EPISODE 10: Repeat Purchase Rates

7 September 2020

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Repeat Purchase Rates

Episode 10.

When it comes to increasing your sales, finding a customer is only part of it. Getting that customer to buy more frequently is what shifts a business from constantly hunting new customers, to having the time to properly serve their most valuable customers. 

In this episode we're covering the Repeat Purchase Rate. Using the data in your Xero account, you can use this measure the effectiveness of your marketing campaigns and get customers through the door faster.

Episode Transcript

Riann Umaga-Marshall: Hi, I'm Riann Umaga-Marshall. 

Hamish Mexted: And I'm Hamish Mexted. 

Riann Umaga-Marshall: And welcome to Business Made Easy. When it comes to increasing your sales finding a customer's only part of it. Getting that customer to buy more frequently is what shifts a business from constantly hunting new customers to having the time to properly serve their most valuable customers. 

Now lifting how often your customers buy from you is more than clever marketing or sales tactics. Firstly, it's raw data, followed by trial and error, and then more data. 

Hamish Mexted: Once we know what your current data is and how you're looking today, you can try new things. You can try new bounce back offers, you can try email campaigns, or loyalty programs. You could even look at something like next job recommendations to get customers coming back to your shop more and more frequently. But without knowing where you are today, you can't measure the success of these new promotions. 

Riann Umaga-Marshall: Over the next couple of episodes, we're covering three things: your repeat purchase rate, purchase frequency, and time between purchases. Now these all sound a little the same, but they do measure slightly different things. Once you've got that sorted, you'll be able to measure the impact of the most successful strategies we've seen to increase purchase frequency in your business. 

Hamish Mexted: So, to recap before we go on too much, the repeat purchase rate, the purchase frequency, and the time between purchases all look very similar, but they do measure really subtly different things. Briefly, the repeat purchase rate measures the percentage of customers who buy from you more than once.

So, if a customer only comes back to you one time, it means they often don't value your service. And this applies from a high frequency shop like a corner dairy, right through to a business where you might not go back to that often like a roofing company, for example. 

So, at the end of the day the repeat purchase rate is important no matter what industry you're in. Then you've got your purchase frequency, which focuses on the number of times your repeat customers buy from you. So, if that's dropping, you might be hitting your repeat customers. And then finally, we've got the time between purchases. This is best used to target the timing of your various marketing campaigns. With this data you can clearly see the impact on your bottom line from the various initiatives you roll out within your business. 

Riann Umaga-Marshall: Now some of the most successful new initiatives we've seen include a law firm educating their customers during the house buying process, a retail firm with a game to get customers back in the store, and a mechanic creating a loyalty program. All that comes down to is showing your customers the value that you provide, so that they're more likely to come back and spend again. 

Hamish Mexted: For more information, keep listening to the rest of this podcast and check out episode 11, which is coming out later this week, but more than anything, download the worksheet that comes along with this episode. The worksheet will help you calculate your own numbers for your particular business, and then with those numbers you can benchmark yourself today against how you perform in the future. For more detail, today we're going to cover the repeat purchase rate, and then the next episode we'll look at the other two calculations. 

Riann Umaga-Marshall: So, that first metric is your repeat purchase rate. This is working out the percentage of your customer base who buys more than once from you in each period. To calculate it, take the number of people who have bought more than once from you in a period, say a year, and divide that by the total number of customers you've had. 

Now this does come down to having the data collected when your customers are spending, so it's easy for you to work out those numbers. So, getting those systems in place is also an important part of this. 

Hamish Mexted: So, if you're running Xero as your accounting software, there's some reports you can pull out of there which are going to help you calculate your repeat purchase rate for your business. So, if you have all of your sales running through a particular code, you'd pull up the total transactions that run through the sale code, you'd then export that data to Excel, and by modifying it around you're able to get the list of customers who have bought once from you, but also the list of customers who have bought more than once. 

And with that data you can calculate exactly where your repeat purchase rate is sitting for your business. Now that might be hard if you have a lot of customers who come through infrequently, but you can get a lot of data for example from your FPOS terminal or from your point of sales terminal, which may help you work out the repeat purchase rates for your particular situation. 

Riann Umaga-Marshall: Running loyalty programs also helps with that, because you're able to collect your clients data and they'll use those cards to provide more information about when they're spending the money, so you've got that on hand ready to use. If people are generally buying from you once only, it can indicate that you're either not providing an exceptional product or service, or at other times it can suggest that your follow up marketing is ineffective. 

Hamish Mexted: Often though a businesses product or service can be better than what the business owner themselves think it is. It may be that they're not articulating the value that they give their customers the right way, they're not delivering the right sales message, and they're not quite selling exactly what benefit it is the customer gets from dealing with the business. 

So, by tightening these kinds of things up, you can have really significant impacts on your repeat purchase rates. So, put another way, if you tell your customer everything you do for them, then they're going to value you more, and that more than anything is going to get them back in the door to visit your business again. 

Riann Umaga-Marshall: Now you may have heard data or Excel spreadsheets mentioned a couple of times through this podcast, if those things freak you out, get in touch with us and we can help you work out your numbers or the best way for you to track your data so you can use these to improve your business. 

Hamish Mexted: But once you have got it worked out, there really is no magic number that you need to aim for, because every industry, and then every business within every industry is different. The main thing is to work out where you sit today and use that as the benchmark to constantly improve against. 

Riann Umaga-Marshall: Now you can look at it and say you only deal with your customers when they need you. Say you're a roofing business, people are only go to buy from you when they need a new roof redone. But are there other things that you could sell them? Gutter guard or biannual inspection to get people coming back more often. 

Hamish Mexted: Well if you measure it in terms of the repeat referral rate, rather than the repeat purchase rate, you can get as good a gauge on what your customer service is or how much people value your business as you can from using the purchase rate itself. So, there's a lot of different tweaks that you can make to get data that's relevant and accurate for your business. 

Riann Umaga-Marshall: Now even us as an example, people normally come to us once a year to get there taxes done, but there are other things that people can buy from us if we're able to show them the value that we can provide. 

Hamish Mexted: So, for an accountant we can measure things annually but we can also look at how often customers are coming in for business coaching, or for personal financial planning, or how we get them to interact with the lawyers we deal with. So, there's a whole lot of things we can measure and the more we measure, the more we improve, because if we can benchmark ourselves against how we were performing last month or last year, we know whether we're on track and we know whether the initiatives we're rolling out are giving value or not. 

To recap though, today we've covered the repeat purchase rate. In the next episode we're going to cover purchase frequency and time between purchase. Because with these different metrics you can really get a good gauge on how effective the different marketing techniques are that you're rolling out in your business, and how successful the various promotions you run are. 

Riann Umaga-Marshall: That's all we've got time for today. For more on what we've covered, check out our website convexaccounting.co.nz/podcasts and select episode 10. 

Hamish Mexted: In our next podcast, as we mentioned, we're covering the other two calculations. But in the meantime, jump on our website, download the worksheet that goes with this episode and from there start to calculate some of the numbers that apply for your particular business. Thanks for tuning in. 


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for more help feel free to reach out. Get in touch with Hamish Mexted


for more help feel free to reach out. Get in touch with Riann Umaga-Marshall