Purchase Frequency: How to Calculate It and Tips for Improving Customer Retention
Cashing in on repeated, habitual buying behavior should always be a priority for brand marketers – especially online brands whose KPIs can be harder to keep track of. You could have the most attractive and enticing Shopify platform in the world that draws plenty of people in for a quick browse, but if no one ever comes back to the store, then something’s not quite working.
To help you get to know how many of your customers are coming back, we suggest working out some retention metrics – including purchase frequency. After all, just a 5% increase in customer retention has the ability to boost profits anywhere between 25% and 95%.
Want to see these kinds of results? Well, you’re in the right place. Upscribe we know all about unlocking the full potential of your online shop – so let’s explore the ways you can improve your customer retention, including the importance of calculating your purchase frequency metric. Here’s what you need to know.
What Is Purchase Frequency?
Purchase frequency (AKA ‘order frequency’ or ‘PF’) is the number of times the average customer buys something in a given period of time. It’s a type of retention metric that represents how many repeated customers you get, whether it’s over a week, month, year, or longer.
It’s also one of the most important KPIs for monitoring your company’s growth over time. The higher the frequency, the better you are at enticing customers to come back and purchase from you again. Analyzing the order frequency over a set period of time also means you get more accurate results and can better pinpoint any habitual buying behavior changes.
However, purchase frequency is different from another similar metric: ‘repeat purchase rate’. So watch out, because they’re easily mixed up.
Whilst purchase frequency works out the average number of purchases per customer, repeat purchase rate works out how many of your customers are repeat buyers. So although they’re not the same, the two go hand in hand when tracking how good you are at motivating customers to stay loyal and stick with your brand over competitors.
Product type affects purchase frequency
It’s also worth pointing out that different types of products will naturally have different purchase frequencies. For instance, common groceries like milk tend to have a weekly frequency rate, toothpaste a monthly frequency. Goods designed to be more long-lasting like furniture or home appliances will have a purchase frequency between 1-10 years. So keep this in mind when you’re thinking about your company’s own purchase frequency rate.
In other words, if you’re an online electronics retailer specializing in new TVs, you will probably have a much lower purchase frequency than let’s say, a bakery selling all sorts of cakes and other perishable baked goods.
How Is Purchase Frequency Calculated?
It’s actually pretty simple. Use this customer retention rate formula:
Whilst purchase frequency can be calculated over any given period of time, we recommend looking at the annual rate to get a broader view of your customers’ habitual buying behaviors. And no matter what period of time you use, just make sure the total number of customers used in the calculation is the number of ‘unique’ customers (ie. one single individual that’s bought something from you) – that way no duplicate purchases will skew the rate. Thankfully ecommerce stores using Shopify have a much easier time discovering how many unique customers they have, as you can identify them with an IP or physical address.
Reasons Why Measuring Purchase Frequency Is Helpful
In a nutshell, purchase frequency helps you understand when your customers buy and how often. Without this KPI, you will struggle to know how successful you are at engaging with loyal customers and persuading them to return to your store.
There are two main reasons why all online brands should calculate and keep track of their purchase frequency:
- It helps you keep track of customer retention. Loyal customers are the consumers who push your business forward the most. So many new companies focus too much time and money on acquiring new customers rather than targeting repeat shoppers. After all, repeat customers are the best, most loyal advocates who are more likely to refer you to others. What’s more, 82% of CEOs agree that customer retention is cheaper than customer acquisition too.
- It gives you a better understanding of customer habits. The more information you have about your customer, the better you become at selling them the products they need/want. With retention metrics in your arsenal, you can start to build marketing strategies around the ways your most loyal customers engage with your brand. After all, the longer your customers stick around, the more money they tend to spend with you.
Need a hand scaling up your customer retention? Once you’ve got the insights needed to build better marketing campaigns, tools like ours can help you create a better online CX – especially when the aim is to grow and retain subscribers. Our system includes tools like…
- Loyalty actions that automatically enable discounts, rewards, and free gifts to be added at shipment for repeat shoppers.
- Smart cancellation leaves no customer left behind. Anyone trying to cancel is given the option to skip shipment, gift their subscription, add discount codes, or swap products. Don’t let them leave you so easily.
- At-a-glance dashboard that allows you to view important analytics and keep an eye on how you’re doing behind the scenes. This is the place you’ll come to check out insights like churn rates.
Four Effective Ways Of Boosting Your Brand’s Purchase Frequency
It’s all well and good knowing your purchase frequency – but understanding what to do with the number is a whole other ball game. Remember: Action sees results. Here are the four most effective ways you can give your brand’s purchase frequency a well-needed boost.
1. Re-engage customers with stellar email campaigns
80% of SMBs rely on email marketing to keep customers engaged with their brand. Plus, with 4 billion daily email users, never underestimate the power of a killer email campaign – especially when it comes to customized customer retention. Creative email marketing is cheap, effective, and super convenient when personalizing messages to individual recipients.
2. Wield the power of a loyalty program
Treat your most loyal customers like VIPs with a loyalty program. 82% of consumers say getting frequent rewards from a worthwhile loyalty program hugely influences their decision of who to buy from. So whether it’s a points scheme, special offers, or discounts, money-saving incentives are a great way to keep customers on board. Think about your own spending habits for a second: if you’re racking up points from spending your hard-earned money with one brand, you’re unlikely to switch to a competitor who offers nothing, right?
3. Restock with products built for repeat purchases
Suppose that you’re an online bakeware brand – a customer might only buy the cooking tools needed to make a cake (ie. bowls, spatulas, etc) just once a year, whereas the consumable ingredients used in a recipe are likely to be repeat purchases. So anticipate customer needs and optimize your stock around the items that they’ll come back for again.
Our Upscribe reorder feature provides functionality and convenience in the reorder journey. The built-in button allows existing customers to purchase again without feeling like they’re locked into a commitment they don’t want or need. It’s the little things like this that matter to their online shopping experience.
4. Offer subscription-based purchasing
Offering subscriptions on repeat purchase products is another surefire way for getting customers to return. Get to know their buying habits and build subscription-based offers around the products more suited for repeat sales, such as consumables and items that need replacing more often.
The truth is, subscriptions offer ease and convenience. In fact, the subscription economy has seen a growth of more than 435% over the last 9 years. What’s more, 78% of all adults around the world are currently signed up for some kind of subscription service.
We’re masters in subscriptions. Schedule a demo and check out the various ways we help keep your users subscribed for longer – including building a portal that’s frictionless and easy to manage from their end. It’s all about treating your active subscribers like VIPs.
To sum up
Purchase frequency is a customer retention metric that works out the number of times your average customer buys something in a given period of time (ie. how much they like coming back to your store). As a KPI, it’s vital for staying aware of how loyal your customers are. With these kinds of insights in your arsenal, you can start to build effective marketing campaigns that boost your customer retention rate.
Some of the best methods include personalized email campaigns that retarget your most loyal customers and loyalty programs that offer incentives for picking you over competitors, especially on the products most suited for repeat sales and subscription-based services.
Schedule a demo with us today to discover how you can grow your business with out-of-the-box tools. Simply submit a few details and we’ll get back to you asap.