Cohort analysis is a method of grouping customers by a shared characteristic - most commonly their first purchase date - and tracking their behavior over time as a group. Rather than looking at aggregate metrics that blend all customers together (which can mask improving or deteriorating trends), cohort analysis isolates the experience of customers acquired in a specific period and follows them forward, making it possible to see exactly how retention, revenue, and purchase frequency evolve month by month after acquisition.
The most common form in e-commerce is the acquisition cohort: all customers who made their first purchase in January 2025 form one cohort, February 2025 another, and so on. For each cohort, you track how much revenue they generate in month 1, month 2, month 3, and beyond - typically displayed as a retention curve or a percentage of month-1 revenue. This view makes two things immediately visible that aggregate reporting hides. First, whether newer cohorts are retaining better or worse than older ones - an improving retention curve means your product, experience, or post-purchase marketing is getting better. A deteriorating curve is an early warning signal that something has changed, often before it shows up in top-line revenue numbers. Second, the shape of the revenue curve - how quickly a cohort's spending decays or stabilizes - is the empirical foundation for calculating customer lifetime value with real data rather than assumptions.
Cohort analysis also reveals the impact of specific interventions. If you launched a loyalty program in March, did the March and subsequent cohorts show meaningfully better 90-day retention than pre-March cohorts? If you changed your post-purchase email flow in June, did June cohorts show higher repeat purchase rates than May cohorts? These questions are unanswerable in aggregate reporting but clearly visible in a cohort view - making cohort analysis the most reliable tool for measuring whether retention initiatives are actually working.
For Shopify brands, cohort analysis is available natively in Shopify Analytics under the 'Returning Customers' reports, and in significantly more detail in tools like Triple Whale, Polar Analytics, and Lifetimely. The practical starting point is simply pulling a monthly acquisition cohort table and reading the 30-day, 60-day, and 90-day retention rates for each cohort - that single view, reviewed monthly, will surface more actionable insight about your business trajectory than most other reports available.
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