A returning customer rate is measured by how many times a customer purchases something from your ecommerce store.
Generally, a customer who purchases multiple items during separate website sessions is considered a returning (or repeating) customer. Even if someone buys a product, and then doesn’t purchase again until the following year, they’re still considered a returning customer.
Why is it important to measure your returning customer rate?
Measuring returning customer rates can provide insight into how satisfied customers are with your products. It also indicates a degree of loyalty to your brand, which can help you understand how well your marketing campaigns are going.
How to measure your customer return rate?
Returning customer rates can be measured using the following formula:
(Number of returning customers / Total number of customers) x 100%
This will give you the percentage of customers who have made multiple purchases from your business. For example, if you have 100 total customers and 50 of them have made at least one additional purchase, your returning customer rate would be 50%.
To calculate this, you’ll need to track the number of unique customers who’ve made purchases from your business. You can use customer data from your sales records, customer database, or ecommerce platform.
What is a good returning customer rate?
Every industry has different standards for returning customer rates, but the average is around 28%. Here’s a breakdown of some returning customer rates:
Cosmetics - 2.9%
Apparel - 26%
Pet products - 23.5%
Coffee - 29.6%
CBD - 36.2%
Keep in mind that the returning customer rate can be a useful metric for understanding the loyalty of your customer base and the effectiveness of your retention efforts, but it’s only one aspect of customer behaviour. It’s important to track other metrics such as customer lifetime value and customer acquisition cost, too.
What’s a bad returning customer rate?
If your returning customer rate is too high - generally over 50% - it might indicate you’re not doing enough to drive customer acquisition. Or, on a positive note, perhaps you’ve got a cohort of loyal customers who make up the majority of sales.
If your returning customer rate is too low, it could indicate that you aren’t meeting your customer’s needs or there’s nothing compelling enough to make them want to buy from you again. Here are a couple of guides if you’re struggling to drum up new sales:
What’s the difference between returning customer rate and customer retention rate?
You may have heard the term ‘customer retention rate’. It’s basically the same as a returning customer rate. However, ‘returning customers’ are often used for brands that sell physical products online. In other words, customers can make one-off purchases from your store. ‘Retention’ is often used in software or brands that sell subscription-based products. These companies have customers who sign up on a monthly or annual basis. Their goal is to retain them over longer periods of time.