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Introduction to Churn and Lifetime Value (LTV) Analysis

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Cohort Reports

4:35 with Michael Watson

We introduce Cohort Reports, a graphical way of displaying data.

Example Files

Additional Resources to Learn More About Cohort Reporting

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    Here we are looking at what is called a cohort report. 0:00
    A cohort report looks at different groups or cohorts of our customer base. 0:04
    In this example they are separated out based on the month 0:11
    that they first started using our service. 0:14
    We call these monthly cohorts. 0:17
    Along the y-axis in column A, we can see the month that they signed up in. 0:19
    And in column B, we can see the number of customers that are in that cohort. 0:26
    Then, going along the x-axis, or 0:32
    row 3 in our example spreadsheet, we have the monthly billing point of the service. 0:35
    So in our July 2017 cohort, there were 74 customers that started paying us in July. 0:40
    The data is showing the average realized lifetime value of the cohort. 0:47
    I'll explain what realized means in this context in the next video. 0:51
    But before that, let's look at this cohort report some more. 0:56
    We see that our first cohort, in November 2016, we had 75 people sign up. 1:00
    On average, each of those people paid us $1,500 that first month. 1:08
    Then the following month on average each of those 75 people paid 1:14
    us $2,471 over the course of those two months for billing cycles. 1:19
    You read the report the same for all the different cohorts. 1:25
    For the cohort in December 2017, 1:30
    those 45 new customers on average paid us $1,544 on the first month. 1:33
    By the sixth month, those 45 on average have paid $4,849. 1:39
    So this is showing a cumulative total of what we've 1:44
    collected from the average customer in that cohort over the time frame. 1:50
    When you look at this data, does anything stand out to you? 1:57
    Pause the video and look at it. 2:02
    Not for too long, just a minute or two. 2:03
    How does it fluctuate by cohort and over time? 2:07
    Okay, welcome back. 2:10
    There are lots of things that might have jumped out to us. 2:12
    But the answer I was looking for is that this business 2:15
    doesn't appear to have a set rate cart, subscription price, or monthly fee. 2:18
    Or to put it in different terms, the ARPU is fluctuating month to month. 2:23
    The first month payment is different for every cohort. 2:28
    It also does not scale linearly, based on a set monthly fee. 2:33
    So this suggests that the pricing for 2:38
    this product is based on some component of usage or consumption. 2:40
    Maybe there is a satellite card or 2:46
    minimum monthly payment with an additional charge based on usage. 2:49
    Or perhaps this is a cohort report for different tiers of service, and 2:53
    we just aggregated all new customers from a given month into this report. 2:58
    Let's contrast the Monthly tab with the Annual tab. 3:03
    On the Annual tab, we can see a clear linear evolution for each cohort. 3:08
    When their contractual obligations terminate at the end of the year, 3:15
    some renew and some don't. 3:19
    So for example, we see the different 3:23
    realized LTVs in billing cycle 13 here for the different cohorts. 3:26
    The larger the number here, such as the more renewals there were, 3:31
    less churn, higher retention. 3:36
    And we can see here for the January 2017 cohort, 3:39
    the realized LTV didn't change at all from month 12 to month 13, 3:44
    suggesting no one was retained and everyone churned. 3:48
    There are a lot of different types of data you can see presented in cohort reports. 3:52
    ARPU, Churn, LTV, Activity, 3:57
    Temperature, there's just a lot you can present with these types of charts. 4:00
    Also, you don't always have to use a time frame on both axes. 4:05
    Maybe you want to look at months across the x-axis, 4:11
    but different acquisition channels along the y. 4:14
    So you can compare how your earned acquisition channels compared to paid. 4:17
    In the teachers' notes you will find link to a few articles on cohort reporting that 4:21
    includes some additional real world examples. 4:26
    Let's move on to the next video and and introduce what realized LTV means. 4:30

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