---
title: "Cohort simulation: definition, formula and example"
description: "Running a group of customers through a plan many times, with chance and uncertain inputs varied, to get a range of outcomes instead of one number."
url: https://offersuite.io/glossary/cohort-simulation
updated: 2026-10-13
---

# Cohort simulation

Running a group of customers through a plan many times, with chance and uncertain inputs varied, to get a range of outcomes instead of one number.

## In plain words

A cohort simulation plays a plan out customer by customer. Each simulated customer buys, then renews or leaves at each step according to the renewal rates. Do that for a whole cohort, many times over, and you get a spread of results.

A single projection gives the average. The spread shows how far a real cohort could land from it, both because a few hundred customers never behave exactly like the average and because the inputs themselves are estimates. The result is a band, and a chance of reaching the goal.

## Formula

- Run the cohort many times, each with its own random draws; report the median and the range that holds 80% of runs

## Worked example

200 runs of a 200-subscriber cohort, with the acquisition cost uncertain by 20% and the renewal rates by 10%. After twelve months the median run has earned $21.82 per subscriber, and eight runs in ten fall between $9.23 and $30.68.

98.5% of runs pay back within the year. The median does so in month 5, and the unlucky edge of the band in month 6.

### The example order

A $40.00 bag of coffee, shipped free, every cost counted

Revenue $40.00 to contribution margin $15.36 (38.4%)

Revenue

$40.00

Cost of goods

−$12.00

Pick and pack

−$1.18

Packaging

−$0.50

Shipping label

−$7.50

Card fee per order

−$0.30

Refunds

−$2.00

Card processing

−$1.16

Contribution margin

$15.36

2 declared kinds cost nothing on this option

Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost.

## A simulation is not more accurate than its inputs

It turns the uncertainty you describe into a range. It cannot discover uncertainty you left out. If the renewal rates are guesses, the band is a careful picture of those guesses.

## Using it

Read the bad edge of the band, not the middle. A plan that pays back early on average and months later when unlucky needs cash for the later date. Use a fixed seed so the same inputs always give the same answer, and widen the uncertainty on any input you have not measured.

## In Offer Suite

For a subscription offer, Offer Suite's simulator runs seeded cohorts and reports an 80% band with the chance of payback. Renewal rates are supplied by the brand: they are not yet read from its own orders, and the simulator refuses to guess them.

Source: Offer Suite's offer simulator.

## Related

- [Glossary **Glossary of offer economics** The terms behind offer profit, defined plainly with their formulas and a worked number: contribution margin, profit per visitor, break-even lift and more.](https://offersuite.io/glossary)
- [Calculator **Subscription payback calculator: CAC and churn** How much a subscriber's first order loses against what you paid to acquire them, how many renewals it takes to earn that back with churn, and in which month.](https://offersuite.io/calculators/subscription-payback)
- [Glossary **Cohort analysis: definition, formula and example** Following a group of customers who started together, month by month: how many remain, and what they have earned so far.](https://offersuite.io/glossary/cohort-analysis)
- [Glossary **Renewal curve: definition, formula and example** The renewal rate at each order number: who takes the second order, the third, the fourth. It starts low and settles higher as the casual leave.](https://offersuite.io/glossary/renewal-curve)
- [Glossary **CAC payback period: definition, formula and example** How long a customer takes to earn back what they cost to acquire. With churn counted, it is later than the simple division suggests.](https://offersuite.io/glossary/cac-payback-period)
- [Glossary **Sensitivity analysis: definition and formula** Moving each input of a plan up and down by the same step to see which one changes the result most. It shows where to spend effort.](https://offersuite.io/glossary/sensitivity-analysis)