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Understanding Repeat Purchase Rate
It’s great to see new customers every month, but repeat customers are the bread and butter of your ecommerce brand. Because customer retention is a big part of your long-term growth, knowing how many customers return and at what rate to make purchases is essential.
At Tydo, we define repeat purchase rate as the percentage of people who have made two or more purchases from your store over a set period.
Looking at your customer retention rate helps in several ways. This number allows you to see which customers are returning and why (or if there’s a high churn rate). It also shows you customer loyalty and where you can provide even more value to these shoppers.
Placing a focus on retention is a beneficial move. Nik Sharma, CEO of Sharma Brands, says retention marketing builds higher brand loyalty and purchase frequency (plus, Alex Greifeld explains retention is cheaper than customer acquisition costs (CAC) because you’ve already built trust and brand awareness with your customer base).
How to calculate Repeat Purchase Rate
Repeat purchase rate = (the number of customers who have made two or more purchases / total number of customers) x 100
Data source: Shopify
Example
Let’s say your Shopify store sells protein powders. You noticed many customers who bought from you in 2021 returned to your store and made a protein powder purchase in January 2022. You assume they wanted to start the new year on a healthy foot.
Out of the 5,000 total customers you served that month (January), 2,000 of them were customers who made two or more purchases. Your repeat purchase rate for January 2022 looks like this: (2,000/5,000) x 100 = 40%.
Takeaway
Repeat purchase rate is like a coffee shop regular, who visits their local coffee shop every day before heading to the office.
Why is repeat purchase rate important? Because repeat purchases from existing customers increase revenue.
This metric lets you get an up-close view of your loyal customers and shows you how much of an impact these customers are making on your business, especially concerning customer lifetime value (LTV).
Retaining customers, after that initial purchase, is better for profitability, as acquisition strategies are usually much more expensive. Plus, by focusing on increasing metrics such as repeat purchase rate, you decrease spending in other areas of the business, and you can make more informed decisions around your marketing strategy.
Taylor Holiday says customers who continue to purchase on a frequent timeframe often choose the same SKUs (either because they love it or want to share them with friends or family) on a second purchase, or customers return to stock up on accessories or complementary products.
Moiz Ali recommends looking at the repeat purchase rate through the lens of cohorts to offer a more accurate insight.
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Cody Plofker, CMO at Jones Road Beauty, makes an important note. He says it’s not as reliable as a metric when viewed alone. This is because you want to see how many people made two or more purchases from a defined group at a specific time.
Ready to level up your learning?
Read more about Repeat Purchase Rate
Factors that influence Repeat Purchase Rate
How do you get customers to buy from your store again? Your repeat purchase rate depends on a few factors:
- The buying lifecycle of your product; if it’s short, like razors, your customer is more likely to purchase more often. Items with a longer replenishment cycle, mattresses, for example, will have a lower repeat purchase rate.
- The category or industry your business is in. Consumable brands, such as Graza, that sell affordable and highly-used products (i.e. CPG products) will see a higher percentage of return customers than a brand selling higher-priced products with a longer lifespan, like grills.
- Great customer service sees a higher repurchase rate. If the customer experience isn’t good, customers won’t return. Engaging with customers on social media and responding to requests are two ways to improve loyalty and keep customers coming back.
- Fast shipping and delivery times incentivize customers to keep shopping. Using services that offer same-day delivery such as bodo will keep your customers engaged.
What is a good Repeat Purchase Rate?
As with all ecommerce metrics, it depends on your business, your category, what products you sell, and even the industry. The customer buying cycle also impacts the repeat purchase rate.
There’s a consensus amongst founders and ecommerce marketers that anything between 30% and 40% is the target; however, brands with subscription products and loyalty programs should see a higher repeat purchase rate.
Strategies to improve Repeat Purchase Rate
Implement strong email flows
Sending out automations, such as a post-purchase email flow, increases a customer's likelihood of returning. Chase Dimond, an email marketing expert, recommends sending out an email that includes: thanking the customer for their order, recommending complementary products along with their respective benefits, and including a CTA (with discount) that encourages them to add the item to a shopping cart for the order.
Optimize your shipping and delivery times
Nothing is more frustrating than ordering a product and not knowing when it will appear. Send shipment confirmation emails to build trust between your ecommerce store and your customer.
In addition to improving your customer’s brand experience, this type of post-purchase, communication around shipping and delivery cuts down on support tickets for your team.
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