Marketing
In this article, we're going to do a deep dive into eCommerce repeat purchase rate. We'll explore the factors that drive customer loyalty, look at the best practices for increasing your store's repeat purchase rate, and show you how to turn one-time shoppers into loyal customers - but first...
So that we're all on the same page, and there is no confusion moving forward, let's define "repeat purchase rate."
Repeat purchase rate (RPR) is a measure of customer loyalty and is calculated as the percentage of customers who made at least two purchases within a given time frame (usually one year).
For example, if you had 100 customers in total, and 25 of them made two or more purchases within 12 months, then your repeat purchase rate would be 25%.
Repeat purchase rates are a vital metric to track as the cost of acquiring a customer is almost five times higher than the cost of retaining them (more on this later). What's even more important, loyal customers are not just more profitable but also tend to be bigger spenders and bring higher customer lifetime value (LTV).
Every store varies in its customer base, so understanding your repeat buyers better allows you to tailor your offers to their demographic.
The lives of your customers are heavily influenced by the choices that they've made that put them in certain demographics - for instance, the city they live in, their chosen profession or trade, married or single, homeowner or renter, pet owners or not... these are all factors that will help us as marketers understand their needs and create offers that better fit the designs that they have on their lives.
Today, we spend more than ever to acquire a customer. Twilio estimates that the average eCommerce store spends $100- 125 per new customer... which means we need to understand our repeat purchase rates and churn to know whether or not we're actually making money on each transaction.
Now that we've gone over what a repeat customer is and why it matters, let's dive into the ways you can increase your store's repeat purchase rate.
Repeat purchase rates and customer retention are often confused with one another as they measure similar metrics, but they're far from the same thing…
The repeat purchase rate is a metric that measures the percentage of customers who make a second purchase. It's a way to measure how likely customers are to come back and buy again.
Retention, on the other hand, is a broader term that refers to the ability to keep customers engaged over time. Customer Retention Rate encompasses a variety of metrics, such as repeat purchase rate, customer lifetime value, and churn rate (the percentage of customers who stop doing business with a company).
To sum up the differences, repeat purchase rate is a specific metric that measures how many customers make a second purchase, while retention is a broader term that encompasses a variety of metrics that measure how well a company is keeping its customers engaged over time.
Now that we have a clear understanding of repeat purchase rate and customer retention, let's look at how to calculate the repeat purchase rate of your eCommerce store.
The formula for calculating repeat purchase rate is as follows: (Number of Customers Who Made Multiple Purchases / Number of Total Customers) x 100 = Repeat Purchase Rate.
So, for example, if you had 500 unique customers acquired over a 12-month period and 250 of them made at least two purchases within that time frame, then your repeat purchase rate would be 50%.
It's important to note that this metric will vary depending on what time period you're looking at. If you look at the past 12 months, it will give you a good idea of how many customers come back to make multiple purchases. But if you look at the past 3 or 6 months, it will give you an even better glimpse into how often customers come back to make multiple purchases.
Now that we've discussed what repeat purchase rate is and how to calculate it, let's look at some of the most impactful factors before we turn our attention to increasing your eCommerce store's RPR.
The average repeat purchase rate in eCommerce varies by industry and often hovers between 15% and 30%. Shopify says 28.2% is the average that they see in their stores, and Moran Khoubian, Senior Director at Yotpo said 29.2% is the average that they see, so if you're benchmarking your own store, then you want to aim for something around that number.
It's important to note that this figure will vary depending on the industry and types of products you're selling. For example, fashion apparel tends to have higher repeat purchase rates than electronics or home goods.
But Elise Dopson makes an interesting point in her article on the Shopify blog, "E-commerce Customer Retention Marketing: How to Use Emails, Loyalty Programs & Communities to Improve Retention;"
"Repeat customers... are your loyal fans, generating 44% of total revenue and 46% of orders—despite only accounting for 21% of a brand’s customer base."
Re-read that last sentence again... and consider the impact of having a repeat customer base that generates 44% of recurring revenue in your store that you paid to acquire once. They're raving fans who buy your products repeatedly, recommend them to their friends, and help to spread the word about your store for free. That's huge!
This is why creating repeat customers is vital to sustainable growth long term. Now, before we get into the "good stuff" - how you increase your repeat purchase rates, best practices, and the like, let's talk about the culprit behind customer attrition and the biggest detractor to your repeat purchase rate... churn.
"Churn" is the term we use when a customer stops doing business with you. It's the opposite of a repeat customer, and it impacts your eCommerce store in multiple ways.
First, churning customers take away potential revenue that you could have earned if they had stayed as loyal customers. Second, the cost of acquiring new customers is much higher than retaining existing ones. So when someone leaves your store, it means that you now need to invest more money in customer acquisition in order to make up for the lost revenue.
Finally, churning customers also hurt your brand image and reputation. This is because any experience that a former customer had with your store before they left will reflect on how potential new customers perceive it. In other words, if a customer has a bad experience, they're more likely to tell their friends and family about it or tarnish the reputation of your store by leaving poor ratings and reviews.
The bottom line is that churn hurts your eCommerce store in more ways than one, and it's something that you should be aware of if you want to increase your RPR. It's estimated that the average eCommerce store has a churn rate of around 20-40%. That means if 100 customers come to your online store in January, by December only 60 remain.
High churn rates keep us on the endless hamster wheel of spending money to acquire customers and then losing them over time. To break this cycle, we need to focus on increasing our repeat purchase rate and creating loyal customers who stick around long-term.
The churn rate calculation in an e-commerce store is a bit complicated. Because customers don't always tell us when they no longer wish to buy products from your store (in fact, they never do), you'll need to set a specific timeframe to measure it.
To calculate your store's churn rate, you'll need to divide the number of customers that left within a certain period by the total number of customers at the beginning of that period. Then multiply this number by 100 and you'll get your store's churn rate, expressed as a percentage.
For example, let’s say you had 100 customers in January and by December only 20 remained.
Your churn rate would be: (100-20)/100 x 100 = 80%.
This means that 80% of your customers have left within one year and stopped doing business with you. That's a pretty high number, and it's something that should be addressed if you want to increase your RPR.
Many people have asked about this but there is currently no single standard churn rate calculation used across e-commerce - which means, for most stores, you'll have to calculate this for yourself.
However, Shopify uses a standard that we like to reference as a guide:
Again, it's important to understand that these are just averages and every store will be different. The best way to find out your own churn rate is to calculate it yourself.
Now that we've covered the basics of churn and how it affects your eCommerce store, let's talk about the strategies you can use to reduce it and increase your repeat purchase rate...
If you think about the customer lifecycle more like a relationship than a transaction, you'll handle it very differently.
Think about the last time you met someone interesting at work, in a coffee shop, or at the gym. You probably got their TikTok, Instagram, or phone number, and you sent a message, right?
Maybe it was a story or reel that popped up and made you think of them, or maybe it was something funny that pertained to the conversation that you had with them, either way, the two of you communicated in an ongoing, fun, and low-pressure way.
The same should be true for your customers and your sales cycle. Once a customer comes to your store, they want to feel seen, understood, and given a quality of service that makes them feel warmth toward your brand —whether it's through email, social media, or even text message, you should be making the effort to stay in touch with your customer's and make them feel appreciated.
The best way to do this is through a 1:1 human connection. PwC did a recent survey of shoppers and asked them what they'd most like to see in future shopping experiences. 82% of them said, "more human interaction."
The days of making high-consideration purchases through chatbots are coming to a close as people are experiencing increased isolation and hunger for more meaningful exchanges. To keep customers coming back, you need to create an experience that caters to this need.
One of the best ways to do this is through conversational commerce software that connects them directly to a remote concierge. Platforms like Humankind allow a shopper to interact 1:1 with a concierge who can ask them questions about their needs and preferences, provide expert product feedback and reviews, and deliver an excellent shopping experience.
They can also provide the personalized touch that technology can't. For instance, if a customer purchases something from your store, a concierge can send them a personal note thanking them for their purchase. Ask how they're liking the product, or remind them of any bundles, coupons, or additional products they could purchase that would increase your order values (AOV) and fit their needs.
At Humankind, we've studied over 1 million customer interactions and have found that these are the best ways to keep customers coming back for more:
As you can see, conversational commerce software from Humankind allows you to create a far better customer experience - more like texting a friend than typing questions into a chatbot.
Right now you may be thinking, why should I focus on repeat purchase rates when I'm already overwhelmed, using too many tools to keep track of and have enough on my plate?
...Because new (first-time) customers are costly!
Most e-Commerce businesses spend over 90% on acquisitions for first-time buyers. Not particularly "cost-effective."
On the other hand, when it comes to repeat purchase rates, you’re more likely to get a significantly higher return on your investment. This is because repeat customers are more familiar with your brand and product/service offerings and tend to make larger purchases. As such, focusing on increasing the repeat purchase rate instead of trying to acquire more new customers pays off in the long run.
How many e-Commerce store owners dream of achieving repeat purchase rates that drive 44% of revenues and 46% of orders- as Elise Dopson mentioned in the article I referenced earlier?
By using conversational commerce software such as Humankind, you can create a unique and personal shopping experience for each customer that will make them want to come back again and again.
As a result, you’ll be able to provide the human connection that shoppers are craving and increase their loyalty to your brand while realizing higher repeat purchases and customer lifetime values (CLV.)
In summary, if you want to maximize your customers repeat purchase rate, the key is to create a unique shopping experience that caters to their needs and preferences. By going all-in on your current customer base you can dramatically lower customer acquisition costs (CAC) and build relationships with your customers (increasing LTV).
By investing in conversational commerce software by Humankind you can shortcut the major barriers to providing shoppers with an excellent customer experience and give them the 1:1 human connection they crave. Book a demo to see how it works, today!
