How To Calculate The Repeat Purchase Rate: A Step By Step Guide

As ecommerce businesses think about new ways to grow their customer base, there are often two marketing strategies they focus on: acquisition of new customers and increasing their customer retention rate. While many companies prioritize new customer acquisition, customer acquisition is more expensive on average. A study by a customer experience agency saw that by focusing on customer loyalty, you could create highly dedicated repeat business. The report saw that loyal customers were 5x as likely to repurchase a product, 5x as likely to forgive a company for mistakes, 4x as likely to refer the company, and 7x more likely to try a new product or offering from the company!

By gaining your existing customer's trust, you'll foster repeat orders that take significantly less investment from your company. Implementing customer retention strategies will not only increase your sales but help your brand grow exponentially as you gain new customers through referrals and repeat customer purchases. So, what metrics are used to help measure this idea? One great way to look at your shoppers' purchase frequency is by measuring your repeat purchase rate.

What is the repeat purchase rate?

Sometimes also called your repeat customer rate, the repeat purchase rate measures the total number of customers who have made repeat purchases on your platform compared to those who only make one purchase. You can make better business decisions by looking at your repeat purchase rate in combination with other metrics, such as your customer lifetime value (CLV) and your customer acquisition costs (CAC). You can use repeat purchase rates to examine how to improve your customer experience, where to target your marketing campaigns, and how you can best continue to grow.

Repeat rate vs. retention rate

Retention rates are found by taking the number of customers you end with over a defined period, subtracting the number of new customers you gained in that time, then dividing that by the number of customers you started with. While retention rate can be good for examining your incentives and advertising at a macro level, it is a general calculation that doesn't necessarily give a clear, fully encompassed picture. Looking at how many customers are interested in coming back after their initial purchase often gives ecommerce marketers a more precise benchmark of how their special offers or email marketing campaigns drive loyalty and future purchases.

How to calculate the repeat purchase rate

To calculate your average repeat purchase rate, take the number of buyers who have made multiple purchases, and divide that number by the total number of buyers. A few times, companies measure this rate, mainly weekly and monthly, depending on new campaigns.

For example, let's say that you measure the number of customers over a week, and 1,000 people purchased items from your store. If 350 of those were repeat customers, you would have a repeat purchase rate of 35%.

Why the repeat purchase rate is essential to ecommerce

It is often said that repeat customers are significantly easier to retain and less expensive than finding new prospects. Business Insider reported that 48% of all ecommerce purchases are made by returning visitors, with new shoppers being half as likely as repeat buyers to add items to their cart. Repeat customers are more financially favorable for a company's budget, especially as social media ads, such as those on Facebook, are showing lower and lower ROI.

Tips to improve your repeat purchase rate

After examining your repeat purchase rates in conjunction with your other metrics, there are a few ways you can try to bring that number up. From reducing cart abandonment to responding to customer feedback, here are a few tips.

Use branded tracking to cross-sell and upsell

The customer experience doesn't stop when customers finish checking out. It isn't uncommon to lose customers due to bad experiences with their shipping, 84% of consumers say they won’t come back after just one bad shipping experience. The solution? Platforms like Malomo deliver beautiful, branded tracking experiences that drive second purchases and foster customer loyalty through education and customized product recommendations. And Malomo integrates directly with Shopify, one of the most widely used ecommerce platforms.

Focus on creating a frictionless customer experience

From hitting your landing page to receiving your package, every step of the customer journey should be considered when looking at customer experience. As mentioned in the last section, you can implement powerful tools to improve your tracking and post-checkout experience. But, everything before that needs to be frictionless, too. Hard to search sites with poor product filters or bad product images can turn customers off quickly.

Implement a thorough abandoned cart strategy

What do you do when a customer abandons a cart? If your team doesn't already have an abandoned cart automation, you should introduce one. From timed discounts to abandoned cart emails, bringing lost buyers back to your site can help continue to drive repeat purchases.

Run loyalty programs

Loyalty programs showcase a brand's gratitude and appreciation for their customers who make repeat purchases. These incentives—like discounts and rewards programs—give customers a great reason to return and snatch that great deal while guaranteeing you more business.

Run retargeting ads

Once a customer has been to your site, you start to know more about them by what items they clicked on or the things they left sitting in their cart. Consider running retargeting ads for these customers who need a reminder of what value your brand adds. Product recommendations based on past interest or purchases are a great way to bring those previous visitors back with the perfect item suggestion.

What is considered a good repeat purchase rate in ecommerce?

Your repeat purchase rate will most likely change depending on the item category you sell. The range for what is considered a reasonable repeat purchase rate varies, but ResearchGate saw that repeat customer rates were between 21% and 37%. In most studies, repeat purchase rates seem to fall between 20 to 40%, meaning that anything 30% and above is better than average.

Conclusion

Identifying and tracking your repeat purchase rate is a great way to see how well your loyalty programs, cart abandonment marketing, and new outreach perform are performing. By knowing how many customers are willing to come back to purchase more items, you can better understand your customer's feelings towards their experience and your brand. There are many ways to improve your repeat purchase rate, from focusing on retargeting ads to improving your post-checkout experience with a platform like Malomo. In combination with other metrics, monitoring and improving your repeat purchase rate is an excellent return on investment and will help your company sustainably scale in the future.