What is cohort analysis and when would you use it instead of looking at overall totals?

What the interviewer wants to hear

• Groups users by a shared start event such as sign-up month
• Tracks the same group over time since that start
• Separates growth from changes in behaviour
• Useful for retention, revenue per user and product changes
• Shows how to read the triangle table

Model answer

Cohort analysis groups users by when they started, for example their sign-up month, and then follows each group over the months since they joined. The output is usually a triangle table: rows are cohorts, columns are month 0, month 1, month 2 and so on, and each cell is the share still active or their revenue. I use it when totals can mislead. If a company is growing fast, total active users can rise even while each new group of users leaves sooner, because new sign-ups hide the losses. Cohorts show whether behaviour itself is improving. They are also great for checking the effect of a change: if users who joined after the new onboarding flow keep a higher month 1 retention than earlier cohorts, that is a strong signal. I read down a column to compare cohorts at the same age.

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