Purchase frequency: The biggest unlock for retention marketing
Whether you’re new to retention marketing or a pro, this metric is the most important thing for you to know when building out your retention marketing tactics and strategy in ecommerce.
Actually, there are two metrics but they are very much related. The first is purchase frequency and the follow-up metric to that is the time between purchases. Both of these will help you decide the type of tactics to try and can be used to find the absolute best times to follow up with customers.
Higher store profitability is built by increasing the value of each purchase by focusing on a higher average order value or by increasing the number of times that customer purchases by focusing on purchase frequency. The latter is what we are focusing on today.
Before we get into how to use these metrics, let’s first define them, and show you how to calculate them.
Purchase Frequency
Definition
Purchase frequency is a metric that shows you the average number of times a customer will purchase during a given time period.
Calculation
Number of Orders (365 days) / Number of Unique Customers (365 days)
It’s important to use the same time period for both orders and customers. The most common would be one year (365 days) but you can use any time period you want to analyze. It’s also important to use UNIQUE customers or you will not get an accurate number.
Time Between Purchases
Definition
The time between purchases shows you how often a typical customer goes before making another purchase.
Calculation
365 days / Purchase Frequency
Obviously, you need the previous calculation in order to use this one. To get a number you can use the number at the beginning of the equation that must match the time period you chose for your purchase frequency calculation.
Use Purchase Frequency to Choose Your Retention Strategy
How often your items are purchased (purchase frequency) plays a critical role in the type of retention strategies you choose. I like to use purchase frequency and the average value of items to place what you sell on the retention marketing matrix.
Understanding your purchase frequency will allow you to place your brand on either the left or right side of the matrix. If you are on the right side your standard retention tactics like post-purchase emails, loyalty programs, and VIP programs will be effective. However, if you are on the left side the retention tactics you choose are not as straight-forward.
On the left side of the retention matrix your strategy is going to be more focused on additional products you can add (peripherals or complimentary) as well as how you will leverage your existing customer base with something like a pre-purchase engagement loop or referral program.
If you don’t calculate your purchase frequency, you will never choose the appropriate retention marketing strategy. Use a purchase frequency of 2 as the divide of the matrix.
3 Ways to use Purchase Frequency and Time Between Purchases in your Retention Marketing
1. Increase Purchase Frequency with a Rewards Program
Once you have a benchmark of your purchase frequency, a rewards program is a fantastic way to increase it. Especially if you have placed your brand on the right side of the matrix above.
However, your standard 1 point for every dollar spent program won’t be nearly as motivating as a program that encourages members to earn points for non-purchasing actions. I wrote a previous post on how to structure your loyalty program that goes over the specifics of what I recommend. For the purpose of this article, lets just cover the basic strategy.
When you reward points for actions like sharing a blog post, following on social, or referring friends you are giving them value that they have to earn (which is stickier than a discount). When the customer works towards these added points they are actually helping you spread the word of your brand while also creating a switching barrier on their next purchase. They are more likely to come back to you to use those points instead of a competitor.
All those different ways to earn points is also giving them value they can apply to their next purchase. The faster you get a member to your first reward level, the quicker they will make a repeat purchase (and move closer to becoming advocates). Reaching that next purchase quicker will help you increase your purchase frequency as well as your repeat customer rate.
2. Use Time Between Purchases to Send Timely Repeat Purchase Emails
Every brand should have a post-purchase email flow, but when do you send that email that invites the customer back for another purchase? The answer is whenever you can do so in a value add way. The best value add is reaching out when the item they bought last is “out” or no longer useful.
If you sell coffee or shampoo that would be when the bottle or bag runs out. If you sell sneakers or bras it would be when those items are worn to the point of needing to be replaced. No matter what you sell, there is an ideal time to follow up. ITS NOT at the number of days it should last with your recommended use. Looking at you shampoo companies 👀 no one is actually rinsing and repeating.
The time to send these value add emails is at the average time between purchases. It gives you a read on how long customers are going before they decide to buy again. Will this give you a scientific calculation of when someone needs to replace or get more of what they bought… no. It does tell you how your customers are already behaving and allows you to work into what they do now rather than what you think they should do.
Luis from Shapermint does a great job explaining how he approaches post-purchase flows in this episode of The Exchange.
3. Knowing When to Send The Break-up Email
If you are not familiar with the break-up email ask one of your friends in sales how effective it can be. It is an email that you send as the last attempt to make contact and continue the sale. If they don’t respond, the deal was going to die anyway.
You can actually do something very similar in ecommerce marketing. You use this type of email to engage with and potentially create a steeper offer for people who have bought from you before but have now gone an abnormally long time without making a purchase.
You can give these customers one final offer you think they can’t refuse before stopping your outreach and marking them as disengaged (or removing them from your contact list). I have seen these offers take varying shapes. A buy one get one offer to get them back on track, an invite to talk to the founder to find out what they could have done better, a free gift with the next order.
The important thing is that it needs to actually be compelling. Offering 15% off in your break up email that someone can get filling in the pop-up on your site is NOT COMPELLING.
Once you know your average time between purchases, you can start to set these break up emails to go out based on how long past that they have gone without a purchase. If you have a sophisticated set up, I recommend setting this at one standard deviation past your average. If you are not a math person just eyeball it. The important thing is that you are not making these types of offers unless you think the customer is truly not coming back.
The Key Takeaways
The above was a lot, I get it! That is why I always include the key takeaways for you to grab at a glimpse.
Purchase frequency is the most important metric in retention marketing tactics
Time between purchases will allow you to be much more methodical with your retention email strategy
Use purchase frequency and item value to place your brand on the retention marketing matrix
A rewards program that awards for more than just purchases is super effective