Repurchase Rate: Over-looked Metric of Thriving eCommerce

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Have you ever thought of the value that repetitive customers brought to your store? If not yet, take a look at the repurchase rate (also known as the reorder rate) and other retention metrics to maximize the revenue of your business right now!

The Repurchase Rate Definition

The repurchase rate is commonly known under several familiar, similar names:

• Repeat customer rate.
• Reorder rate.
• Customer retention rate.
• Repeat purchase rate.

The repurchase rate is the percentage of customers who placed a new order after their previous purchase at your store. For a newly opened store, it’s also known as the proportion of customer-base that decide returning to your store to buy after their first purchase.

In a nutshell, the repurchase rate is a useful measurement for customer satisfaction and loyalty. It could be used as performance scaling to evaluate the effectiveness of any marketing, selling, customer-service or shipping related actions in a business.

The Repeat Purchase Rate Formula

The repurchase rate is calculated as:

Besides from the formula mentioned above, when it comes to the performance, it’s to keep in mind that the repurchase rate (or repeat purchase rate) is affected mostly by the product prices.

If your store/business products have a high floor-price then generally, the repurchase rate will be at a much lower range than other stores/businesses that sell the products at low prices.

This stems from customer’s’ general mentality: low prices make buying decisions much easier without spending much time pondering and comparing between products.

A high repurchase rate is also the signal that proves the great value of your product to beloved customers. It also highlights a good result when assessing the effectiveness of marketing, sales activities of stores, companies or businesses.

Meanwhile, if your repeat purchase rate is low, then the product hasn’t brought much value to your customer. Or it’s just simply that the customer hasn’t realized your product value due to the ineffective activities.

Other Retention Rate Metrics’ Formula

To achieve maximum possible returns, retention metrics measurement is one of the required actions to be done at first.

Know exactly what your retention metrics is and understand their numbers are the first steps towards a higher reorder rate for your store/business.

Beside the repurchase rate, there are two other retention metrics that are worthy of being noted:

• Purchase frequency (PF).
• The time between purchase (TBP).

Let’s take a look at each formula.

1. Purchase Frequency (PF)

Purchase frequency is the ratio of the order placed by a particular group of customers over a specific time period. Simply put, purchase frequency is the more accurate and particular version of the repeat purchase rate.

The exact formula for the frequency of purchases is:

Similar to the repeat purchase rate, high or low purchase frequency also partly reflects the performance of a business.

Just keep in mind that this purchase frequency applies to only one particular customer group, so it would be inaccurate to impose the results on the entire business.

Instead, think of the purchase frequency as an indicator to determine the product value as the effectiveness of activities affecting that particular group of customers.

For example, your store is offering a 10% discount to all customers born in August. Despite the deal, your purchase frequency is still low as if nothing happens.

This is a signal that you need to check the following cases:

• The product hasn’t brought enough value to customers (outstanding features, unique attributes, etc.)
• Marketing/sales activities aren’t sufficient enough to get in touch with customers.

2. Time Between Purchases (TBP)

The time between purchases is a useful metric that represents the average time between repeat purchases by customers.

Although having less application than the two metrics above, the time between purchases is highly constructive in improving marketing campaigns, especially when it’s related to email marketing.

Knowing the time between 2 repeat purchases from customers is a huge advantage! You can send mail to drive repeat orders from customers earlier than expected or to better retain customers by sending a follow-up email or promotional email.

Same as the two indicators above, the time between purchases also varies significantly between industries. This means that the TBP could be much longer for expensive products than the cheaper ones, so it’d be best to find an appropriate range that reflects your store’s performance.

Repurchase rate in eCommerce

1. The importance of repeat purchase rate in eCommerce

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According to Pareto’s principle, no matter what type of business, 20% repeat purchasers of the total customer base will always contribute up to 80% total revenue of a business.

Similarly, the statistical results of an Adobe study showed that up to 80% of profits come from 40% of loyal customers.

What more, can you believe that only 8% of repeat customers are already making up to 41% of the total revenue?

With the fierce competition of today’s market, especially in the e-commerce industry with the steady development of technology and investment, creating leads and acquiring new customers is much more difficult and costly than retaining existing customers.

According to the study, the cost to earn 1 new customer is up to 5 times higher than the cost of retaining old customers. A repeat purchaser who has used the product/service several times gets used to the brand and its products, which makes it easier to put on a purchasing decision.

In the long-run, a high retention rate combined with a loyal customer base is undoubtedly bringing numerous benefits to a business.

By testing diverse strategies that improve customer experience and maintain consistent measurement of their effectiveness, we believe any businesses are possible to work upon reaching a high retention rate as desired.

2. Does a perfect repurchase rate for eCommerce exist?

“It depends on the vertical you’re in. What you need to do is, have the tools to think, ‘who out there is comparable’ and how you can look at it and say, ‘am I anywhere close to what real success looks like in this vertical?

…For social media, you’ll need to retain at least 80% of users. eCommerce companies are much different. If you can get 20–30% of your customers coming back every month and making a purchase from you, then you should do pretty well.”

Alex Schult, VP of Growth at Facebook, said in his start-up course

An impressive example with great retention rates is StitchFix, an online personal fashion design modeling platform. The company claims 80% retention during their 90-day period.

To put it simply, it depends on many factors, one of them is probably your product price.

Is your product price higher than the general price of the market? Is your product expensive or cheap compared to others?

As mentioned above, if the average product price of your industry is already high, you shouldn’t expect a repurchase rate to be equal to other low-cost products in different industries.

However, that doesn’t mean you shouldn’t improve your retention rate.

We would recommend learning by trial-and-error to find an appropriate repeat purchase rate for your business by monitoring any improvement or deterioration of your repurchase rate.

3 Tips to Improve Reorder Rate in eCommerce

1. Focus on email marketing campaigns

Email is a fantastic channel if you’re looking to improve retention.

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Although email marketing campaigns are not suitable for all industries yet in general, their effects are undeniable, especially for eCommerce businesses.

A study shows that up to 67% Consumers agree that email marketing is the preferred communication channel to receive deals, new product announcements or promotions.

For email marketing, we encourage you to try campaigns such as:

a. Lifecycle email campaign

Lifecycle marketing is an important marketing campaign to increase repeat purchases and increase the new-customer base.

Usually, customers who know the brand for the first time will rarely make a buying decision due to a lack of understanding of your product/brand.

By regularly sending emails to educate customers to familiarize and understand products, you’d nurture them through many stages of a customer journey until they eventually make a buying decision.

To improve repeat purchase rates, your campaign needs to create a strong incentive for your next purchase at the right time. Since this is unique to each business, it’s necessary to analyze and choose the correct time for sending motivated emails about your product.

Also, don’t forget to make personalized emails! According to Ometria’s research, 56% of British consumers said that a personalized email would make them more likely to purchase than generic ones.

b. Winback email campaign

A win-back email is an email that reminded your long-time-no-see customers about the brand as well as your previous purchases.

It’s to be said that you should’ve enough information about their last purchases so that your email would contain the best suggestion based on their most recent concern.

The win-back email campaign would be even more effective if you also provide an incentive to lie within the email content. Another great suggestion is to personalize the email, offer some discounts if possible.

Also, don’t forget to put on appropriate call-to-action that reminded them of the urgency to buy your products. “Limited edition”, “One of a time”, “Last chance” are some well-known examples.

2. Create a rewards program

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A loyalty program is compelling in improving the purchase frequency as well as increasing the rate of repeat customers (or repurchase rate).

Try to encourage your customers to join the loyalty program and sign up for a loyalty card! This inadvertently makes customers more interested in offers from your brand than your competitors via news and offers to receive on emails or social media.

With a loyalty card, by building corresponding promotional milestones with attractive gifts of suitable value, you inadvertently create motivation for customers to continue placing orders with the desire to hit the milestone and win valuable prizes.

Another suggestion is to show customer points of their previous purchases and a way for them to spend those points such as vouchers, discounts, free delivery, small gifts & services, etc.

3. Try gamification

Fun and games are what people care about most nowadays, especially for Millenials. Don’t forget to take uses of these elements in your marketing campaign.

Some well-known brands, such as Coca-Cola and Pepsi, regularly use the element of gamification for their marketing campaigns.

For eCommerce, by adopting some features like badges, leaderboards and ranks then apply to your websites or account interface, you could quickly provide incentive as well as motivate customers to compete with each other and placing orders more often. 

You can also delight customers by offering perks at many specific “levels” to increase the customer experience and increase the frequency of repurchases as desired.

Increase Reorder Rate in Magento 2

No different from other eCommerce platforms, Magento 2 requires much work to increase the customer retention rate of your store.

Fortunately, you can find yourself at ease with the help of various extensions and modules that will do most of the hard work for you. These extensions below are some impressive suggestions for a try!

1. Magento 2 Reorder Product List

It’s usual for customers to come back and place new orders, only to find out that the default Magento 2 reorder interface is horrible and un-organized.

By improving the user experience in managing reorders, Magento 2 Reorder Product List extension will increase your reorder rate. It brought you several features:

• New grid list for all previous orders.
• Search bar for faster finding via name, SKU, attributes.
• Product quick view easier double-check.
• 1-click for multiple products added to cart.

2. Magento 2 Quick Order

Repeat customers who already have in mind what to purchase at your store might not be happy with the slow and hassle default order process. 

A quick order form is the fastest way to quicken it up. With Magento 2 quick order extension, you’re prepared with lots of ability:

• Create a quick order form with multiple SKUs/product names.
• Bulk order placement for customers via CSV file.
• Pre-fill bestsellers or frequently bought products.
• Select product options and allow 1-click to add to cart.

3. Magento 2 Reward Point

Reward point extension for Magento 2 is an absolute requirement if you want to create a reward program for your store.

Our Magento 2 Reward Point extension allows you to:

• Reward customers with points for orders, registration, review submission, etc.
• Allow customers to use reward points to pay for orders.
• Keep money by refunding customers by points.
• Manage the reward point on customer accounts. 
• Add or deduct reward points to customer accounts from the backend.
• Send customers emails about the expiry date of reward points.
• Import/export reward points and transactions.
• Build a Magento 2 loyalty program.

4. Magento 2 B2B Company Credit

Losing your big customers because you can not offer them a flexible payment method that regulates late payment? Grant them some credit and they will stick to you like glue!

The Magento 2 B2B Company Credit equips you with:

• A workable purchase order payment method allowing customers to buy on credit;
• A tailored credit limit that lets each customer create multiple credit orders;
• Credit excess permission for special customers only
• Credit and purchase order details included in sales documents
• Multi-level customer segmentation for B2B2C websites

Summary

Improving the retention rate is undoubtedly the first and foremost goal for any business. Above we have understood the definitions, formulas as well as three suggestions for better repurchase rate (RR) and other retention rate metrics such as purchase frequency (PF) plus the time between purchases (TBP).

In case you use Magento 2 for eCommerce, we’ve given several relevant suggestions to you. Please check them out if possible.

If you have any questions or issues related to B2B features in Magento, don’t hesitate to share with us. We are one of the leading multi-platform e-commerce solution providers and web development services in the world. With experienced and certified Magento developers, we commit to bringing high-quality products and services to optimize our business effectively. 

CONTACT NOW to let us know your problems. We are willing to support you every time.