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What Is a Repeat Customer? Meaning, Rate & Statistic

Repeat customers are the backbone of many businesses.

Sep 15, 2021 - By Adomas Sulcas

Repeat_Customer_Benefits_and_Examples

Repeat customers are the backbone of many businesses.

Most businesses prefer keeping existing customers at all costs over gaining new ones. Long-standing business research has shown that acquiring a new customer can be five times as expensive!

Therefore, it’s no surprise that many businesses have been looking into strategies that help them create customers that just keep buying.

However, in order to implement these strategies properly, we should first describe repeat customers and what benefits they bring.

acquiring_new_customer

Repeat Customer Definition

Repeat customers (or recurring customers) are those who has purchased from your business numerous times. They are differentiated from return customers and loyal customers. 

The former are those who simply returned to make another purchase at a later date, but do not have a tendency to do so repeatedly.

Loyal customers will choose your brand time and time again and over competitors even if they haven’t even tried other products on offer.

What makes a buyer become a loyal repeat customer is an incredibly wide topic. However, the basics of it are, depending on the business model, high-quality customer service and overall experience, great prices, and loyalty programs.

Of course, repeat customers are the bread-and-butter of retail and ecommerce businesses. In fact, Shopify recommends that profitable well-established ecommerce companies focus on retention over acquisition.

However, focusing on acquiring repeat customers is relevant in all industries and business models, therefore even if you are not in ecommerce, there’s a lot you can learn.

The Value of Repeat Customers and Benefits

One of the first questions that go through someone’s head when they hear the concept of frequent customers is whether they’re truly worth it.

After all, loyal and repeat customers will expect a lot out of your brand, therefore a lot of costly changes and supportive maintenance might be required.

However, all data points to repeat customers being more valuable than nearly anything else. First, you want to create a positive experience for all customers. Research by Oracle has shown that after a poor customer experience, 89% of people start looking towards the business’ competitors.

That, on its own, can lead to significant losses.

poor_customer_service

On the other hand, customer lifetime value rises exponentially if they become repeat or loyal customers. According to research, increasing customer retention by 5% can increase profitability by 75%. Additionally, on average, loyal customers are worth up to 10x their first purchase (according to White House Office of Consumer Affairs).

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Finally, even if none of the data has convinced you, the real kicker is the share of profit repeat customers provide. According to BIA/Kelsey and Manta, 61% of SMBs report that over half of their revenue comes from repeat customers! Clearly, building long-lasting customer relationships is simply way too beneficial to pass up.

Building long-lasting customer relationships are too beneficial to pass up.

Repeat Customer – Goals & KPIs

Every good strategy starts with measuring the progress and efficiency of processes. If you’re wondering how to make customers return to your website or ecommerce business, then you will have to implement the tracking of specific metrics.

Customer Retention Rate

Straightforward and simple. You will be measuring customer retention rate at all times as it’s the foundational metric. Of course, there are other metrics you will be tracking. However, the rest of the metrics mostly support customer retention rate and allow you to get a deeper understanding of it.

In order to calculate customer retention rate, there’s a handy formula you should use:

Customer Retention Rate = ((NCE – NEW) / NCS)) X 100

  • NCE – Number of customers (over a time period).
  • NEW – Number of new customers over the same time period.
  • NCS – Number of customers at the start of the same time period.

Customer Churn Rate

If you run an ecommerce or retail business, you’re likely already calculating some form of churn rate. If not, a short version of churn rate is essentially the amount of customers you lose over time.

A rule of thumb when aiming for a good churn rate is to keep it below 5%. All businesses have some churn, however, if you’re consistently above 5 or 7%, you should be delving deeper into the reasons why it’s so high.

churn_rate_stats

However, there are numerous ways to calculate churn rate. Depending on who you ask, they might provide you with a more or less complicated formula. The easiest way, however, is:

Churn Rate = Number of Churned Customers / Number of Total Customers

If you are looking for more granular metrics, you should take into account time periods, quarters, sample sizes and many more factors. Even customer segments might churn at different rates.

If you are looking for more granular metrics, you should take into account time periods, quarters, sample sizes and many more factors. Even customer segments might churn at different rates.

Repeat Purchase Ratio

Repeat purchase ratio is a good way to gauge the number of loyal customers over one-time customers. Of course, you will never know exactly when is the last time someone decided to buy from you, making the ratio slightly skewed. However, the metric is still great in and of itself.

Calculating the repeat purchase ratio is actually quite simple:

Repeat Purchase Ratio = NRC / NTC

  • NRC – Number of returning customers (over some time period).
  • NTC – Number of total customers (over the same time period).

It’s generally considered a strong indicator of customer loyalty. You want to get it as high as possible as long as it doesn’t harm NTC.

Net Promoter Score – NPS

Most of us have run into NPS even if we don’t know what it stands for. If you’ve received a request to rate how likely you are to recommend the business to someone else from 1 to 10 after a purchase or a customer service event. Such a request is the company collecting data to measure the net promoter score.

NPS is another strong indicator, although auxiliary, of customer loyalty. A high number of promoters means that people are likely to recommend your business to others. Of course, that also generally means that they will be repeat customers.

To calculate NPS, you need to collect data by implementing a survey or questionnaire after relevant interactions with your customers. However, the NPS data has to be normalized under a scale of 1 to 10.

After collecting the data, all you need to do is plug in a couple of numbers:

Net Promoter Score = % of Promoters – % of Detractors

  • Promoter – Gave a score of 9 or 10.
  • Detractor – Gave score of 6 or less.

Active User (Changes)

Finally, a metric you should be tracking that requires no formula – daily, weekly, and monthly active users. Unlike with other metrics, there’s not a lot to calculate here outside of delta (the changes over time periods).

Of course, you want to keep the average number of active users increasing steadily. However, outside of that, it’s highly recommended to track behavioral statistics to get a better understanding of what your users are doing.

If you track activity closely, you might discover when you need to start reengaging your users.

How to Keep Customers Coming Back

As repeat customers are such an integral part of retail and eCommerce, these industries have developed many best practices over the years.

Luckily, even if you aren’t in these industries, you can easily use most of the best practices and have customers keep coming back.

Start Customer Retention Programs

A classic lesson we can learn from ecommerce and retail is to implement loyalty programs that reward customers for repeat purchases. While these are not the sole reason why your customers will keep coming back, they’re a great starting point.

For example, if you sell a similar service for a similar price as your competitors, small benefits from loyalty programs might tilt the scales just enough. Additionally, it may give them a better reason to continue buying from you, even if your products aren’t essential.

Finally, another way to implement a loyalty program is to create a VIP discount club. Of course, you will have to carefully segment customer audiences, but those people will definitely appreciate being in an exclusive club.

Focus on Customer Service 

If you’ve ever dealt with Amazon customer support, you might have noticed one particular message that appears after you finish the conversation – “the Earth’s most customer-centric company”. Clearly, Amazon puts great emphasis on providing great customer service.

As they are an extremely established ecommerce company, we can deduce they heavily focus on retention and that customer service is part of their strategy. In fact, brands with superior customer experience bring in up to 5.7x more revenue than competitors that lag behind in that aspect. So invite changes if needed. 

Collect In-Depth Feedback

There’s no better source of information on how your business is doing than the customer themselves. However, many businesses only collect feedback from reviews and comments, which causes data to skew.

Establishing an in-depth feedback collection strategy is the way to ensure that customers keep coming back. Usually, this will involve using emails to send surveys and, sometimes, rewarding those who have finished them. Of course, you have to act upon the feedback, but simply implementing a collection strategy is a great start.

With Sender’s automation feature, create automated feedback emails based on a particular event, e.g. after a purchase. With a user-friendly interface, setup process is simple and straightforward.

Here’s a sneak peek of automated workflow.

automated_drip_campaign_example

Also read: How To Ask For Customer Feedback

Send Triggered Emails

An old marketing strategy was to always stay on the mind of the client. Some salesmen even used to give branded calendars as gifts in order to make the logo and company always visible.

Triggered emails can serve the same purpose, except in a significantly better manner. They have the added benefit of being partly personalized, therefore customers will pay more attention to triggered emails. 

There are numerous ways to approach triggered emails, each depending on the industry, however, the most popular triggered emails are:

Of course, you can include many more triggered emails and customize them according to your industry standard.

Recurring Customers as Recurring Revenue Model

Recurring clients means recurring revenue, which can be the foundation for a profitable business. The most successful businesses make it easy for customers to buy from them repeatedly. Recurring revenue can be as simple as one-off payments, including subscriptions and memberships.

If someone purchases something from you and continues buying from you after that initial purchase, they’re part of your recurring revenue stream. A regular revenue model is much more predictable than a one-time revenue business. You have an idea of what to expect from your customers and how much it costs to serve them. You can also plan for the future by investing in infrastructure and hiring employees.

Why Recurring Revenue Matters

Online businesses can be less customer-centric because they don’t have physical stores and inventory costs like brick-and-mortar businesses. However, this can lower quality customer service and less customer loyalty.

Recurring revenue models are a great way to increase the value of your business by creating ongoing relationships with your repeat buyers. These relationships make it easier for you to retain their business and increase their lifetime value — which means more money in your pocket!

The most important thing about recurring clients is that they’re predictable. You know exactly how much money will come in every month (or week, or day) because it’s set up as a subscription service or membership site where people pay for access to something (like an online course).

The other advantage of recurring customers is that they provide consistency in your income. You can plan and know how much cash flow will be coming in every month (or week, or day). It also allows you to scale up your business if things go well. It’s the idea that you can repeatedly have the same clients spend money with you.

How Recurring Revenue Works

The most common example of recurring revenue is a subscription service, where customers pay for regular access to a product or service. For example, Netflix offers monthly subscriptions for unlimited streaming video content, while Spotify offers subscriptions for unlimited music streaming. Other examples include:

  • Insurance companies sell life insurance policies that provide coverage on an annual basis.
  • News platforms such as CNN and New York Times charge users monthly fees for access to their sites.
  • Many online retailers offer “subscribe and save” options that allow customers to set up automatic monthly deliveries of products at discounted prices (e.g Amazon).

How to Grow a Recurring Revenue

If you’re just getting started with a business and looking for ways to grow it, recurring revenue is the way to go. Here’s how you can use this strategy in your business:

  1. Establish your value proposition. ​ Before you can sell something on an ongoing basis, you need to know what value it offers your customers. Give them good reasons why they need what you’re selling before signing up for any subscription service with your company.
  2. Figure out how much money it will take to keep a repeat buyer happy. ​ When calculating the cost of running your recurring revenue program, you’ll need to factor in everything from customer support to marketing costs to stay profitable over time (and don’t drain your bank account).
  3. Ensure there’s no upfront cost or risk for customers signing up for your service or product. It’s a lot easier for someone to commit to buying something if there’s nothing up front required from them.
  4. Give customers options. If you want to make sure that your customers are happy with their subscriptions, give them as many options as possible to customize their experience. For example, if you sell fitness DVDs through a subscription service, let customers choose which videos they want each month instead of renting all of them at once (which may not be possible).
  5. Build an email list. You can’t buy advertising if no one knows who you are, so building an email list is essential to growing a company through recurring revenue. You can send newsletters and promotions regularly or provide value by sending tips on using your products or services and other relevant information such as industry news or updates on related topics.

Take All Advantages From Repeat Customers

Repeat customers should be the focus of all, but the newest businesses. They bring in more revenue than returning customers and are only outclassed by loyal ones. However, all loyal customers will start out by being repeat customers.

Want to use triggered emails to improve your chances of turning some people into repeat customers? Use Sender.net to automate your email campaigns and send triggered emails without hassle.

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