Repeat customers are the lifeblood of ecommerce businesses. Returning customers are worth their weight in gold because they save you money, support your business for longer, and help you grow your brand through referrals.
That’s why the repeat purchase rate is a key loyalty metric for ecommerce businesses.
In this post, we’ll look at the importance of the repeat purchase rate as a metric, how it helps ecommerce businesses gauge customer loyalty and satisfaction, other related metrics, and how you can improve your RPR using loyalty programs.
What is the repeat purchase rate?
The repeat purchase rate (RPR) is a crucial metric to track the success of your business’s loyalty efforts, as it measures how often customers return to your business to make a purchase.
- A high RPR means customers are returning to your business to buy more products, which signifies high customer loyalty and satisfaction.
- A low RPR may mean that customers aren’t finding the value they want in your products or brand and need some convincing to return.
It’s an essential indicator of customer satisfaction and loyalty that allows you to track the success of your customer retention strategies. By understanding your repeat purchase rate, you can better refine and target your marketing and customer service efforts to retain existing customers and increase customer loyalty.
How to measure repeat purchase rate in ecommerce
How to calculate your repeat purchase rate
The formula for repeat purchase rate is:
RPR = (Number of Customers Who Have Made Repeat Purchases / Total Number of Customers) x 100
For example, if a business has a total of 500 customers, and 250 of those customers have made repeat purchases, then the repeat purchase rate for that business would be 50%.
This implies that half of the business’s customer base has made repeat purchases, showing that the business has a successful customer retention program.
To figure out what counts as a “repeat customer”, you need to set a timeframe that works for your brand. If you sell high-frequency items — skincare products, say — you might consider multiple purchases over 6 months to be a “repeat customer”.
If you sell low-frequency items — household appliances, say — you might consider 5 years to be a good timeframe.
Take a look at your highest-value customers — how often are they buying from you? This can give you a good idea of what sort of purchase frequency to target.
Where to find the data to calculate your repeat purchase rate
To track customer activity, businesses can analyze their customer relationship management (CRM) or sales data.
If you use Shopify or a similar ecommerce platform, the sales and customer data can be pulled into a report in the analytics section of your dashboard.
The benefits of having a high repeat purchase rate
Increased customer lifetime value (CLV)
It’s no secret that having a high repeat purchase rate benefits businesses. One of the most significant advantages is increased customer lifetime value. Why? Because, when customers return to purchase more products or services, they are likely to spend more money on every repeat visit.
On average, loyal customers are worth up to 10x as much as their first purchase. Loyal customers also tend to be less price-sensitive and more confident in your brand than new customers, so it’s easier to drive up revenue per transaction—especially when you implement other loyalty techniques such as ‘free with purchase’ offers, or discounts over a certain threshold.
To see this in action, take a look at how LIVELY’s team designed a loyalty program that increased customer lifetime value by 39% and customer spend by 36%.
Improved brand recognition and loyalty
One of the most important advantages of a high repeat purchase rate is the improved brand recognition and loyalty it brings.
Satisfied customers will spread the word about your brand through positive reviews and recommendations on social media platforms or among friends and family members. This can further your company’s growth as you acquire more leads from referrals and gain valuable insights into what truly resonates with your target audience.
Returning customers also give you more data to work with. Once you identify what the customer loves most about your product or brand, you can create tailored offers that will help to build further trust.
The ability to grow and scale the business faster—and more cost-effectively
Companies can save on costs when it comes to acquiring and retaining their customers by using loyalty programs or other incentives to encourage them to return. By offering discounts or rewards points, businesses can reward their most devoted customers without spending too much money.
These types of promotions also help to create an atmosphere where people feel appreciated and valued for supporting the company, which further helps to build brand loyalty.
And, once you’ve fostered that brand loyalty, your repeat customers’ word-of-mouth referrals will make it more cost-effective to acquire new customers.
More opportunities to upsell and cross-sell to existing customers
When it comes to growing a business, one of the significant benefits of having a high repeat purchase rate is that you will have more opportunities to upsell and cross-sell.
For example, let’s say you sell luxury soaps. Instead of investing heavily in advertising campaigns targeting potential new buyers, you can instead offer your existing customers recommendations for related or complementary products. This way, there’s no need for extra marketing costs—and you increase the likelihood of more word-of-mouth recommendations.
What’s a good repeat purchase rate for ecommerce businesses?
Although benchmarks vary depending on the company and industry, it’s widely accepted that a rate of 20% and above is considered the norm for ecommerce businesses.
Many ecommerce businesses see 25-30% of sales becoming repeat customers.
That said, if you fall below this, it may not be a point for concern—it depends heavily on the industry you’re in, the time between purchases, and more.
How to improve your repeat purchase rate
If your ecommerce business is struggling with its RPR, here are some suggestions to help improve it. Offer different types of incentives, discounts, and rewards programs within your loyalty program, such as:
- Double or triple points events
- Tiered loyalty programs where customers can work their way up to the highest perks
- Experiential rewards, such as sending high-value customers pre-launch products to test and review
- Free or discounted shipping for high-value customers
- Recycling initiatives where customers get points for trading in old products, so they have more to spend on new products. (Astrid & Miyu’s ‘Astrid & Renew’ jewelry recycling scheme and the device trade-in offers from big tech brands are good examples of this.)
- Building a community by offering loyalty points for Instagram follows or user-generated content
- Re-engage abandoned shopping carts or inactive customers through targeted email/SMS campaigns or reactivation strategies
- Create seamless experiences across all platforms (mobile, web, etc.)
- Focus more on Relationship Marketing
- Utilize data analytics to track customer satisfaction levels, purchase behaviors, and other relevant metrics
- Create effective content marketing initiatives such as email newsletters, blogs, and social media campaigns tailored toward loyal buyers
- Offer discounts or special promotions exclusively for returning customers
What are some other important ecommerce metrics?
There are many, many metrics businesses can focus on, depending on what their biggest focus points are. However, some of the most important ones from a loyalty point of view are:
- Customer Retention Rate (CRR) measures the proportion of your customers that are loyal, based off the number of customers who made a purchase in a time period, the number of new customers, and the number of repeat customers.
- The Churn Rate is like a reverse retention rate; it tells you how many customers dropped out in a given time period.
- Customer Lifetime Value (CLV) helps you understand your revenue source better, by understanding how much on average customers are worth in terms of revenue for your business.
- Revenue Churn refers to the revenue lost from existing customers, through order cancellations or subscription downgrades for example.
- Your Net Promoter Score (NPS) measures your customer’s overall satisfaction and how likely they are to refer your business to other people.
- Time Between Purchases represents the average length of time between customer purchases.
You can learn more about how to use each metric in this article on loyalty metrics and how to calculate them.
How LoyaltyLion helps brands improve repeat purchase rates
LoyaltyLion is a loyalty and rewards platform that makes it easy to set up a high-performing loyalty program for your ecommerce store. Here’s how LoyaltyLion helps your store improve its repeat purchase rate.
Full-featured loyalty programs
With LoyaltyLion, you can set up a comprehensive loyalty program to show your customers that their loyalty is appreciated. Your loyalty program can include rewards such as discounts, points for purchases, charitable donations, early access to products or sales events, and even special VIP events.
LoyaltyLion also integrates with apps such as Klaviyo, Okendo, and Attentive to provide a more seamless customer experience.
Powerful analytics
LoyaltyLion’s powerful analytics let you collect customer data, giving you valuable insight into buying habits and preferences. This makes it easier to personalize and tailor your messaging even more effectively. By identifying when a customer is at risk of churning, you can send out specific messaging to re-engage them and keep them as loyal customers.
Win back churned customers
LoyaltyLion helps win back churned customers by allowing your brand to create personalized rewards programs tailored to their customer base.
We help brands stay connected with their customers by sending automated emails and notifications reminding customers of their loyalty points, rewards, and exclusive offers. You can also track customer engagement to identify customers at risk of churning and target them with tailored rewards and incentives.
To learn more about how LoyaltyLion helps you improve customer retention, schedule a demo with our team.
Managing your program
