What is repeat purchasing?
Put simply, a repeat purchase is when an existing customer makes a purchase again. Repeat purchasing can apply to both B2C, B2B, product and service-based businesses.
Why is Repeat Purchasing Important?
Repeat purchasing rate is an essential KPI (key performance indicator) to measure and improve at all stages of your business. This is because it is less expensive to encourage a customer to purchase again than advertising and acquiring new customers.
Repeat purchasing is essential during the turbulent times
Repeat purchasing is even more valuable during turbulent times in your business journey whether that be external factors like rising costs, or internal factors like high labour turnover.
The probability of selling to an existing customer is 60 to 70%, whilst the probability of converting a new customer is around 5 to 20%. When cash flow is delicate and your advertising budget becomes more sensitive, having a reliable base of loyal repeat customers will ensure your business remains afloat year round.
How to Measure Repeat Purchasing Rate
There are a range of equations one can use to measure customer loyalty and repeat purchase rate. For eCommerce businesses using Shopify, a repeat purchase KPI is often calculated and displayed automatically on your dashboard.
Use Churn Rate to identify how many customers you are losing
However, one figure not often used by small businesses is churn rate. Churn rate allows you to measure the proportion of customers who have stopped being a customer during a specific period, and therefore have not become a repeat purchaser.
Churn rate is relevant to both product and service businesses and the goal is to keep it as low as possible.
Churn Rate Equation
Churn rate is a simple equation and can be adapted to suit a specific length of time, depending on your product or service.
The measure churn rate using the following equation:
It’s important in this equation that you use a period of time that makes sense for your business depending on the lifetime of your product or service. For example, a car wash business may choose anywhere between 3 to 4 weeks, whereas a car retailer is more likely to choose between 2 to 3 years.
5 Ways to Increase Repeat Purchase Rate
The following five methods of increasing repeat purchase rate apply to both B2C and B2B businesses. Our recommendation is to test three or four that apply most to your business and measure the results, committing to the method which reduces churn rate the most.
Five ways you can increase repeat purchase rate include:
- Ad retargeting
- Discounts and promotions
- Loyalty programmes
- Email marketing
- Collect and implement customer feedback
Let’s take a deeper look at those five methods, and identify which applies most to your business and your product or service.
1. Ad Re-targeting
Engaging customers post-purchase via targeted advertisement is equally important for repeat buying behaviour. Many brands fall into the trap of ceasing their targeted messaging activities after the initial purchase despite the fact conversion rate can be up to 40% higher.
These targeted advertisements can be placed, tested and measured through Facebook Ads, Google Ads or TikTok ads most commonly. Furthermore, patterns in buying behaviour and customer journey can be observed at different stages of the purchase.
For example, a subscription cooking business targeting young millennials could use Facebook pixels to track purchasers of their taster boxes. Once the taster box has been used after one week of cooking, an ad can then be re-targeted, advertising the larger more cost-effective boxes. Not only is this consumer statistically more likely to convert, but they are also likely to spend 33% more following their more tentative first order.
2. Discounts and Promotions
An effective strategy of increasing repeat purchase rate can be the use of promo codes, discounts, and coupons. Rewarding customers on their purchases encourages them to make their purchases again from the same seller.
This is a strategy used by sustainable clothing brand BAM. Every order is packed with a unique discount code for that purchaser. Not only does this encourage the purchase whilst a customer is trying on their new product for the first time, but the unique code allows the brand to track the specific purchase habits of that particular customer. This in turn allows them to target the customer with email, physical mail and social media ads with products which feature their favourite designs and colours.
With the customer likely to spend 33% more on their repeat order, the difference in profit margin made by the discount code is more than accounted for by the higher purchase value.
Avoid overuse of discount and promotions
Particularly when it comes to luxury or high-end brands, discounts and promotions can often be damaging to the perceived value of your product. Therefore using discounts with caution is advised for any brand who seeks to be perceived this way.
3. Loyalty Programmes
Loyalty programmes encourage customers to be loyal to their specific brand or seller, increasing repeat purchase rate. This can often be favoured over discount and promotions as the potential damage to perceived value is reduced.
There are three ways in which your business can integrate a loyalty programme:
- A gamified repeat purchase incentive – eg spin the wheel.
- A points system – eg get your 10th coffee free.
- Early access to new products or beta versions of your platform.
Loyalty programmes like the ones above are an especially effective strategy in the case of replenishable goods, where the time between purchase can often be short like food and drink for example.
4. Email Marketing
In the age of social media and video ads, email marketing has picked up a reputation for being old fashioned in the marketing world. However, this could not be further from the truth with 77% of marketers seeing an increase in email engagement over the past 12 months.
Email marketing is particularly suited to repeat purchasing as email information can easily be acquired at the initial purchase stage, and therefore makes email marketing suitable further down the conversion funnel.
Tailor your emails
It’s absolutely essential that emails sent to past customers differ from emails sent to newsletter subscribers.
What to include in a past customer email:
- Loyalty programmes
- Brand story
- Ethical values
- Brand engagement opportunities such as events or feedback forms
In the case of a past customer, this person already knows about you, they have tested your products or service, and they are more likely to purchase more on their second purchase. For this reason, offering product add-ons or upgrades in your emails to past customers offer more value than gateway products.
5. Collect and Implement Customer Feedback
Using customer feedback offers not only a chance to improve your product or service, but also with it a chance to make your customers and stakeholders feel heard and valued. Both incentives can have a measurable impact on your repeat customer rate.
In the case of CRM tool Salesforce, customer feedback became a core part of their product development with the creation of their IdeaExchange, a dedicated online space where customers can submit suggested improvements anf features which users and engage with by upvoting and commenting.
Using an online feedback system like the IdeaExchange requires little management internally whilst at the same time automatically prioritising which improvements and products their current customers value most.
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