Last updated: December 5, 2022
One common reason so many brands fail to truly take flight is that they spend too much money and time on customer acquisition rather than customer retention. In other words, these businesses put all their attention on gaining new customers, rather than keeping their existing ones happy.
The reason this mistake is so often made is that a lot of business owners don’t realize how important it is to engage with returning customers who are actively choosing to keep coming back. After all, the average success rate of selling to an existing customer is around 60-70%, whereas the success rate of selling to a new customer can be as low as 5% – these figures speak for themselves when proving just how financially worthwhile customer retention is.
To figure out whether you need to pour more money and effort into customer retention, there’s an all-important metric you need to be calculating: repeat purchase rate. We here at Upscribe have been helping Shopify brands scale effectively, by boosting subscriptions. With that in mind, we know a thing or two about repeat purchase rate. So let’s get into it.
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What Is Repeat Purchase Rate?
Sometimes known as repeat customer rate or simply ‘RPR’, repeat purchase rate is a customer retention metric that calculates the ratio of returning customers against your total number of customers. Simply put, it works out what percentage of your overall customers come back to buy from you more than once.
The metric of repeat purchase rate is a way of discovering how good your brand is at enticing customers to return, whether it’s a second-time purchase, a third-time, or preferably more. The higher your repeat purchase rate, the higher number of loyal returning customers you have. It’s definitely a KPI that you need to keep your eye on.
Your repeat purchase rate is different from another similar metric:’purchase frequency. The two metrics are easily mixed up due to them both measuring customer retention. However, they’re best used in conjunction with each other. They work hand in hand to gain valuable insights into how successful your customer retention strategies are.
How Is Repeat Purchase Rate Calculated?
Well, like a lot of customer retention metrics. It’s pretty simple.
The calculation goes something like this:
Let’s say, you have over 10,000 customers in one month, 2,500 of which have shopped from you more than once – that means your repeat purchase rate will be 25%. Pretty simple, right?
You can also track your repeat purchase rate over any length of time, whether it’s weekly, monthly, yearly, or longer. That way you can see how your customer retention is improving over time and start to notice certain behavioral trends (for example, your repeat customer rate may rise significantly around Christmas or during summer sales, etc.)
What is considered a ‘good’ repeat purchase rate?
Most successful e-commerce brands should have around 25-30% of their customers returning – but remember this rate will differ massively depending on your industry, mostly because some product types have naturally lower reorder rates, ie. durable, long-term items like electricals that are bought once every few years.
For instance, e-commerce stores selling high-end furniture or home appliances will naturally have a lower repeat purchase rate than a bookstore that can retarget customers with new releases every month.
Why Measuring Repeat Purchase Rate is Helpful
Measuring repeat purchase rate is an evaluation of your long-term performance. But why is having an understanding of customer retention success so vital for driving your business forward toward bigger things?
Returning customers spend more money
Research shows that half of a company’s total profits come from just 8% of their most loyal returning customers. This is because loyal repeat customers tend to spend more money with brands they already know and trust – sometimes up to 33% more.
Returning customers speak positively about your brand
Word of mouth is a powerful form of advertising. In fact, 90% of us are more likely to trust a brand that’s been recommended to us. The more your customers return to make a purchase beyond the first, the more likely they are to refer your products to friends and family.
Second sales are super valuable
A customer who has made just one purchase has a 27% chance of coming back again, whereas second-time shoppers have a 45% chance of returning for the third time. The longer your customer lifetime span, the easier it is to sell—mostly because new customers are harder to convince than returning customers who are already satisfied with their purchase and therefore more willing to spend money with a business they’ve already tried out.
Five Effective Ways of Boosting Your Repeat Purchase Rate
Despite the importance of increasing your repeat purchase rate, just 18% of businesses focus on customer retention whilst 44% of businesses focus on customer acquisition. That’s nearly half of businesses failing to put time, effort, and money into the right long-term investment.
Here are five strategies we recommend turning your attention to boost your repeat customer rate.
Focus on improving your CX
Building a fast and frictionless customer experience should be a top priority for any e-commerce business. Brands that highly customize their online experience also tend to outsell competitors by 30%. Your customers should enjoy a seamless and personalized customer journey from start to finish, from their very first visit to your website to the email confirmation of their first purchase.
Provide genuine post-sales service
The customer journey shouldn’t come to an abrupt end with a purchase. Instead, follow up with each individual customer to make sure they’re satisfied. Just a short and sweet email can show you’re a brand that cares. And if they’re not happy, address their concerns immediately. Even dissatisfied customers can soon be convinced to give you another chance if you’ve made the effort to reconcile. It’s all about leaving a positive and lasting impression.
Be a communicative brand
Maintaining continuous multi-platform communication also improves the customer experience. An omnichannel presence helps nurture your audience via the platform they prefer to reach you by, whether it’s your website, social media, or email.
Research has found that marketers think email marketing is the most effective method of customer retention (they rate its effectiveness at 56%). This is followed by social media (37%) and content marketing (32%)
Minimize cart abandonment
There’s nothing wrong with giving customers with abandoned carts a little nudge. Retargeting them with incentives or even just a quick reminder email increases the chances of them making a second purchase – you even reach the customers who created a cart as a guest.
One of the best ways to boost your repeat purchase rate is to create a loyalty program that provides worthwhile incentives to continue shopping with you. Research shows that 54% of consumers admit they’re more likely to purchase from a company if they offer loyalty rewards.
Even small incentives like gifts and seasonal discounts can increase customer loyalty too. Growth tools like ours can help maintain your number of subscribers – our revolutionary technology reduces churn rate by triggering cohort actions that convince subscribers to stick around. These include offering discounts, special offers. and adding on a free gift at shipment.
Acquiring new customers is a lot more expensive than engaging with existing ones. What’s more, returning customers tend to generate a lot more revenue than new ones. By regularly working out your repeat purchase rate and using it to measure how successful you are at keeping customers on board, you can then start to deploy the right kind of marketing strategies.
The best way you can improve your customer retention is to promote the right products on the right channels to the biggest-spending individuals. Offering incentives such as discounts can also improve your repeat customer rate – especially with the assistance of our growth tools that improve the overall online customer experience for your most loyal customers and subscribers.