Percent Returning Customers
What is Percent Returning Customers?
Percent Returning Customers is the ratio of people who completed an initial purchase to those who come back and make a second (or third or fourth) purchase. This is the percentage of repeat customers.
Advice from Ecommerce Experts: Why Percent Returning Customers is critical
“One of the most critical post-sale mistakes is to assume that your job is done once you make the sale. Turns out, what you do after the sale is just as important as what you do before. You want those repeat customers who bring in other customers. They are the lifeline of your business!” - Rachel Daley, Content Manager at MadeFreshly and Author of MadeFreshly Ecommerce Blog.
“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
How to calculate Percent of Returning Customers:
(#) Returning Customers
(#) Total Customers
(%) Percent Returning Customers
To calculate the Percent of Returning Customers, 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 Percent Returning Customers is 25%.
Tracking the percent of repeat customers is incredibly valuable since returning customers usually spend 20% more than first-time customers, and are more likely to refer your product or business to a friend. Repeat customers also have a 60-70% conversion rate.
This metric is 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. The Percent of Returning Customers measures the value of customer loyalty.
Percent Returning Customers is just one snippet of the overall health of an ecommerce business. This metric should be tracked along side other metrics for context such as Conversion Rate, Net Promoter Score, Gross Profit Margin, and Shopping Cart Abandonment Rate.
Relevant Ecommerce Metrics and KPIs:
If you’re adding Percent Returning Customers to your ecommerce dashboard, you might want to also consider tracking these related ecommerce metrics for context.
Although benchmarks vary from company to company, most ecommerce businesses have 25-30% percent returning customers. 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.
Percent of Return Customers is a more actionable metric for ecommerce businesses than Customer Churn Rate or Customer Retention Rate since it can be measured in a shorter time-frame. Churn or retention rates usually need to be calculated over several months and focus on the lifetime value of a customer?