What is the Repeat Purchase Rate?
The Repeat Purchase Rate measures the proportion of a company’s customers that make more than one purchase.
By returning to complete another transaction on a later date, the customer (and the transaction) is categorized as a “repeat purchase.”
How to Calculate the Repeat Purchase Rate
The repeat purchase rate — or often called the repeat customer rate — assesses a company’s retention of past customers.
The repeat purchase rate enables retailers and eCommerce sellers to understand the tendency of their customer base to return (and repurchase) after their initial purchase.
A customer purchasing more than once is perceived as a positive signal.
While the metric is not applicable to companies in all industries — such as businesses selling products with long life cycles and business models oriented around one-time purchases — the metric can be useful for gauging customer loyalty to a specific brand or seller.
In particular, usage of the metric is very prevalent in the eCommerce industry, as many of the products sold are consumed rather quickly.
For example, the purchase of everyday essentials such as soap and toiletries, pet food, cosmetics, apparel, as well as coffee would be examples of where this metric can gauge customer loyalty. Consumers can become a “regular” at certain coffee shops, but being a “regular” at a yacht brokerage would clearly not make much sense for most people.
The process of calculating the repeat customer rate is straightforward and can be broken into four steps.
- Step 1: Count the Number of Repeat Customers (i.e. > One Purchase)
- Step 2: Count the Total Number of Customers
- Step 3: Divide the Number of Repeat Customers by the Total Number of Customers
- Step 4: Multiply by 100 to Convert to Percentage Form
Repeat Purchase Rate Formula
The formula for calculating the repeat purchase rate is as follows.
A repeat customer means a customer who made more than one purchase, while the total number of customers is the sum of both one-time and repeat purchase customers.
The higher the proportion of repeat purchases, the more sales the company likely generates and the more satisfied the customers are — all else being equal.
The total number of customers refers to paying customers, i.e. those that actually made a purchase.
If more informative for the specific context on hand, the denominator could be replaced with a metric inclusive of non-paying customers, too.