Key Concepts

You may find the following definitions and explanations useful:

Cohorts

Cohorts are a group of users, tied together by a common action within a particular time frame, such as a first purchase in a certain month. For example, November’s first purchasers would be a cohort.

Cohorts vs Segments

Segments are typically different from cohorts because they are people grouped generally by demographic or other non-time based information.

Each segment will have several cohorts within it based upon the time each cohort first purchased or took an action. For example, you may have a segment of customers based on living in a particular city and may have two cohorts based upon whether customers in that segment purchased in January or February.

Cohort Analysis

Cohort Analysis is the practice of analyzing large amounts of data by smaller groups based on actions taken in a specific period of time. 

Cohort analysis makes it easier to understand how customers interact with your business over time by isolating natural customer patterns without conflating data with all customer groups generally.

Customer Acquisition Cost (CAC)

CAC is the total marketing spend required to acquire a new purchase within a period of time. 

In the LTV report, the CAC is defined as total marketing spend within the selected time period, divided by the total number of new customers. 

Lifetimely defines this as ‘front-loaded CAC’ because the value does not account for any spend for activating past buyers.

Lifetime Value (LTV)

The academic definition of LTV is the present value of the total future cash flows attributed to the customer relationship. However, for one-time purchase businesses like eCommerce stores, a more practical way to define LTV is how much a new customer spends on your products within a certain time period such as 3 months or 2 years.