How to Calculate Repeat Purchase Rate

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Published on
July 29, 2016
Repeat Purchase Rate

The Value of Calculating Your Repeat Customer Rate

Your Repeat Customer Rate is calculated by dividing your Repeat Customers by your Total Paying Customers.    

Every store has two types of customers: New Customers and Repeat Customers. Knowing your Repeat Customer Rate will show you what percentage of customers are coming back to your store to shop again. This is an important factor in customer Lifetime Value. Customer Acquisition Costs (CAC) are one of the highest expenses in the ecommerce world. When you pay buckets of marketing money to Google Adwords, Bing Ads, Facebook Ads and Pinterest, you want to ensure you're effectively encouraging customers to shop more than once.    

Learn how to calculate your Repeat Customer Rate and strategies for increasing repeat purchases. Help increase sales revenue with customer retention and loyalty.

Visualizing a Repeat Customer Rate

What is a Repeat Customer?

A customer who has purchased twice or more from your site.  

What is a Paying Customer?

A customer who has purchased once or more. (You might be thinking, but isn't that all of my customers? No. Remember to exclude customers who created an account but failed to make a purchase. Those customers fall into your Zero Purchased segment.)  

Example: You have 250 total customers in your store. Out of those: 25 have never purchased, 150 have purchased once and 75 have purchased twice or more. In this example, your Repeat Customer Rate is 33%.    

75 (Total Repeat Customers)/225 (Total Paying Customers) = 0.33

How to Calculate Repeat Customer Rate

What is a Healthy Repeat Customer Rate?

Unfortunately there is no one right answer to this question. Many factors go into your Repeat Purchase Rate. The largest factor for repeat purchases has to do with the types of products you offer. Naturally, a store that sells consumable products should have a higher percentage of repeat customers than a store that sell large, expensive items. But all stores can use email to drive repeat purchases.    

What statement most closely resembles your product selection?

#1 I sell a variety of products that can change throughout the year. One customer could buy several different items from my store. Example: Shoe company, jewelry store, online apparel retailer

#2 I have a few main products, but offer additional accessories for those products. Example: Camera store that also sells camera lenses, bike store that also sells biking accessories

#3 My products are consumable, so I could sell the same product to one customer multiple times. Example: Beauty products, food or beverage companies, electronic vape-companies

Strategies for Increasing Your Repeat Customer Rate

If you fall into the first category of retailers, you have the opportunity to encourage repeat purchases frequently. Send people emails about new products and tailor your suggestions to their previous purchasing history.    

If you sell one main product but customers can still buy accessories, contact them quickly. The most crucial window of time to encourage a repeat purchase is very soon after their initial purchase. Send a follow-up email that shows the accessories they could add-on to their purchase.    

If your products can be purchased multiple times from your website, wrap your strategy around average time between purchases. If you sell shampoo and a bottle is typically used up after two months, time your emails to go out when a customer would need to order more

3 Ways to Learn About Your Business from Your Repeat Customer Rate

1. Look at Quarterly Changes to Your Repeat Customer Rate

Businesses go through cyclical changes that often follow the calendar year. Can you find any good metrics about your industry? If not, study your trends from each quarter's Repeat Customer Rate and ask yourself why it might be high or low. Challenge yourself to raise repeat purchases in the quarters following an influx of new customers.    

Q1: January 1-March 31  

Q2: April 1-June 30  

Q3: July 1-September 30  

Q4: October 1-December 31

2. Run a Split Test on Email Timing

Run a split test to see how email timing can affect your Repeat Customer Rate. Set up automation to send an email to new customers encouraging them to keep shopping. For a two week span send out an email three days after the customer's initial purchase. Then, for another two week span, send out an email seven days after the initial purchase. After a month is up evaluate your Repeat Purchase Rates for the first two weeks compared to the second two weeks. Did timing make a difference?

3. Evaluate How Each Channel Changes Your Repeat Customer Rate

Did customers who came in from organic search have a higher Repeat Customer Rate than those who purchased from Facebook Ads? How did your mobile content work? This data can be tricky to get to, but by using an ecommerce tracking tool, look to see if there are some channels that bring in customers with a higher repeat rate. Use this data when planning on your advertising spend. Spend more on channels boost your customer Lifetime Value.

Tools to Quickly Calculate Your Repeat Purchase Rate

Retail stores focused on increasing their Lifetime Value and Repeat Purchase Rate should subscribe to an analytics tool for advanced customer insights.  

Glew is the best tool for stores who want to quickly view their New vs. Repeat customers. You can easily isolate a timeframe and then filter even further by evaluating customers who came in from a specific Source, Channel, Device or Campaign. This makes the reporting process easy and fast. Instead of retroactively figuring out your Repeat Purchase Ratio, proactively monitor what is and is not working to bring in repeat purchasers.

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