What is cohort analysis?
Cohort analysis consists in studying the characteristics of cohorts / vintages / generations, united by common temporal characteristics..
A cohort/vintage/generation is a group formed in a specific way based on time: for example, the month of registration, the month of the first transaction, or the first visit to the site. Cohorts are very similar to segments, with the difference that a cohort includes groups of a certain period of time, while a segment can be based on any other characteristics.
Why is it valuable?
This kind of analysis can be helpful when it comes to understanding the health of your business and the stickiness of your customers. Stickiness is critical, as it is much cheaper and easier to retain a customer than it is to acquire new ones. Also, your product evolves over time. New features are added and removed, design changes, etc. Observing individual groups over time is the starting point for understanding how these changes affect user/group behavior.