What is Purchase Frequency?
Purchase Frequency is the number of times an average customer purchases a good or service from your store in a specified time period.
Why is Purchase Frequency important?
For most ecommerce businesses one of the most powerful ways of growing revenue and profits is to focus on your customer retention. Purchase Frequency alongside Repeat Customer Rate is one of the most commonly used KPIs for tracking this.
Repeat shoppers are cheaper to acquire than new customers. Loyal customers who make frequent purchases are also more likely to advocate your brand and refer other customers.
Purchase Frequency helps you to understand your audience’s purchasing behavior and better structure your marketing activities around your customers’ habits.
How to calculate Purchase Frequency
No. orders / No. unique customers = Purchase Frequency
To calculate Purchase Frequency, divide your total number of orders by the number of unique customers for the same time frame. Purchase Frequency is effectively the average number of orders per customer.
What time period to use to calculate Purchase Frequency will depend on the specifics of your business but it’s most commonly looked at over a 12 month period to take seasonality and promotions into account. You need to allow a time period long enough for a typical customer to make more than one order. For most stores looking at Purchase Frequency for less than a quarter won’t make sense.
Your Purchase Frequency will always be one or greater if you’re using the same period for the number of unique customers as the number of orders. The longer the time frame used, the higher your Purchase Frequency will be.
How’s Purchase Frequency different from Repeat Customer Rate?
Whereas Repeat Customer Rate is concerned with what proportion of your customers have bought from you before, Purchase Frequency indicates the average number of purchases made per customer for a set period of time.
Both are common measures of customer retention in ecommerce businesses but are useful for different things.
If you’re looking for a measure of retention that can be tracked on a daily or weekly basis, Repeat Customer Rate is a better metric. Purchase Frequency by contrast is a laggy metric that can only be looked at for longer periods of time because each individual customer needs time to be able to make multiple purchases in that time period.
How to boost your Purchase Frequency
Whatever industry your business is in, it’s important to have a good Purchase Frequency that shows that your customers find value in your business.
Remember that some businesses won’t typically have people buying from them regularly. Online stores that sell larger, high-value goods can expect to have a lower Purchase Frequency than businesses selling consumable products.
For instance, if you’re a company like Cazoo who sell cars, it’s likely that once a customer has purchased a car they won’t return immediately to purchase another. That’s because customers tend to purchase more expensive high-value goods less frequently.
Regardless of the type of goods your business sells, take a look at a few techniques for encouraging your customers to make more frequent purchases.
1. Start a loyalty program
Rewarding your loyal customers is a great way of boosting customer retention and Purchase Frequency. When customers take the time to sign up for your loyalty program, they may feel more motivated to continue shopping with you instead of going to a competitor. You could use a points system to help encourage customers to shop at your online store and increase their purchase frequency.
You can then encourage your customers to spend more on specific dates like holidays by rewarding them with extra points. Use targeted email campaigns to remind customers of how many points they have and what they could spend those points on.
When customers have points with a specific store, it becomes harder to forgo their hard-earned points and choose a competitor.
2. Focus your marketing efforts on retention
Use strategic marketing campaigns to focus on retaining your current customer base. Email campaigns can be an excellent way of boosting both your Purchase Frequency and Repeat Purchase Rate.
To increase Purchase Frequency, try making your email campaigns ultra-targeted to each customer. For instance, if your store releases a new collection including items that are similar to what they have purchased before, try promoting the newer items.
If you have readily available information on what a customer has bought, use this to promote other products. For example, if a customer just bought a laptop from your store, you could send out an email encouraging them to purchase chargers, cases, and other relevant accessories.
You could also send out personalized emails that contain relevant discounts to each customer. If you know a customer has purchased from the same line of products several times, you could give them a discount code to use for a limited time.
3. Personalize your marketing campaigns
Keep your store at the forefront of your customers’ minds by using retargeting ads. When a customer has made a purchase on your site, you can encourage them to return and make another purchase by personalizing your ads to feature items that complement their most recent purchase.
Consider segmenting your audience based on their unique preferences and purchase history so you can target them with relevant messages that make sense to them.
Make the shopping experience more personal for each customer by implementing a personalized product slideshow that they see when they enter your site.
Limitations of Purchase Frequency
Purchase Frequency is just one of a few different customer retention metrics you should analyze to fully understand your customers’ behavior and satisfaction with your site.
It’s important to note Purchase Frequency is a laggy metric so isn’t good for spotting trends in customer retention in the short term.
As always, take Purchase Frequency as part of the bigger picture along with other metrics.
Relevant ecommerce metrics and KPIs:
If you’re adding Purchase Frequency to your ecommerce dashboard, you might want to also consider tracking these related ecommerce metrics for context.