Quick Answer (TL;DR)
Retention by Cohort measures retention segmented by signup date. The formula is Retention rate per cohort over time. Industry benchmarks: Improving cohorts = product-market fit progress. Track this metric when evaluating product improvements over time.
What Is Retention by Cohort?
Retention segmented by signup date. This is one of the core metrics in the retention metrics category and is essential for any product team serious about data-driven decision making.
Retention by Cohort is a direct measure of whether your product continues to deliver value over time. Retention is the single most important category for long-term product success because it compounds: small improvements today create massive differences over months and years.
Understanding retention by cohort in context --- alongside related metrics --- gives you a more complete picture than tracking it in isolation. Use it as part of a balanced metrics dashboard.
The Formula
Retention rate per cohort over time
How to Calculate It
Apply the formula Retention rate per cohort over time using data from a consistent time period. Pull the values from your analytics platform or data warehouse, compute the result, and compare against the benchmarks below.
Benchmarks
Improving cohorts = product-market fit progress
Benchmarks vary significantly by industry, company stage, business model, and customer segment. Use these ranges as starting points and calibrate to your own historical data over 2-3 quarters. Your trend matters more than any absolute number --- consistent improvement is the goal.
When to Track Retention by Cohort
When evaluating product improvements over time. Specifically, prioritize this metric when:
You are building or reviewing your metrics dashboard and need retention indicators
Leadership or investors ask about retention performance
You suspect a change in product, pricing, or go-to-market strategy has affected this area
You are running experiments that could impact retention by cohort
You need a quantitative baseline before making a strategic decision
How to Improve
Invest in proactive customer success. Do not wait for users to complain or churn. Use leading indicators (declining usage, support tickets, low NPS) to intervene early with at-risk accounts.
Continuously deliver value. Retention requires ongoing value delivery, not just an initial aha moment. Ship improvements, communicate them, and ensure users see the product evolving to meet their needs.
Run cohort analysis regularly. Compare retention curves across signup cohorts to determine whether product changes are improving or hurting long-term retention.
Common Pitfalls
Treating this as a standalone number. No metric tells the full story alone. Always analyze this metric in context alongside related metrics to get an accurate picture.
Looking only at aggregate retention. Blended retention hides critical differences between customer segments, cohorts, and plan tiers. Always segment your retention analysis.
Measuring without acting. Tracking this metric is only valuable if you have a process for reviewing it regularly and a playbook for responding when it moves outside acceptable ranges.
Related Metrics
Time to Churn --- average duration before a customer churns
Reactivation Rate --- percentage of dormant users who become active again
Expansion Rate --- percentage of revenue gained from upsells/cross-sells
Contraction Rate --- percentage of revenue lost to downgrades
Product Metrics Cheat Sheet --- complete reference of 100+ metrics