Cohort analysis segments customers into groups (cohorts) based on when they signed up or another defining attribute, then tracks metrics like retention, churn, and revenue over time. It reveals how different customer groups behave as they mature.

Example: A SaaS company analyzes the January 2024 cohort and finds that customers who signed up during that month have a 90% 12-month retention rate, compared to 75% for the January 2023 cohort, showing improved onboarding effectiveness.