cohort" icon="chart-line" href="/advanced/cohort-analysis/ltv-and-aov">
    Cumulative revenue per customer and AOV progression over time
  </Card>
</CardGroup>

## What good retention looks like

<Note>
  There is no universal benchmark — it varies heavily by product type, price point, and purchase frequency. Use these as rough guides only.
</Note>

| Retention at Month 3 | Assessment                                        |
| -------------------- | ------------------------------------------------- |
| Under 10%            | Below average — focus on post-purchase engagement |
| 10–20%               | Average for most ecommerce stores                 |
| 20–30%               | Good — strong repeat purchase culture             |
| 30%+                 | Excellent — high customer loyalty                 |

Subscription businesses should expect much higher retention (80%+ at Month 3 is typical for healthy SaaS).