Repeat Customer Rate
Repeat Customer Rate: Definition, Calculation & Benefits
Just as your favorite barista knows your coffee order by heart, eCommerce shops understand your shopping habits. Learn more about Repeat Customer Rate and discover the insights that drive customer loyalty in the online shopping realm.
What Is Repeat Customer Rate?
Repeat Customer Rate is a key performance indicator used in eCommerce that quantifies the percentage of customers who have made two or more purchases within a specified period. This metric is crucial for assessing the overall quality of the customer experience provided by an online store and gauging the level of value customers perceive in the business.
A repeat customer is someone who has made two or more purchases on the website, and there is typically no strict time limit in determining repeat customers. Whether they made their initial purchase a year ago or just last week, if they have made two or more purchases, they qualify as repeat customers. To calculate the Repeat Customer Rate, businesses can analyze various times, such as the proportion of customers who made repeat purchases within the same week, month, or quarter in which they have previously made a purchase.
How To calculate Repeat Customer Rate?
Repeat Customer Rate is calculated using a straightforward formula:
Repeat Customer Rate (%) = (Number of customers who have purchased before / Total number of customers) × 100
- Determine the Number of Repeat Customers: Count the customers who have made more than one purchase within the defined period. It is essential to include only those who have completed a transaction, not just created an account, or placed items in their cart.
- Total Number of Customers: Calculate the total number of customers who have made a purchase within the same time. This encompasses both new and returning customers.
- Convert to Percentage: After dividing the number of repeat customers by the total number of customers, multiply the result by 100 to get the Repeat Customer Rate as a percentage.
For example, if there were 500 returning customers out of 2,000 customers who made a purchase in the past week, your Repeat Customer Rate for that week is 25%. This rate can be calculated for various periods (daily, weekly, monthly) to monitor customer retention and the effectiveness of your eCommerce strategies.
What Are the Benefits of Repeat Customer Rate?
- Cost-Efficiency: Reaching out to past customers for repeat purchases is more cost-effective than acquiring new customers, particularly in the competitive eCommerce landscape where customer acquisition costs are rising.
- Higher Spending: Repeat customers tend to spend more per order than new customers, increasing the average order value and revenue per customer.
- Word of Mouth Marketing: Satisfied repeat customers often refer friends and family to your store, contributing to word-of-mouth marketing.
- Actionable Metric: Repeat Customer Rate is a more actionable metric for eCommerce businesses compared to metrics like customer churn or retention rates. It provides insights into changes in customer retention in a shorter time frame.
- Customer Experience Indicator: It serves as a broad calculation of overall customer experience and satisfaction. Customers who find your products valuable or enjoyable are more likely to make repeated purchases.
The Repeat Customer Rate is just one aspect of your eCommerce business's overall health. Its relevance may vary depending on the types of products you sell. A decline in this rate may not necessarily indicate a problem if it is due to substantial growth in new customers.
Repeat Customer Rate: Key Takeaways
- The Repeat Customer Rate is a vital eCommerce metric that quantifies the percentage of customers who have made two or more purchases within a specific period, helping assess customer loyalty and perceived value.
- A high Repeat Customer Rate is advantageous, indicating cost-efficiency, increased customer spending, word-of-mouth marketing, and a valuable customer experience indicator. Repeat customers often refer others and contribute to brand success.
- While important, the Repeat Customer Rate is just one facet of assessing eCommerce health and may not always reflect a problem if it decreases, especially when accompanied by substantial new customer growth.