Cohort Analysis Dashboard Overview

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Cohort analysis is a management tool to analyze time-dependent groupings of both customers and invoices. The more common of the two by far are customer cohorts, but invoice cohorts are also very interesting in the context of recurring revenue businesses. They allow for a waterfall display of the revenue recognition and deferred revenue remaining after grouping the invoices into cohorts according to their respective billing month, quarter or year. With this waterfall and drill-down to the underlying invoice detail and attributes in every cohort, it becomes easy to perform both a high level visual review and a granular audit of any cohort where the recognition waterfall appears to be out of line (e.g., due to early or late billing or unusually long or short subscription periods vs. the other cohorts).

Customer cohorts are groups of new customers for a month, quarter or year. Cohort analysis displays how the retention or attrition for each customer cohort trends over time. Retention or attrition can be displayed in either MRR or customer count terms. And totals and changes can be displayed in both revenue and percentage terms. Customer acquisition cost (“CAC”) is also often factored into the cohort analysis, as in one dashboard below, to highlight how the payback period for these up-front growth costs is changing over time by cohort.

Cohort analysis can be powerful tool to uncover both hidden successes and hidden failures at a relatively early stage, particularly after operational changes are made. For example, as new marketing campaigns are launched, or as new sales or support staff are hired, all such changes tend to have a significant impact on new customers. The impact also tends to be outsized on new customers, since a solid customer relationship has yet to be established.

By cross-referencing the timing of such changes to the affected customer cohorts, a cause-effect relationship can often be quickly established to explain significant fluctuations in the cohort analysis. For adverse fluctuations, this could then lead to immediate remedial action, such as retraining or replacement of underperforming employees. For positive fluctuations, it could obviously lead to reinforcing actions, such as continuing or ramping up of successful sales and marketing campaigns.

Cross-referencing operational variables and attributes to explain cohort analysis fluctuations can often be done “off the cuff” based on readily available knowledge. However, it is not always so easy or definitive in an enterprise-scale recurring revenue business. This is especially true when multiple BUs are involved who may share marketing campaigns and resources across multiple departments.

To address this problem, segmentation analysis adds a whole new layer to the cohort analysis by allowing a deeper dive into the potential root causes of positive or negative cohort fluctuations. By allowing both customers and products to be segmented by a virtually unlimited number of attributes – both standard and customized – one can change the analysis in one click to show how all the cohorts look for any particular customer or product segment. One no longer has to remember when every marketing campaign took place, when staff changes occurred, which sales or support staff were assigned to which customers, which customers got larger price increases this year, etc. To do a deeper dive, just select the campaign, assigned sales or support staff member, price increase category, etc. from the appropriate segmentation hierarchy to see if any of these can explain the aggregated cohort analysis fluctuations. Please see the “Segmentation Analysis” product page for more information on the segmentation functionality.

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% Retention by Cohort

Analyze the % of customers retained by new customer cohort after each period to identify in which periods after acquisition a customer is most at risk of being lost. Switch the analysis in one click to % Retention of MRR to show how MRR is lost or gained in each cohort over time. In one more click, change the definition of a cohort from monthly to quarterly or annual for a broader base of analysis when total new or lost customers is not statistically significant for a single month.

% Attrition by Cohort

As the flip side of % Retention, analyze the % of customer attrition or MRR attrition by new customer cohort after each period to identify in which periods after acquisition a customer is most at risk of being lost. Alternatively, identify where the best opportunities exist in the new customer life cycle to drive negative % attrition by increasing MRR organically within each cohort (e.g., with more products, higher price plan, etc.), in spite of any lost customers. Change the definition of a cohort from monthly to quarterly or annual for a broader base of analysis when total new or lost customers is not statistically significant for a single month.

Click to Enlarge

Click to Enlarge

Retention Waterfall by Cohort

View retention in MRR or customer counts as total amounts, not just in % terms, to analyze the waterfall of changes over time. Again, cohorts can be defined to be monthly, quarterly or annual in scope. Like all the customer cohort charts, all changes vs. the original cohort values are color coded to easily identify significant positive or negative fluctuations in retention for each cohort. Drilling down into the detailed support for all cohort changes in MRR or customer counts is just one click away. Simply click on the cohort ID, and the detailed MRR trending analysis for all customers in that cohort will pop into view. This drill down is available in all cohort dashboards.

Attrition Trending by Cohort

View attrition in MRR or customer counts as total amounts, not just in % terms, to analyze the absolute amount of attrition over time. Again, cohorts can be defined to be monthly, quarterly or annual in scope. Like all the customer cohort charts, all changes vs. the original cohort values are color coded to easily identify significant positive or negative fluctuations in attrition for each cohort. Drilling down into the detailed support for all cohort changes in MRR or customer counts is just one click away. Simply click on the cohort ID, and the detailed MRR trending analysis for all customers in that cohort will pop into view. This drill down is available in all cohort dashboards.

Click to Enlarge

Click to Enlarge

CAC Payback by Cohort

Visualize how many periods it takes to recover the customer acquisition cost (CAC) across cohorts to see if it is improving or worsening over time. CAC by month, quarter or year is scheduled to be integrated into the GL data in a future release of the application. In the meantime, CAC values can either be entered into the application manually, or a single estimated CAC override amount can be entered on the report.

Recognition Waterfall by Invoice Cohort

Break down invoices into cohorts by grouping them into their billing months, similar to how customer cohorts group customers into their acquisition months. Display the waterfall of revenue recognition for each invoice cohort over time, along with the cumulative amount of recognition and the total recognition amount remaining (DRR) as of the selected period for the dashboard. An instant revenue recognition audit trail is thus made available for review and validation for all billings in any month, quarter or year.

Click to Enlarge

% Retention by Cohort

Analyze the % of customers retained by new customer cohort after each period to identify in which periods after acquisition a customer is most at risk of being lost. Switch the analysis in one click to % Retention of MRR to show how MRR is lost or gained in each cohort over time. In one more click, change the definition of a cohort from monthly to quarterly or annual for a broader base of analysis when total new or lost customers is not statistically significant for a single month.

% Attrition by Cohort

As the flip side of % Retention, analyze the % of customer attrition or MRR attrition by new customer cohort after each period to identify in which periods after acquisition a customer is most at risk of being lost. Alternatively, identify where the best opportunities exist in the new customer life cycle to drive negative % attrition by increasing MRR organically within each cohort (e.g., with more products, higher price plan, etc.), in spite of any lost customers. Change the definition of a cohort from monthly to quarterly or annual for a broader base of analysis when total new or lost customers is not statistically significant for a single month.

Retention Waterfall by Cohort

View retention in MRR or customer counts as total amounts, not just in % terms, to analyze the waterfall of changes over time. Again, cohorts can be defined to be monthly, quarterly or annual in scope. Like all the customer cohort charts, all changes vs. the original cohort values are color coded to easily identify significant positive or negative fluctuations in retention for each cohort. Drilling down into the detailed support for all cohort changes in MRR or customer counts is just one click away. Simply click on the cohort ID, and the detailed MRR trending analysis for all customers in that cohort will pop into view. This drill down is available in all cohort dashboards.

Attrition Trending by Cohort

View attrition in MRR or customer counts as total amounts, not just in % terms, to analyze the absolute amount of attrition over time. Again, cohorts can be defined to be monthly, quarterly or annual in scope. Like all the customer cohort charts, all changes vs. the original cohort values are color coded to easily identify significant positive or negative fluctuations in attrition for each cohort. Drilling down into the detailed support for all cohort changes in MRR or customer counts is just one click away. Simply click on the cohort ID, and the detailed MRR trending analysis for all customers in that cohort will pop into view. This drill down is available in all cohort dashboards.

CAC Payback by Cohort

Visualize how many periods it takes to recover the customer acquisition cost (CAC) across cohorts to see if it is improving or worsening over time. CAC by month, quarter or year is scheduled to be integrated into the GL data in a future release of the application. In the meantime, CAC values can either be entered into the application manually, or a single estimated CAC override amount can be entered on the report.

Recognition Waterfall by Invoice Cohort

Break down invoices into cohorts by grouping them into their billing months, similar to how customer cohorts group customers into their acquisition months. Display the waterfall of revenue recognition for each invoice cohort over time, along with the cumulative amount of recognition and the total recognition amount remaining (DRR) as of the selected period for the dashboard. An instant revenue recognition audit trail is thus made available for review and validation for all billings in any month, quarter or year.

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