← Business Metric: Operational (all topics)
Cohort analysis & repeat rate
What it is
Tracking each intake of customers separately over time - what they spend, how often they return, how many remain. It separates genuine improvement from the flattering effect of adding new customers
A business whose aggregate numbers rise while each cohort decays is buying growth rather than earning it
Impact on industries
- Reveals whether the product is improving, since later cohorts should retain and spend better than earlier ones if it is
- Repeat rate and order frequency are the strongest predictors of lifetime value, and they appear long before profit does
- Requires several years of data to be meaningful, so the youngest and fastest-growing businesses can show least
- Cohort quality often falls as marketing widens beyond the early enthusiast base, which is normal but must be priced in