It’s hard to acquire new customers these days. In the last 5 years, customer acquisition costs have increased by over 50%, according to a piece of research conducted by Hubspot. It actually costs 5 times less to keep an existing customer than to attract a new one. That’s why we should put renewed emphasis on customer retention strategies- that is, strategies that focus on increasing purchase frequency and, implicitly, the customer lifetime value. In today’s article, we will be focusing on repeat customers, how to calculate your store’s repeat purchase rate, and we’ll also be sharing some tips for increasing purchase frequency.
What is a good repeat customer rate?
Average repeat purchase rates for eCommerce stores vary wildly. Benchmarks depend largely on the industry. As Shopify rightly states, steady, sustainable growth in customer retention can yield impressive results. In the graph below, two stores are pictured, each one having 100 customers that buy a $10 item each month. Except the light purple store retains 5% of these customers each month, while the dark purple one is retaining 10%. You can see clearly what a big difference a 5% increase in customer retention can make for your profits over time.
After conducting cross-industry customer retention research, ResearchGate found out that the repeat customer rate among the brands they surveyed ranges between 21% and 37%. The average repeat purchase rate and a good repeat purchase rate would be around 28%.
How do you identify a repeat customer?
If you run an eCommerce store, then you definitely use a customer data platform as well. Returning customers are those that place more than one order in your shop (or who have purchased from you twice or more, according to others). If we are talking about your customers’ lifecycle or the buyer’s journey, they are the customers that have already converted and are moving towards the retention and advocacy phases. You will want to focus on repeat purchasers, as they bring more value to your business than any kind of shoppers.
Most customer data platforms have Customers over time reports, where you can apply filters to find out how many of them are first-time buyers and how many are returning customers. If you’re using Google Analytics, you can go to Audience Insights, find the Behavior section, and then see your new and returning users. In this New vs. Returning users tab, you can scroll down and find the percentage of repeat customers, as well as the percentage of revenue coming from returning users.
How do you calculate repeat customer rate (repeat purchase rate)?
Depending on which definition of repeat customer you use (a customer that places a second order or a customer that buys twice or more from you), you can calculate repeat purchase rate in eCommerce as follows:
Def. 1: Repeat customers / No. of total customers x 100 = Repeat Customer Rate
Def. 2: Total of repeat customers who purchased 2+ times / Total no. of customers who have purchased 1+ times x 100 = Repeat Customer Rate
As discussed above, you will find these numbers in your analytics or customer data platform but you will likely have to do the maths for yourself. With Reveal, not only will you find these categories of customers more easily, thanks to its highly visual, intuitive dashboards and reports, but you will also be able to get the repeat purchase rate without any fuss.
Keep in mind that first-time buyers and repeat customers are not the only eCommerce metrics that count in this equation: customer lifetime value, average order value, and the net promoter score are some of the other metrics that we will be discussing further on, as we talk about the strategies to increase your loyal customer base and boost your retention efforts.
The importance of repeat rate in eCommerce
Do you think digital advertising has become increasingly expensive? Do you find yourself spending more and more to capture some leads or get some traffic for your eCommerce store, in hope that some of those who visit it will find what they are looking for and buy from you? Acquiring new customers is important but learning how to keep them close is even more significant.
According to Smile.io, a repeat customer is much more likely to stick with you in the long run.
After an initial purchase, unique customers have a 27% return rate, while repeat customers have increased value: after the second purchase, the likelihood of placing the third one is 45%, and after the third purchase… well, the numbers go through the roof. While this may sound difficult to achieve, you should know that repeat customers are easier to sell to, as they already know you and your products or services. Plus, the more they shop with you, the more data you will be able to gather about their behavior and preferences, so you’ll know exactly when to target them with promotional offers or when to place a new product before their eyes.
Here are some other important things eCommerce marketers should know about the value of repeat customers:
Upselling and cross-selling are more achievable within your loyal customer base. What’s more: repeat customers have a lower likelihood of abandoning products in their carts, so you won’t need to target them with cart abandonment messages anymore. In short: they’re much likelier to convert, time and time again.
Bigcommerce has found out that repeat customers are more loyal: your loyal top 10% spend 3x more per order than your lower 90% of customers, and your top 1% of customers spend 5x more than the lower 99%. Not to mention that every time they return, there’s a high chance they will be spending more.
Last but not least, repeat customers (at least some of the most motivated and outspoken among them) are your best advocates. Word-of-mouth is very important nowadays, as trust in business has eroded. The guys from Hubspot found out that 83% of consumers trust the advice of friends and family over business advice. In this context, having your most loyal customers speak highly about you in front of their acquaintances does more than any kind of advertising campaign.
How do you get consumers to repeat purchases?
In other words, how do you turn current customers into loyal customers? Through retention marketing, of course. This is a kind of marketing that places emphasis on connection and customer engagement as a means of increasing awareness and interest in your business. First of all, you will have to calculate your customer repeat rate and set realistic goals for improving it. Where are you at right now and where do you want to be in the next quarter, in terms of repeat customers?
Then you will have to look at their preferences, their buying patterns, the average time between purchases, the brands and products they buy, as well as the amount of money they are spending per purchase, and how this trend evolves. This way, you will be able to gain important insights into their behavior and understand what’s important to them.
By staying relevant to your current consumers, you increase your chances for them to turn into valuable, repeat buyers. Checking in with them after they purchase your product or service, offering great customer support, continuing to provide value even after they have converted, and reaching out with meaningful offers and messages from time to time- these are just a few ways to keep your customers engaged and encourage loyalty.
According to an Accenture report, a good starting point for improving customer retention would be to move from being simply transactional in your messaging and business strategy towards more empathetic, relationship-based interactions. This doesn’t mean you can’t target your customers with product offers anymore, it simply means that you will have to invest more in post-purchase programs and strategies, as well as in your customer support and online presence.
People crave authenticity and connections, especially in the current context. A study published in the Journal of Product & Brand Management has found that authenticity is positively correlated with purchase intention and with the likelihood of existing customers to further recommend a brand’s products and services.
Improving your eCommerce repeat purchase rate/repeat customer rate
The pillars for improving your customer retention rates will be your customer loyalty programs. Focus on your customers’ experience first and foremost. What are the points of friction they encounter across their journey? What do they like about your eCommerce store, your product/service, your communication? How do they like to be approached and what motivates them to climb up the ladder that turns prospects into loyal customers? These are some questions you’ll need to answer before you proceed.
Another thing to keep in mind is the customer segmentation part: you have different audiences to appeal to. Within these audiences, you have one-time, occasional, and repeat buyers. And within each of these segments, you’ve got sub-segments. You may think that your repeat buyers have a lot in common but there are many differences among them too. Fortunately, Reveal offers you in-depth, actionable insights about each category of buyers, so you can approach them accordingly.
Now, what exactly can you do to boost loyalty and improve your eCommerce store’s repeat purchase rate?
- Offer rewards
Depending on what your repeat buyers want or need, you can add rewards that trigger their purchase motivation again and again. Choose a specific time for offering these rewards: it can be after the third, fourth, or fifth purchase, but make sure they get something meaningful in exchange for their trust and loyalty.
- Create a loyalty program
Give your buyers the opportunity to enroll in a loyalty program that will allow them to gain points or other kinds of rewards as they return to your store to place an order. Make it attractive to the various segments within your audience and brand it accordingly. Scatter well-thought-out messages here and there (no one likes the pre-made messages that come with templates), and communicate the benefits of becoming a loyal customer in a way that resonates with your audience.
- Grant them access to a “VIP Club”, where they can get coupons and discounts outside of your sales campaigns
A nice touch here would be to allow users to claim coupons that apply to categories of products you know very well they like and need, based on their past consumer behavior. Assuming you run a make-up eCommerce store and you have a wide loyal customer pool, the VIP Club program would offer a 20% discount code that they can use for products they want, not for products chosen by you out of your portfolio. Some may choose eyeshadow palettes, others may choose lipsticks or mascara, but rest assured: most of them will buy something after getting this discount that is made for them and them only.
- Create referral programs
Whenever a customer of yours recommends your product or service to a friend, they both get a discount. Use personalized codes so you can follow the transaction and make sure that a specific new customer comes to you as a consequence of another customer’s recommendation.
- Encourage your most loyal customers to share their experience online
Either through pictures of them using your product or service that you can use on your Facebook or Instagram page or through reviews on social media and other relevant platforms and forums for discussion- it doesn’t matter, as long as they are sharing a positive experience with their peers. This way, you can showcase precisely how the product/service fits into the consumers’ lifestyles, boost credibility and trust, acquire new customers, and raise existing customers’ interest.
Depending on the industry you are active in, you can make engagement look like a lot of fun. A cross-channel program that allows you to offer rewards for every little thing they do that is relevant to your business. You can even make it public and let users display badges that keep on updating as they go up level after level in your program. Gamification is a trend that’s here to stay: people want fun experiences that they can share with others and that are, at the same time, simple and intuitive.
- Offer birthday gifts or small rewards on special days
People feel important when you remember their birthday. They feel treasured when you bring them a gift. And a small reward on other special days can go a long way. It can make their day, it can make them feel better, and deepen the relationship they have with your brand.
- Offer excellent customer support and post-purchase interactions
This kind of communication is crucial for a business so you should get it right. Hire the right people, make the right communication plan, and don’t forget to personalize your messages- be it the pop-up that comes up when a client completes an order or the emails they receive with the updates on their order. Make it as personal as possible and leverage every little touchpoint to showcase the personality and values of your brand. Consider offering customized cards inside of the package and use the latter as creatively as possible- a way to connect your values to the ones of your customers. Choose bright, colorful patterns, geometric shapes, a logo placed strategically inside of a bigger picture, or even contextual packaging for special occasions, such as holidays. This will put a big smile on your customers’ faces and will ensure they will buy from you again.
The customer repeat rate of your eCommerce store is very important from many points of view. It can help you better understand where and how to invest your marketing budget, it can help guide your overall marketing strategy, and, most importantly, monitoring it across time is a way to increase the profitability of your business. Luckily, there are tools out there that can help you calculate the repeat purchase rate faster and give you insights into the online behavior of this segment that is so valuable. Like Reveal, the most advanced customer intelligence platform on the market that urges you to activate your store’s pillars of growth.
Give it a try!