Did you notice that, ever since Ad Networks such as Google and Meta became the norm in advertising, marketing also became a synonym for “spending money on Ads”?
While investing all your budgets in Ads might generate short-term gains, it isn’t a sustainable business model anymore, not with the current spike in acquisition costs and the pool of competitors fighting over consumers’ attention.
The real, undeniable game of eComm & Retail occurs after the acquisition: in the retention stage.
Today we will look at a crucial metric to track your performance post-acquisition: the repeat order rate. We’ll go through the definition, the formula, and tips & tricks to increase this metric using the Customer Value Optimization methodology.
What Is a Repeat Order?
In eComm & Retail, repeat order has two meanings:
- When a product gets ordered again by the same customer
- When the customer returns for another purchase (the products inside their order being irrelevant)
Both meanings refer to high customer satisfaction and retention, showing you that your products are high quality and customers are satisfied with the value they got from you.
When the repeat order rate is high, it signals you’re doing an excellent job keeping your customers happy and returning.
Suppose you’re a retailer selling organic ingredients and snacks for people interested in having a healthy lifestyle.
You’re running an ad promoting gluten-free granola bars, promising the consumers the products will reduce bloating and stop the cravings for “something sweet.”
Let’s say this campaign attracts 40 new customers, all ordering the pack of 12 granola bars.
Each customer who returns for another purchase (even if they don’t buy the granola bars, but order organic sweetener) and each reorder for the granola bar represents a repeat order.
If out of the 40 new customers, not one returns for a second pack when it’s time to restock, the products didn’t deliver on the promised value, and customers weren’t satisfied.
Taking into account the natural churn that occurs, you should see at least 20% of customers returning to order the granola bars a second time.
What Is the Repeat Order Rate?
As the name suggests, the repeat order rate measures the % of your customers who return to your shop for another purchase.
This rate measures the success of your retention and prevention campaigns. It can also be used to showcase your actions’ impact on the company revenue.
What makes a reasonable repeat order rate?
Alex Schultz, VP of Growth at Facebook, says a good repeat order rate is 20-30%. In his words exactly, if you manage to entice around 20% of customers to return for monthly repeat purchases, “you should do pretty well.”
Yet, the rate varies by industry and the cyclical nature of your products.
For example, suppose you’re playing in the wellness industry. In that case, you should see a higher return rate, as your products wear out and customers need restocking more frequently than customers buying from a sporting equipment store.
Here are the official benchmarks for 2023, powered by Shopify:
- Beauty & Cosmetics: 25.9%
- Coffee-Related Products: 29.6%
- Pet-Related Products: 31.5%
- Apparel: 26%
- Supplements: 29.1%
*if you can’t find your industry here, it doesn’t mean there’s no data for it – compare and contrast your rate with benchmarks inside your specific industry, to determine how low or high your rate is.
Repeat Order Rate vs. Repeat Customer Rate
While in theory, both rates measure how good you are at selling your products and getting customers to return, there’s a subtle difference between the two: one measures the orders, the other the customers.
In that case, the repeat order rate can help you track how often customers return to make purchases. In contrast, the repeat customer rate shows how many customers return.
To that end, use the repeat order rate when you want to measure the frequency of repeat purchases and the repeat customer rate when you want to measure the % of customers who return for another purchase.
Like what you're reading?
Join the informed eCommerce crowd!
Stay connected to what’s hot in eCommerce.
We will never bug you with irrelevant info.
Why Repeat Order Rate Matters
Even in the age of expensive acquisition, some companies still rely on it in an attempt to grow their business. However, in this particular case, the more isn’t necessarily, the merrier, as the CAC: CLV ratio* might be off and prevent you from gaining the traction to grow.
*This ratio represents the total value you can expect to gain from a customer across his entire lifespan with your business. If marketing and sales spending represent the CAC, the CLV represents the Customer’s Lifetime Value. You should aim to get a CLV 3x the CAC.
Evidently, new customers are essential to your business, and we aren’t disregarding the role of acquisition in business growth. We’re merely advocating for the right balance between customer acquisition and retention (as a way to increase the repeat customer rate).
If you prioritize customer retention, you outperform your competitors and achieve long-term success:
- Repeat customers have higher Average Order Values
- Repeat customers are more receptive to marketing campaigns
- It’s more expensive to acquire new customers
- Repeat customers provide Word-of-Mouth Advertising
- Sustainable growth depends on customer retention.
The repeat order rate is essential here, as it shows how good you are at getting customers to return and whether your products meet consumers’ needs and requirements.
A high repeat order rate proves your customers are satisfied with your products, happy with the experience, and willing to return for additional purchases.
Usually, businesses with high order rates also exhibit strong customer loyalty and good Customer Lifetime Value. All metrics are indicators of excellent business performance.
Tracking the repeat order rate brings significant benefits.
First of all, you’ll gain insights into customer behavior and preferences. Moreover, you also get a crystal-clear view of patterns and trends in customer purchasing habits.
With this information at your fingertips, you can make data-driven marketing and product development decisions and become an even better brand in time.
The repeat order rate can also serve as KPI to track the success of customer retention and loyalty initiatives.
You only need to set targets for this rate and monitor your progress toward these goals. This way, you’ll hold yourself accountable and make adjustments as needed.
Calculate Your Repeat Order Rate
There are four steps before calculating your repeat order rate (applicable whether or not you own a store on Shopify).
Step 1 – Decide on the time frame for which you want to measure your repeat orders (it can be a month, a quarter, a semester, or even a year).
Step 2 – Identify the number of unique customers who purchased more than once during that specific period.
Step 3 – Identify the total number of orders placed during the same period (including both initial and repeat orders).
Step 4 – Divide the number of repeat orders* by the total number of orders, then multiply the result by 100 to get the percentage.
Repeat Order Rate
(# of repeat orders/ total # of orders) × 100
*alternatively, you can divide the number of customers with at least two orders by the number of total customers to get the repeat customer rate.
Suppose you run an online bookstore and want to see the repeat order rate during 2022. Let’s say you had 1000 total orders placed by 800 unique customers. Of all 800 customers, 200 ordered more than once during the year.
In that case, you must divide the # of repeat orders (200) by the total # orders (1000), then multiply by 100.
Repeat Order Rate for Your Bookstore
(200 / 1,000) x 100
In this case, your repeat order rate for 2022 was 20%, which means 20% of your total orders were placed by returning customers.
How to Increase Repeat Orders
In the example above, the repeat order rate is at the threshold of a reasonable purchase rate, backed by Alex Schultz. But what happens when you’re not doing so well? Or when you’re doing a good enough job but know you can do better?
We’ve got you covered – here are a series of initiatives you can undertake to stimulate repeat orders within your shop:
- Find your best products and push them in your acquisition campaigns.
Out of the entirety of your product suite, a few items will rise up as diamonds in the rough.
These products are of such quality that customers will definitely return to repurchase them (or buy something else since you have already gained their trust).
Asking salespeople for their data and finding products that act as bestsellers will enhance the value you’re offering.
You can even survey your customers to identify precisely what they appreciate about said products, verbalized in their own voices.
After you identify your top-performing products and why people love them, create targeted acquisition campaigns focusing on these products. Write the copy using the feedback you got from customers to craft copy that highlights the unique value of these products.
Hint: you can use Omniconvert Reveal to identify products that have the highest chances of generating a second order, then use that information for innovative acquisition campaigns:
- Identify initiatives that brought in customers with high repeat order rates (and launch more of them).
Not every campaign has the same level of success, and that’s ok. However, some campaigns brought in more revenue in the long term by bringing in new customers who stuck with your brand longer than others.
These are the campaigns you need to identify and then analyze.
The first step is looking at metrics such as the repurchase rate and lifetime value for your campaigns, to see which were the most effective in the long term. You can also look at the acquisition costs to determine your budget for future campaigns and the expected ROI.
Be careful – it doesn’t matter how many new customers each campaign brought in, but how many stayed with you in the long run.
Then look at the architecture of the most effective campaigns: what were the audiences used? Which products were promoted? What was the creative used? On which channels did it run?
Break down each campaign element so nothing gets left to chance.
When you have all pieces of the puzzle, rerun the campaign to target these high-value customers.
- Send reminders when customers are likely to repurchase.
Looking at the Average Days Between (ADBT) Transactions metric, you will notice patterns in the buying behavior for your products.
Even if you don’t track the ADBT (although you should), you can look at purchase frequency and types of products customers buy. The time passed since the last purchase to determine when the customer will likely buy again.
Once you know when customers need to buy, you can use email, sms, or push notifications to send a reminder. People will appreciate the convenience of not having to remember when they need to restock and most likely place a repeat order.
How about going the extra mile here?
If you’re up for it, you can personalize these reminders, including new product info, tips on using the products, or special discounts only available for repeat orders.
These small gestures reduce friction and can go a long way in enticing customers to place another order in your shop.
*Hint: be mindful of the timing. You don’t want to send reminders too frequently and annoy the receiver or too infrequently and risk losing the sale. It would help if you used predictive analytics to determine the ideal time to send reminders.
- Offer curated recommendations when products aren’t bought frequently.
Even if you’re selling products that aren’t usually reordered (such as luxury clothing, sports equipment, and furniture), you can still increase the order rate – only for different items.
Use your shop’s data and see the natural patterns in buying behavior (such as various products bought in a short period by the same customers), then use this information to create curated recommendations.
For example, suppose you’re selling a fitness retailer, selling equipment for at-home workouts. You notice that some people who buy dumbbells usually return within the month to purchase ankle weights.
You can use this information to send recommendations for ankle weights (maybe accompanied by a slight discount) to all people who recently purchased dumbbells. This will increase your chances of turning random customers into repeat customers.
- Keep customers engaged by involving them in your decisions.
It doesn’t even have to be about big business decisions.
Customers (and people in general) love to voice their opinions, and they love it even more when brands listen and act on them.
Use your customer service department to survey customers about how they feel about product packaging and store design, or even get them involved in naming new products or creating new designs – then use their feedback.
Make your customers feel like they’re part of the process to increase their connection with your brand, deepen the relationship, and earn long-term loyalty.
- Create special promotions for repeat orders.
(we stole this idea from Starbucks’ loyalty card).
The logic is simple: there are few things customers love more than striking a great bargain with a brand, reason why they’re more inclined to buy, even if they don’t necessarily need the product.
You can offer coupons for the following order or “buy nine, get the tenth free” promotions to ensure customers will still choose you when it’s time to restock.
And there you have it.
The journey to understanding the crucial role of the repeat order rate and learning tips on increasing it has ended.
Now you only need to get into action and use everything you learned today to actively improve your business.
Will it be worth it? Yes.
After all, what could be better than having customers who can’t get enough of your products?
Good luck and happy selling!
Frequently Asked Questions about the Repeat Order Metric
Repeat orders are orders placed by customers who have already purchased from you in the past. These orders could be either for the same produc, or a completely different product from your product suite.
There are many reasons why customers repeat their orders: customer satisfaction with previous purchases, convenience, and brand loyalty.
Repeat orders are a positive indication that your customers trust your business and are willing to return.
Another term for repeat order is a “reorder.” Additionally, you can also refer to a repeat order as a “repeat purchase”.
If you want to create repeat orders, you can offer incentives to your customers such as loyalty programs, discounts on future purchases, or personalised recommendations based on their past orders.
Excellent customer service and consistently high-quality products can also encourage repeat orders.
The Repeat Order Rate measures the percentage of customers who have made more than one purchase from your business over a given period of time. This metric is used to analyse business success and identify processes to improve retention.
Repeat customers are people who have made multiple purchases from your business. These customers are valuable to your business because they are more likely to provide positive reviews, refer friends and family, and continue to make purchases in the future.