Repeat Customer Rate
What is Repeat Customer Rate?
Repeat Customer Rate is the proportion of your customers who have made at least two purchases during a certain time period.
It is usually expressed as a percentage and is a KPI commonly tracked by ecommerce businesses. It’s particularly relevant for evaluating your overall customer experience and understanding how much value your customers find in your store.
What is a Repeat Customer?
A repeat customer is someone who has purchased twice or more from your site. Usually, there’s no time limit on what counts as a repeat customer. If someone made their first purchase with your site one year ago and only made their second purchase last week, they still count as a repeat customer.
When you measure a Repeat Customer Rate, you may choose to focus on specific time frames. For instance, what proportion of customers who made a purchase this week, month or quarter had made a previous purchase within the same timeframe.
How to calculate Repeat Customer Rate
[ No. customers who've purchased before / Total no. customers] × 100 = Repeat Customer Rate (%)
To calculate the Repeat Customer Rate, simply divide the number of return customers by the total number of customers, and multiply by 100 to convert to a percentage. This can be calculated based on a variety of time frames such as daily, weekly, or monthly.
For example, if you have 2000 customers complete a purchase in the past week and 500 of them were returning customers, your Repeat Customer Rate is 25%.
Make sure to only include paying customers - that’s to say customers that have made an active purchase and not those who have just created an account and may have items sitting in their basket.
What is a good Repeat Customer Rate?
There’s no one right answer to this question. Many different factors impact a business’s Repeat Customer Rate.
It’s important to strike the balance between encouraging customers to make repeat purchases and acquiring new customers.
Your Repeat Customer Rate will ultimately depend on your business’s industry and customer satisfaction levels.
Although benchmarks vary from company to company, most ecommerce businesses have 25-30% percent returning customers. This is backed up by Alex Schultz, VP of Growth at Facebook who says, “If you can get 20-30% of customers coming back every month and making a purchase from your store, you should do pretty well”.
If you have closer to 50% repeat customers, you’ll want to invest more in marketing to expand your customer base. If you have less than 25% return customers, you’re missing out on additional revenue and should actively retarget one-time customers to incentivize repeat purchases.
How does Repeat Customer Rate vary by industry?
Ultimately your Repeat Customer Rate will depend a lot on your business’s industry. The biggest factor for repeat customers depends on the type, and range of products you sell. An online store that sells cheaper expendable products should have a higher percentage of repeat customers than one selling expensive goods with a longer lifespan.
Regardless of the type of industry your business is in, it’s important to encourage repeat customers.
Think about your business’s industry and how you may be able to encourage customers to repeat purchase your products.
Online stores that change which products they sell throughout the year. Clothing and accessory businesses often change the products they sell depending on the season. A repeat customer could buy multiple items from the same store. For example, if you run a jewelry store, you may release seasonal collections that you can encourage the same customers to buy from.
Businesses that sell more expensive high-value goods. You may have a site that sells a few larger technology goods like laptops and mobile phones. Once customers have made an initial purchase they might then repeat purchase accessories like chargers and cases.
Online shops that sell consumable products. If you sell food and beverages you should aim for customers to repeat purchase the same item multiple times. Other examples of businesses that sell expendable products include stores selling beauty products and cleaning chemicals.
Pros of Repeat Customer Rate
Tracking the Repeat Customer Rate is useful because returning customers are usually more likely to convert than a new customer.
“It’s cheaper to get past customers to purchase again than it is to find new customers. This is true for most businesses, especially in the crowded online ecommerce arena where ad impressions, clicks, and conversions always seem to be increasing in cost, making new customers more and more expensive to acquire.” - Richard Lazazzera, Founder of A Better Lemonade Stand.
Repeat customers generally spend more than new customers too - research done by Bain & Company found that apparel shoppers spend 67% more per order after shopping with a company for 30 months or more.
Loyal customers also offer your business some of the most valuable marketing opportunities. A happy repeat customer gives your business increased word of mouth advertising by referring your store to a friend.
The Repeat Customer Rate is a more actionable metric for ecommerce businesses than customer churn rate or customer retention rate. It’s also better for monitoring changes to retention than purchase frequency because it can be measured in a shorter time-frame.
Overall, it’s a broad gauge of the overall customer experience and customer satisfaction with your products. Customers who find your products useful, helpful, and/or enjoyable will likely return again and again to make additional purchases.
Cons of Repeat Customer Rate
Measuring your repeat customers is just one snippet of the overall health of an ecommerce business. Depending on what products your store sells it may be less relevant. A decrease in your Repeat Customer Rate may not be a bad thing if it’s caused by strong overall growth in new customers.
How can you boost your Repeat Customer Rate?
If your Repeat Customer Rate is a little on the low side, implement a few strategies to try and encourage customers to make multiple purchases on your site.
- Identify which of your products produce repeat orders and promote them to your existing customers.
- Work out which campaigns pull in customers who later have high repurchase rates and do more of them.
- Segment your customer base into multiple categories based on their shopping behavior and personal preferences. For instance, those who buy the latest releases or those who prefer your classic products. Once you have customer segments, send each one targeted email campaigns that contain similar products to what they’ve previously purchased.
- If you sell seasonal products, send reminder emails alerting your customers to new items you have available at the start of the season.
- Provide incentives like vouchers so customers make further purchases.
Relevant ecommerce metrics and KPIs:
If you’re adding Return Customer Rate to your ecommerce dashboard, you might want to also consider tracking these related ecommerce metrics for context.