"Purchase frequency is the number of times an average customer buys a good or service from a single seller in a given period."
- The Financial Dictionary
In ecommerce, acquiring customers is only one piece of a big pie. It’s equally important that you understand and track how receptive your existing customers are to your brand, and find new ways to grow the profitability of your business.
In terms of growing profitability, you’ve got two main options: you can focus on getting people to buy more during each visit (average order value) or you can get them to shop with you more often (purchase frequency).
How to calculate Purchase Frequency (PF)
When you’re searching for ways to grow profits, a good place to look for inspiration is your retention metrics. Before you try anything new, you want to know how to calculate how well you’re currently doing. This will allow you to benchmark the results of your new retention efforts, and with metrics like Purchase Frequency (PF), this analysis can lead to extremely valuable insights.
Let’s learn how to calculate some metrics that will give you a better understanding of how and why you need to increase your PF.
Calculating Repeat Purchase Rate (RPR)
The repeat purchase rate is a calculation that shows you the percentage of your current customer base that has purchased at least a second time. This metric is influenced by your customer retention efforts and is a good indicator of the value you are providing your customers.
A good repeat purchase rate is dependent on the industry: if you sell high price, long-lasting items, don’t expect your RPR to be as high as a brand that sells low-cost consumables. Having a high RPR indicates that you are providing a lot of value to your customers when compared to the price of your products.
Even if you do sell expensive products, your goal is to still have a reasonable RPR to indicate that your customers find value in your brand. With that calculated, you’re one step closer to your Purchase Frequency.
Calculating Purchase Frequency (PF)
Purchase Frequency is a metric that shows the average number of times a customer makes a purchase within a set time frame. This provides you with insight on how to structure your marketing to best suit the buying behaviour of your audience. While knowing the number of purchases is useful, it is also important to actually do something with that number.
PF can be utilized in different ways by changing the time frame. Generally, you should be looking at data during a one year period to have a broad view of consumer buying habits (like holiday and sale shopping). No matter what time frame you choose, it is important that you include “unique” purchasers in order to avoid including duplicate purchases in your calculation.
So now you know what percentage of your customers come back, and how often they make purchases within a given time period. The icing on the cake is taking those metrics and using them as a benchmark for influencing how often those customers come back to make another purchase.
Calculating Time Between Purchases (TBP)
Time Between Purchases is exactly that metric that shows you how often a typical customer goes before making a repeat purchase. This is a good stat to know because it allows you to tailor email marketing campaigns to their behaviours. If you know the average customer takes 7 weeks between their purchases, you can start sending promotions during weeks 5 or 6 to get them back a little sooner than they normally would.
Time between purchases will vary significantly between industries. Like purchase frequency, if you are selling furniture you will probably see longer times between purchases than the average coffee shop. The best practice is to try and find another merchant in your industry that you can compare to. If you can’t find a comparable merchant, just use your current frequency and always try to improve from there.
Time between purchases and repeat purchase rate are critical metrics on your road to increasing purchase frequency, which means that they shouldn’t be taken lightly. Do not restrict yourselves to calculating these metrics on an annual time frame. Feel free to play around with them and test them with different customer segments. But most importantly, do not forget to track, track, track!
3 Tips to increase purchase frequency
Now that we know how to calculate purchase frequency and what it means for your store, we can begin to look at ways to increase it. The goal here is to motivate your existing customer base to buy more often.
1. Create retention email campaigns
Email marketing is one of the most effective marketing tools that an online store has at their disposal. Email marketing works wonders for increasing your repeat purchase rate. A classic example of email marketing in action is sending a “we miss you” winback email. This is an email you send to a customer who hasn’t made a purchase in a while and who might be moving outside of your normal purchase frequency average.
Re-engage customers who haven't purchased in a while with "We Miss You" winback emails.
A winback email works best if you have information about their last purchase. This way you can make a new recommendation based on what they like. This strategy is also more effective if you provide an incentive with the email. This ties into personalization and delighting customers, and overall provides a one-of-a-kind customer experience.
You can also use email marketing to increase purchase frequency. The trick is to occasionally email offers that are relevant to that particular customer. If there’s a new product in the collection they purchased from previously, show them the new selection that just came in.
The more personalized an email is, the better the conversion rates
Urgency is another amazing tactic you can and should utilize in your email marketing. Creating a sense of urgency nudges your customers to buy your product more frequently. One way you can create a sense of urgency is by using lines like: “While quantities last” “Limited edition item”, or “One day sale!”. You want to encourage that customer to buy now! But, be leery of doing this too often, as it can cause a sort of “discount fatigue” where your products appear to have less value.
Email marketing is a fantastic way of getting customers to know you and vice versa, so take advantage of this channel. Track open and conversion rates to see if what you are putting out is actually effective, and iterate on the next one to see how you can improve.
2. Start a rewards program
A loyalty program can actually help with both average order value and purchase frequency. The enrollment in a loyalty program encourages a customer to shop with you again (increasing repeat purchase rate) instead of choosing a competitor. Once a shopper is enrolled you can use points to motivate them to shop more frequently (increasing purchase frequency).
Increase your purchase frequency by encouraging loyal customers to spend points to redeem rewards.
You can also team up your email marketing and loyalty program to increase purchase frequency. You can use points in your emails as an incentive to get customers to return. Show them the points balance they have, or even what they can spend those points on. You could also give extra points on certain days to encourage customers to buy now.
A loyalty program encourages shoppers to return to your store by establishing a switching barrier. When a shopper has points it is more difficult to choose a competitor than forgo those points. Once a shopper is hooked on your brand through points, you can start using points to motivate other profitable behavior like referrals.
3. Introduce Elements of Gamification
Do you remember those moments when you’re having fun collecting points, getting ahead of your friends on a leaderboard, and feeling successful in accomplishing something? That’s gamification. Gamification is the addition of game mechanics in situations that are not particularly tied to gaming.
Ecommerce + Game Mechanics = Loyal Customers
Mobile apps have made gamification tactics famous with the use of badges, leaderboards, and ranks. These tactics can be replicated to increase your business’ purchase frequency.
Badges and ranks are two gamification elements that can be used together to create a culture where each shopper is striving to be the best. While your customers are journeying through your product, you can delight them with points and perks which increases their customer experience.
The Purchase Frequency TL;DR
Now you have the right tools and tips to increase your purchase frequency! Your next steps are executing these these tips:
- Calculate your RPR, PF, and TBP to create a benchmark
- Send retention-focused “winback” emails
- Start a rewards program to hook customers into your brands ecosystem
- Use gamification to motivate continuous engagement
- Track how you’re doing compared to your own and industry benchmarks