What is Cohort Analysis and How to Use It For Subscription Apps

We at Qonversion.io have recently released a cohort analysis for our users. It feels like the right time to provide some overview of how to leverage cohort analysis to make better decisions for your subscription app.

What is cohort analysis?

A cohort of users is just a set of users grouped by some specific characteristics. For example, you can group users in cohorts by country, the average time they spend on your app, or the time they started using it. By analyzing the different metrics of a cohort you can understand better and even predict some of its valuable attributes like retention or future revenue.

How to do cohort analysis for a subscription app?

In the case of a subscription app, it’s crucial to understand how a cohort of subscribers acquired during the specific time renews their subscriptions as the time passes.

By looking into renewals over consecutive subscription periods you can understand how good is your app at retaining the subscribers. You can get to the Lifetime Value (LTV) estimates when you know how many subscribers on average renew their subscriptions in each consecutive period. You can check our article on calculating mobile subscription LTV. Cohort analysis provides the view into the crucial parameter for the LTV calculation – subscriber retention.

It is also very useful to filter and analyze cohorts separately by country, specific subscription duration, marketing acquisition channel, and other parameters. All these segments may have significantly different subscription renewal rates.

What is a good subscriber retention rate for a subscription app?

It depends on many factors including your app category, the subscription duration, the country mix of your user base, and many others. In any case, there will likely be a significant churn in the first few months. You can expect roughly 40-60% of subscribers to churn during the first subscription period. An additional 20-30% of subscribers are likely to churn in the consecutive 1 or 2 subscription periods. Users that do not use your app a lot are naturally canceling the subscription in the early stages. As more time passes the users that have not unsubscribed so far are less likely to unsubscribe. 

How to improve user retention in a mobile app?

You should be able to consistently deliver some value to your users to have high subscriber retention. It’s good to make regular updates to your app adding new valuable features. You can also experiment with the duration of your promoted subscriptions. Other important aspects are churn prevention and being able to win users that lapsed back by using push notifications and emails with promotional offers.

What is ARPU and how to calculate ARPU?

ARPU is the average revenue per user. In other words, it’s how much revenue on average each user brings. In the case of a subscription app, it makes sense to look at ARP(P)U – average revenue per paying user (subscriber). This metric shows how much revenue an average subscriber brings over time. You need to divide a cohort’s cumulative revenue by the initial number of subscribers in this cohort to arrive at ARP(P)U. You can see your actual ARP(P)U for monthly cohorts of subscribers in Qonversion.

Closing thoughts

Cohort analysis, including subscriber retention and ARP(P)U, is a crucial instrument to power a subscription app growth. Qonversion already provides you with a detailed subscriber cohorts dashboard. Here is a preview of cohorts you’ll get for your app in Qonversion: