The customer plays an important role in every business and knowing the behavior of these customers can lead to meaningful insights for the business. One of the tools which have been long used to understand the behavior of the customer is cohort analysis. In this post, we will briefly walk through a cohort analysis example.
Let us begin by understanding what are Cohorts exactly. A cohort is simply a group of people having similar characteristics. These could either be their spending pattern or a particular date on which a group of people is on-boarded to a platform.
For example, consider any companies with large datasets like Uber or OLA, for these companies a cohort could be a group of people joining their platform on a particular day. Cohort analysis can come in handy to understand how good the business is in retaining people to their platform.
A typical data set for such analysis would be as shown below.