Cohort retention

Tracking a group of customers acquired in the same period and measuring how many remain over time.

A cohort retaining 55% after a year, 80% of those in the second year and 90% of those in the third keeps about 40% of its original members after three years.

The method is far better than a blended churn rate because retention is not constant: early churn is high and later churn is low, so a single average misdescribes both ends and produces a lifetime value that is wrong in a predictable direction.

Cohort curves also reveal whether the product is improving. Later cohorts retaining better than earlier ones is the clearest evidence available.