Do you ever think about the value that repetitive customers bring to your business? If not, you need to familiarise yourself with the concept of repurchase rate (also known as the reorder rate). Many e-commerce brands tend to focus on aspects like customer acquisition and data utility. On the other hand, the repurchase rate focuses on a wholly different metric and a very crucial one- your repeat customers.
What is Repurchase Rate?
Repurchase rate, also commonly known as the reorder rate, repeat customer rate, or customer retention rate, refers to the percentage of customers who placed a second order at your store after having purchased from your store previously. It is the proportion of your customer base that returned to your site to purchase from you after having already bought something from you previously.
In short, the repurchase rate is a measurement of customer loyalty and satisfaction.
How Is the Repurchase Rate Calculated?
The repurchase rate is calculated by dividing the total number of customers who made repeat purchases in a year by the total number of customers in that year.
The price of the product has the maximum impact on the repurchase rate. If the price of your products is on the higher side, your repurchase rate will be on the lower side than rival businesses that sell products at lesser prices than you. This is because the instinct of most customers makes them go for products with low prices, without spending much time pondering or comparing different products.
The Significance of Repurchase Rate in Your E-Commerce Business
Regardless of the kind of business you’re running, 80% of your total revenue will always be generated by 20% of your repeat customers. The same can be corroborated from this Adobe study that reveals that 40% of the loyal customers bring about 80% of the profits for any business.
The cut-throat competition that currently exists in the market, especially in the e-commerce industry where brands spend millions on their marketing campaigns, acquiring new customers can be a hard nut to crack. Moreover, it is quite expensive than retaining your current customers. According to a study carried out last year, the cost of earning 1 new customer is 5 times higher than the cost of retaining an existing customer. Also, your success rate of selling to an existing customer is 60-70% compared to the abysmally low success rate of 5-20% when you sell to a new customer.
Is There A “Perfect Repurchase Rate” for E-Commerce Businesses?
As mentioned previously, the retention rate depends on many factors, one of which is the product price. Does your product cost more than those of your competitors? If the average price of products in your industry is already on the higher side, you can’t expect your retention rate to be equal to other low-cost products in different industries.
However, that shouldn’t deter you from improving your repurchase rate. With a careful combination of trial-and-error methods, you can find the ideal repeat purchase rate for your brand by keeping track of any improvement or decline in your retention rate.
Here’s How You Can Enhance the Repurchase Rate for Your E-commerce Business.
1. Focus on Email Marketing Campaigns
An email campaign is a tried and tested tactic for brands trying to boost their customer retention. Although email marketing campaigns aren’t suited to all industries, they have a solid impact on customer retention, especially for e-commerce businesses.
You can try the following types of email marketing campaigns if you’re trying to drive the reorder rates for your brand.
Lifestyle Email Campaign
Lifestyle email campaigns can go a long way in driving repeat purchases. Most customers who come across your brand for the first time will refrain from making a purchase decision due to a lack of understanding of your brand. But regularly sending emails to educate and familiarize them with your brand will help you in nurturing them through many stages of the customer journey until they ultimately make a purchase decision.
Winback Email Campaign
A win-back email serves as a reminder to your old customers who haven’t purchased from you in a long while about your brand and their previous purchases from you. To execute a successful win-back email campaign, you must have adequate information about your customers’ previous purchases from you. This will help you make the best suggestion to them based on their biggest concern.
2. Launch A Rewards Program
Loyalty programs are another excellent way of enhancing purchase frequency as well as driving the customer retention rate. Encourage your customers to join your loyalty program and register themselves for a loyalty card. This will automatically make them more interested in your offers than your rival brands.
Also, you can show your customers the points that they earned through their previous purchases. You can provide them with a way to redeem these points through discounts, vouchers, small gifts, free delivery, and other services.
3. Include Gamification In Your Customer Retention Strategy
Online games have taken the world by storm, especially millennials. Therefore, it would be wise to include gamification in your marketing strategy. Well-known brands like Pepsi and Coca-Cola have been regularly using gamification in their marketing campaigns.
You can include features like leaderboards, badges, and ranks on your e-commerce website, which will motivate your customers to compete with each other and place orders more frequently. Also, you can incentivize them for reaching specific “levels”, which will boost their customer experience and drive the frequency of their repurchases.
Knowing your repurchase rate is integral to gauging the quality of your customer acquisition strategies. If you have been viewing the percentage of your repeat orders as merely an indication of the efficacy of your products, it’s time you start concentrating more upon your repurchase rate and optimize it. Improving your reorder rate will result in the twin benefits of faster growth and better bottom-line profitability. All that you need to do is follow the three simple tips given above and watch the repurchase rate for your e-commerce business increase exponentially.
Keep retaining, keep growing!