Repeat purchase ratio

What is repeat purchase ratio?

Repeat Purchase Rate indicates the percentage of a company’s clients who make multiple purchases. By returning at a future date to conduct another transaction, both the consumer and the transaction are classified as repeat purchases. The repeat purchase rate, also known as the repeat customer rate, measures a company’s ability to retain previous clients.

Retailers and eCommerce sellers may determine the likelihood of their consumer base coming back and making another purchase based on the repeat buy rate. Multiple purchases by a consumer are seen as a favorable indicator.

Although the statistic is not relevant to firms in all sectors, such as those selling items with extended life spans and those with business models based solely on a single purchase, it is helpful for measuring consumer loyalty to a particular brand or vendor. As a result of the rapid consumption of a large number of things offered, the statistic is especially popular in the eCommerce business.

When it comes to SaaS businesses, repeat purchases can be represented better by the retention rate metric. It is used to gauge client loyalty and forecast recurring income for a business. However, retention rates provide the need for longer-term statistics, and factors such as multi-year client commitments often diminish the efficacy of the measurement. The rate of repeat purchases is often seen as a marketing indicator that informs short-term modifications.

Therefore, in the SaaS industry, the repeating customers are often the users who come back to make a payment for continuing the service or access to a platform.

There is no one solution to the question of what a good repeat purchase percentage is. Multiple variables influence a company’s Repeat Customer Rate. It is essential to find an equilibrium between supporting repeat purchases and attracting new clients.

Boosting business with existing clients can be done in several ways, such as by providing top-notch customer services, collecting and implementing feedback, introducing a loyalty program, etc.

Repeat purchase ratio formula

In order to calculate the repeat purchase ratio, a SaaS business can use the formula below:

Let’s understand it in more detail.

How to measure repeat purchase ratio

Calculating the percentage of repeat customers in a SaaS firm is simple and can be broken down into four phases.

• Phase one – Determine the number of users that made several purchases, opted for add-ons and upgrades, or simply renewed their platform membership.
• Phase two – Compute the total number of clients or users of the platform.
• Phase three – Divide the number of returning users by the total amount of clients.
• Phase four – Since the ratio is often expressed in percentages, multiply by a hundred.

Remember that a repeat customer is a client who has made many purchases (with add-ons and upgrades) or renewed their membership more than once on the SaaS platform, while the overall number of clients includes both one-time and repeat users. The total number of users only includes the paying clients, not the ones on a free trial or freemium module.

In the absence of other variables, the greater percentage of repeat purchases translates to greater business revenues and greater customer satisfaction.

Let’s understand the calculations with an example.

Repeat purchase ratio example

Say a SaaS business named XYZ provides a CRM platform. In the month of July, it had 9,000 subscribers. In August, 8,000 subscribers decided to renew their membership and continue the services. By the end of August, the total number of users using the CRM platform was 10,000.

We can calculate the Repeat Purchase Ratio with the formula below: Repeat Purchase Ratio (In percentage) = Number of Repeat Purchase Customers / Total Number of Customers x 100

Now, for XYZ:
Total paying users in August = 10,000
Number of repeating users = 8,000

Therefore,
Repeat Purchase Ratio in percentage = 8,000/10,000 x 100 = 80%

When calculating the Repeat Customer Rate, businesses may select to concentrate on certain time periods. For example, how many clients who joined this week, month or quarter also made a transaction inside the same time period?

This ratio is very useful for assessing the quality of your whole user experience and determining how much benefit the users find in the product.