Repeat Purchase Rate (RPR) is a key performance indicator that measures the percentage of customers who return to make additional purchases from a business after their initial purchase.
This metric helps businesses understand how loyal their customers are and how well they keep them.1
How Repeat Purchase Rate Is Calculated?
Repeat Purchase Rate is calculated by dividing the number of customers who have made more than one purchase by the total number of unique customers, then multiplying the result by 100 to get a percentage.
Formula
The formula for product repeat purchase rate is:
Repeat Purchase Rate = (Number of customers who made more than one purchase / Total number of customers) x 1002
Why It Matters
Understanding and tracking the repeat purchase rate is very important for several reasons:
- Customer Loyalty: A higher RPR means more loyal customers happy with your products or services.
- Revenue Growth: Keeping current customers is usually cheaper than getting new ones. A higher RPR can lead to steady revenue growth.
- Marketing Efficiency: Knowing who your repeat customers help you focus your marketing to keep them returning, reducing customer loss.
- Product Insights: Looking at repeat purchases helps you understand which products or services are most popular, guiding your inventory and sales planning.2
Benefits
- Enhanced Customer Insights: Understanding RPR helps you learn more about what customers like and how they shop.
- Increased Revenue: Repeat customers often spend more money over time, boosting your revenue and profits.
- Improved Marketing ROI: Focusing on customers likely to buy again helps you get more value from your marketing efforts.
- Competitive Advantage: A high RPR shows you have loyal customers and a strong market position, giving you an edge over competitors.3
Example:
Consider an online bookstore with 1,000 unique customers last year, 300 of whom made more than one purchase.
The Repeat Purchase Rate for the bookstore would be calculated as follows:
This means 30% of the bookstore’s customers returned to make additional purchases, indicating moderate customer loyalty and repeat business.
The bookstore can use this information to develop strategies to increase this rate, such as personalized recommendations, loyalty programs, or targeted marketing campaigns.
Related Terms
References:
1. Sharp, B., & Sharp, A. (1997). Loyalty programs and their impact on repeat-purchase loyalty patterns. International journal of Research in Marketing, 14(5), 473-486. https://d1wqtxts1xzle7.cloudfront.net/45926325/Loyalty_programs_and_their_impact_on_rep20160524-14500-12yz8y0-libre.pdf?1464137238=&response-content-disposition=inline%3B+filename%3DLoyalty_Programs_and_their_Impact_on_Rep.pdf&Expires=1704462064&Signature=P5Ym2TIdGQx3LZJVLf5t9LqJ9Bq7JcVvfyFTUa55tiLx~FVlzSnsnC7zXrIxIOjCDAUEhnCMOV6Q5lGTi4p3bTSbCoBygpeVEWoTofbduTL2Iz8cHxyExAajAbnOqfkgOpygLMi~M2aWpaXLjWEhMSW0YGlPg-0ORQ3CiAE9DzJGPXo0xRnLdgvt-Ju6-gyUfN5ocVTClStVCkkQsXybhAjBI6B4kyFsa2kHPJObgkGRvpH5kjd4n4GVCfGiiuBpRo5p3stdZ6k33pTPHXG5lsbyVmpV4Q2H9b6fKkicHaP9d066FwOWzm-HAb5sXNgzxB8SUgtc7Y3dMEYkS13u-w__&Key-Pair-Id=APKAJLOHF5GGSLRBV4ZA
2. Repeat customer rate: KPI Example. Geckoboard. (n.d.-a). https://www.geckoboard.com/best-practice/kpi-examples/percent-returning-customers/
3. Partal, B. (2023, May 10). Repeat purchase rate definition. Encyclopedia. https://popupsmart.com/encyclopedia/repeat-purchase-rate
