Customer lifetime value is a backbone metric for ecommerce retailers, but it’s made up of, and supported by, a number of other, smaller KPIs.
One of the most impactful retention metrics that can boost customer lifetime value is repeat purchase rate. Purchases from repeat customers make up a significant portion of revenue for ecommerce businesses, and repeat purchase rate is a flexible and actionable KPI for your store to focus on.
In this piece, you’ll learn exactly what a repeat purchase rate is, how to calculate it, why it’s important for customer retention, and how to improve your store’s rate so you can see an increase in revenue and profitability.
A repeat purchase is when an individual customer makes more than one purchase in a given time period. Repeat purchases are important to ecommerce businesses because they boost customer lifetime value and indicate that loyal customers are engaging well with marketing campaigns.
The repeat purchase rate of an ecommerce store measures the percentage of the store’s total customer base that has made more than one purchase in a specific time frame (typically 365 days). Repeat purchase rate is an indicator of value given to your store’s customers as well as the effectiveness of customer retention strategies.
Repeat purchase rate and customer retention rate are both important metrics for ecommerce businesses to track and fall under the same umbrella. However, their calculations, uses, and implications are slightly different.
The repeat purchase rate measures the percentage of all customers that make two or more purchases in a time frame, while retention rate excludes how many new customers were acquired in that time period, resulting in the percentage of customers who stayed with the brand over the period of time.
Retention rate is a broad metric that gauges the overall health of a store’s retention year-over-year, while repeat purchase rate is a more immediate, flexible, and actionable KPI that impacts retention rate.
The formula to calculate repeat purchase rate is:
Number of customers who made more than one purchase in given time frame ÷ Total number of customers in given time frame
It’s important to note that repeat purchasers are familiar with your brand and return to your store to buy specific products, not to browse like a first-time customer would. Improving the rate at which customers make repeat purchases often means breaking loyal customers out of this pattern.
An after-purchase message, separate from order confirmation, thanking a customer for their business is a simple but powerful way to create repeat customers. This type of message is a great opportunity to send a personalized note to your customer as a genuine expression of gratitude, leading to a stronger customer relationship. Consider including a discount for a future purchase to really nail down the next sale.
It’s also worth mentioning that after-purchase emails are the most opened and read types of marketing emails at 44%, so implementing this type of messaging is a great opportunity to engage with customers and convince them to return to your store in the future.
Abandoned cart emails are a powerhouse for winning back potentially lost customers and have an excellent ROI. In fact, about 40% of abandoned cart emails are opened, and half of the users who engage with the content of the email go on to complete a purchase!
To entice customers to finalize their purchases, offer an incentive like free shipping, especially since shipping issues are the biggest reason carts are abandoned in the first place. As a bonus, customers often spend more money when they convert via an abandoned cart email.
Customer loyalty programs are one of the most popular ways to encourage repeat purchases, increase retention, and improve the customer relationship. They can be executed any number of ways, from point accrual to membership tiers to gamification, but they all add value to customers’ usual purchases and improve the overall customer experience. Encourage shoppers to join by offering a small gift or discount.
Behavior-based ad retargeting is a handy tactic for both acquiring new customers and encouraging repeat purchases because shoppers don’t need to be logged in to even have an account to be targeted. Tracking methods like Facebook Pixel and other bits of code on your ecommerce site that analyze user behavior can be used to design ads targeted to specific users based on purchase history or how they’ve browsed your store.
These ads can be displayed on social media, like through a Facebook Marketing Campaign, or through other paid display advertising methods. Ad retargeting keeps your brand top-of-mind, especially for existing customers. Use retargeting to display customers’ favorite products for repurchase, bestsellers, items that complement past purchases, or new product offerings.
Cross-selling is a flexible marketing tactic that often takes place while a customer is shopping and checking out, but it can also be deployed after a purchase is completed.
Email customers after they make a purchase with product recommendations for their next purchase, and time the contact strategically: These emails can be sent shortly after the purchase, once the customer has gotten some value out of their first purchase, or after a period where the customer has not made a purchase.
Use a tool like Apteo to generate data-backed product recommendations for each customer and automate when these messages will be sent for a passive yet effective marketing strategy to increase repeat purchase rate.
Understanding customer behavior is key to understanding and improving repeat purchase rates. Apteo boasts a robust feature that generates recommended products based on buyer behavior, and is capable of automatic segmentation so that you can send tailored messaging to your most receptive audiences, increasing retention and boosting repeat purchase rate as a result. To see how Apteo can enable your ecommerce team to achieve its goals for repeat purchase rates, try it for free for two weeks.
See how the best ecommerce stores are using Apteo to grow their business