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How to Calculate Your Repeat Purchase Rate & 3 New Tips To Boost It!

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How to Calculate Your Repeat Purchase Rate & 3 New Tips To Boost It!

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calculate repeat purchase ratio

When people share tips for eCommerce marketing, almost 99% of the material out there is based on acquiring customers.

When you first start out, it’s completely understandable for this to be where the bulk of your effort is too.

But, there is really no overestimating the importance of working on customer loyalty, retention and repeat purchases.

After all, if we want to boost our profitability, we have two main options:

  1. Get more customers
  2. Get our existing customers to spend more, either through larger orders or more orders

It goes without saying that you want to push both of these as much as you can, but it might surprise you to hear that the second one is often by far the most beneficial, at least once you have a decent base of existing customers.

After all, if you throw all of your effort and resources into acquiring new customers, you will likely gain some, but how many of them are ordering once and disappearing forever? And how much are you paying each time for that privilege?

customer retention rates
Source: Shopify

 This alone isn’t something that’s sustainable or going to generate huge profits.  

But, by putting effort into increasing the average order size of these customers and how often they return for repeat orders, you can boost your profits in the long run, earning a bigger lifetime return on every single acquisition.

Once you have this in place and your customers are spending more, you may well feel comfortable spending more money on acquisitions, knowing that the customers you’re winning aren’t just bringing you small, one-off orders.

Whether you should focus more on acquisition or retention also depends on your industry and how often people are likely to make repeat orders in it, as shown below:

acquisition vs retention
Source: Shopify

In this post, we are going to go in-depth on how to calculate your repeat purchase ratio, and how to boost your overall profitability by taking measures to increase it.

Let’s start with the basics:

What is “Purchase Rate?”

Purchase rate, also known as “purchase frequency” or “repeat purchase rate”,  is a measure of how many times your average customer makes a purchase within a specific period of time. 

It can lead to some incredibly useful marketing insights, allowing you to work on increasing your purchase rate, as well as targeting potential customers with a higher chance of becoming customers with higher than average purchase rates.

conversion rate for repeat customers
Repeat customers also have a much higher conversion rate as shown here (Source)

Taking action on these insights can also lead to the profit you receive from each customer increasing, resulting in a much higher ROI relative to your ACoS (Advertising Cost of Sale).

How to Calculate Your Repeat Purchase Rate

The “repeat purchase rate” metric shows you how many of the orders you receive are repeat orders.

It’s a great way to figure out the value you’re offering your customers and how comfortable they feel dealing with you again.

calculate repeat purchase rate

A high repeat purchase rate suggests that your customers are happy with your service and should always be the aim.

How to Calculate “Purchase Frequency”

Purchase frequency is a slightly different metric but equally important for improving customer retention.

It essentially tells you the average number of times a customer makes an order with you within a specific timeframe.

This then allows you to calculate the average amount of time between purchases, which can be powerful information when it comes to planning things like “ready to order again?” type email marketing.

calculate purchase frequency

How to Calculate Average Time Between Purchases

As mentioned above, this metric allows you to customise your email marketing campaigns to match the buying habits of your customers, increasing their effectiveness in the process.

For example, if your average customer orders every 6 months, you can email them offering them a discount 5 and a half months after their last order, and therefore drastically increase your chances of getting that repeat order.

calculate time between orders

It’s a good idea to compare your time between orders to other businesses in your niche if you can get access to the data.

For example, if you’re running a cosmetics brand, there is no point comparing your time between purchases to that of a bakery – the two of you operate on completely different schedules.

But if you can find these metrics for somebody in a similar area to you, this information can be extremely valuable for working out how attractive you are for customers to deal with, in comparison with some of your competitors.

It can’t be overstated how important it is to boost your customer retention, but if you keep these metrics in mind and constantly track them and think of ways to improve them, you will see a noticeable difference.

According to Adobe, revenue distribution in the United States points to 41% of revenue coming from repeat purchases, even though customers that order more than once only represent 8% of the total audience.

Meanwhile, customers that order once represent 92% of the total audience but only provide 59% of the revenue.

That should make it clear which group is more worth targeting!

average revenue per repeat visit
Source

How to Increase Your Repeat Purchase Rate

Now that you know how to calculate your repeat purchase rate, average purchase frequency, and the average time between purchases, you will naturally be looking for ways to improve these stats.

Don’t worry, because we’ve got some foolproof recommendations that are sure to work:

Target Retention and Repeat Orders with Your Email & Other Marketing Strategies

Email marketing is incredibly cheap and, due to the power of segmentation it offers, one of the most effective forms of eCommerce marketing.

We already mentioned above how you can send automated emails just before your customers are likely to buy again to increase the chances, but you can also send messages exclaiming how much you miss them if they outlast the average purchase frequency without buying anything.

It’s also a great idea to use personalised marketing in your emails, appealing directly to your customers by name and offering them products you know they’re interested in based on their previous browsing habits, like the below example from BirchBox.

personalised discounts

The more specific and personalised to a customer each email and offer is, the higher the conversion rate, which means the more ways you are able to segment your customers and target them separately, the better.

Of course, this same strategy can be applied to other techniques like remarketing and social media campaigns.

If a customer adds a product to the basket then doesn’t go ahead and purchase, we all know how effective abandoned cart emails can be, but what about remarketing ads popping up around the web, reminding them of the product when they’re “off guard”?

Use Gamification

gamification

The gaming industry is at the top of the game (no pun intended) when it comes to creating addictive and rewarding loops that encourage people to return, time and time again.

Think of things like leaderboards, achievements, progress bars, ranks etc.

These allow customers to see how they’re doing in relation to other customers and get a sense of pride in being part of an exclusive top-tier.

These are often applied to loyalty programmes in order to make them more enjoyable and rewarding – with the result of customers getting a sense of accomplishment every time they go up a rank and achieve higher discounts or benefits.

Speaking of loyalty programmes, they’re a huge one too:

Reward Your More Loyal Customers

personalised loyalty scheme

A good loyalty programme, especially if combined with aspects of gamification, will increase your average order value, and the frequency of orders.

It also helps to keep your customers from going to your competitors, providing an ongoing benefit to dealing with you.

A common strategy is to offer double points on certain days and combine your loyalty scheme with email marketing to remind users of the points they have or how close they are to their next goal and a range of other techniques designed to keep them active on your site and stop them from forgetting about your loyalty scheme.

Final Tips

The three tips listed above are some of the most data-proven, low investment, immediately implementable, and most effective methods to boost your repeat customer rate and therefore boost your profits.

With that said, they are far from the only way.

Let’s look at a few more ideas you may want to use:

Leverage Your Staff

customer service team

Engaged employees that truly believe in their work are the most effective brand ambassadors you’ll ever get.

Four out of ten consumers will actively tell others not to deal with a business if they have had a negative customer service experience.

Hiring the right staff and making sure they put an appropriate priority on customer relations and customer retention will make a huge difference, but you can even take it further and provide higher quality customer service to your more valuable customers, meaning your ROI from your customer service team grows substantially.

Get a Basic Understanding of Your Place in the Market and Why People Might Leave

You should research your competitors, the products they offer, their pricing, their customer service, and be fully aware who does what better than you (if anybody does).

This makes it easier to look at your own site objectively, from the point of view of a customer and say “somebody might leave us for this competitor because they prefer this benefit over our lower price”.

Once you know that, you can make a judgement call on whether it’s worth the cost of implementing that benefit yourself.

If you do, don’t go about trying to match the competitor though – you need to blow them out of the water completely, throwing the benefit at all of your customers and screaming it from the rooftops to the point nobody can remember you weren’t the ones who offered it first.

Subscription Based Retention Models

subscription based retention model
Source

Subscription-based models help to make feel customers feel more valued and give them a sense of exclusivity, while also making them feel “invested” enough into your brand to make it seem like going elsewhere is a waste of money.

According to Statista, 70% of Americans who both shop online and earn over $150,000 dollars have an Amazon Prime subscription.

You can bet the preferential treatment and quicker shipping are a major part of the reasoning for this, but what’s more interesting to you and I is that these people will likely naturally look on Amazon first whenever they want to buy something.

They are paying annually for special treatment from Amazon including quicker shipping and annual discounts, why would they bother looking anywhere different?

You can earn the same kind of loyalty from your customer-base by implementing a subscription-based loyalty scheme!

Just make sure it is win/win for you and the customer and genuinely offers them great value, otherwise, your subscription numbers will drop off pretty quickly and you run the risk of customers seeing your subscription offering as more of a scam than something that’s useful to them.

Surprise Them With Extra Value

thank you note

These days, every purchase customers make feels the same – you go online, make the purchase, the box arrives.

Plenty of people miss the uniqueness and personal touches of dealing with brick & mortar businesses.

You can use this knowledge to surprise and delight people, using techniques like:

  • Including a genuine, personally handwritten thank you note in boxes going to your best customers
  • Throwing in free gifts to your biggest customers, based on things you know they would want based on their browsing history
  • Emailing surprise free digital products immediately on purchase, such as eBooks and other digital resources

Build a Brand Community

castrol community

This depends on your niche and may not work for all businesses, but building a brand community such as a forum or chatroom allows you to tempt more customers to sign up for accounts, increases the engagement between these customers and your brand, and can even be used to encourage referrals, social media shares and gamification engagement.

That’s the end of today’s guide and we hope it has helped you understand how important it is to be aware of your repeat purchase rate and to work on improving it.

Once you’ve implemented some of these tips and improved your customer retention, why not check out some of our guides aimed at bringing in new customers?

Successfully combining both will get you on a rapid path to growth, there’s no question about that.

You can find them right here:

If you’d rather our help with your eCommerce marketing strategy – get in touch now by filling in our proposal form to see what we could do for your business!

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