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.”
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How to Calculate the Repeat Purchase Rate
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.
The repeat purchase rate — or often called the repeat customer rate — assesses a company’s retention of past customers.
A customer purchasing more than once is perceived as a positive signal.
While the repeat purchase rate is not applicable to all companies — such as 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 purchase rate is straightforward and can be broken into four steps.
- Count the Number of Repeat Customers (i.e. > 1 Purchase)
- Count the Total Number of Customers
- Divide the Number of Repeat Customers by the Total Number of Customers
- Multiply by 100 to Convert to Percentage Form
Repeat Purchase Rate Formula
The formula for calculating the repeat purchase rate is as follows.
Repeat Customer Rate Formula
- Repeat Purchase Rate = Number of Repeat Purchase Customers ÷ Total Number of Customers
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.
Note that in our formula, 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.
Repeat Customer Rate vs. Retention Rate
However, the retention rate tends to be a longer-term measure and there are often variables that can reduce the effectiveness of the metric, such as multi-year customer contracts.
For that specific reason, the repeat purchase rate is more common for eCommerce and retail purchases, whereas the retention rate is more practical for industries such as SaaS because of the longer time horizon.
The repeat purchase rate is typically considered a marketing metric which helps inform short-term adjustments.
Repeat Purchase Rate Calculator — Excel Template
We’ll now move to a modeling exercise, which you can access by filling out the form below.
Repeat Purchase Rate Example Calculation
Suppose an eCommerce store selling pet food is attempting to determine what percentage of its customers were repeat customers that made more than one purchase.
The number of one-time customers was 80,000 and the number of repeat customers was 20,000.
By the end of 2021, the total number of unique customers is 100,000.
- One-Time Purchase Customers = 80k
- Repeat Customers = 20k
- Total Customers = 100k
Since we have the two necessary inputs, we’ll plug them into our formula and arrive at a repeat purchase rate of 20%.
- Repeat Purchase Rate = 20k ÷ 100k = 0.20, or 20%