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Strategy

Your Guide to Increasing Purchase Frequency

There are many reasons why increasing your customers’ purchase frequency is so important. Let's detail them and show you how to excel

Matt Duczeminski
September 26 2018

Look, it’s pretty simple:

The more often your customers open their wallets and hand over their hard-earned cash to you, the better off your business will be. Sure, the amount of money they spend during each transaction is important too. But, typically, before you can get them comfortable with spending more, you first need to get them comfortable with spending more often.

Increasing your purchase frequency should be one of your main business goals from the get-go. In doing so, you’ll end up creating even more opportunities to sell – and sell more – to your repeat customers.

In this article, we’ll take a look at the important metrics to consider relating to purchase frequency, as well as discuss some of the most effective and efficient ways of increasing the purchase frequency of your individual customers.

Before we dive in, though, let’s dig into the many reasons increasing purchase frequency can benefit your business.

Why Is Increasing Purchasing Frequency So Important?

It’s clearly better to make ten sales than to make five (given that they’re all the same order value). And, of course, it’s better to make two separate sales to the same customer than it is to only make an initial sale and nothing more.

But just how much better it is to get customers to make subsequent purchases may be quite surprising. According to data collected by Adobe, subsequent purchases made after an initial purchase can account for an astounding 41% of a company’s overall revenues. This number is even more surprising when you consider that repeat customers, on average, account for a mere 8% of a given company’s customer base.

A given company typically has a better chance of selling to those who have already made a purchase in the past that it does of acquiring a new customer. What’s more, this probability only increases as a customer makes additional purchases over time. For example, the probability of a customer making their fifth purchase from a brand (after having made their fourth purchase) can be more than two times higher than the probability of them making a second purchase after having made an initial one.

This increased probability – a byproduct of the customer’s increase in satisfaction and trust in the brand – turn leads to an increase in the effectiveness and efficiency of marketing initiatives on the company’s part. Basically, the more likely an individual is to make a subsequent purchase, the less effort it will take the marketing and sales teams to make this next sale happen.

Another point worth noting is that a long-lived sense of trust and satisfaction on the customer’s part increases their propensity to spread the good word about the company.

(Source)

As shown above, the customer most willing to write a product review – by an overwhelming margin – is the one who had an overall positive experience with the company. Again, the more frequently your customers return, the more opportunities you’ll have to provide an excellent experience to them – making them more and more likely to refer your brand to others.

 

Furthermore, getting customers to continue engaging with and purchasing from your company provides additional opportunities for you to truly get to know as much as you can about them – from their shopping and purchasing habits to their overall needs and desires. For one thing, you’ll be able to collect a ton of information on these individuals based solely on the quality of their engagements with your brand. Additionally, the more invested and engaged a customer is, the more likely they are to want to provide feedback (since this will, in turn, enhance their experience with your brand moving forward).

Again, while increasing your customers’ purchase frequency can benefit your company in some rather obvious ways, doing so also has a few more hidden benefits that can positively affect your organization in ways that are much more far-reaching.

Purchase Frequency and Related Metrics

Before you even begin thinking about increasing your purchase frequency, it’s important that you have a true understanding of what that actually means. Rather than looking to “increase the amount of times a customer makes a purchase” in an arbitrary manner, you want to be able to nail down your purchase frequency – as well as other related metrics – to a specific numerical value.

Purchase Frequency

Calculate purchase frequency using the following formula:

(# of transactions made over a specific period of time) / (# of unique customers in that same period of time)

The two key terms to pay attention to are “unique customers” and “specific period of time.”

You want to be sure to only count each customer once – whether they made one or multiple purchases. If a high purchase frequency is the goal, then a smaller number of unique customers is actually better.

The other term – “a specific period of time – is important as well, as it provides context to your purchase frequency numbers. Without looking at a specific time frame, you wouldn’t be able to tell what a given purchase frequency actually means. That is, you wouldn’t be able to distinguish between a customer who made two purchases within one week and one who made two purchases within two years.

As we’ll get to in a bit, what’s considered a “good” purchase frequency varies from industry to industry.

Repeat Purchase Rate

While purchase frequency determines how many of your total transactions were made by repeat customers, repeat purchase rate determines what percentage of your total customer base is made up of repeat customers.

The formula for repeat purchase rate is:

(# of customers who made more than one purchase within a specific period of time) / (Total # of customers who made one or more purchases within that period of time)

 Repeat purchase rate is important because it provides a ballpark idea of the probability of a new customer becoming a long-time customer. For example, if, out of 1,000 customers, 200 have made repeat purchases, this would mean your repeat purchase rate is 20% – meaning you generally have a 20% chance of making a subsequent sale to a first-time customer.

(As we mentioned earlier, this probability typically increases after subsequent purchases – inherently making future marketing initiatives more efficient and cost-effective.)

Time Between Purchases

Time between purchases is an important metric to track, as it gives you an idea of how often (on average) your customers make purchases from your company.

Here’s how you calculate time before purchases:

(Timespan in days) / (Purchase frequency)

Regarding time span, you’ll want to use a full year’s worth of data (365 days), as this will account for sales peaks and valleys that arise due to seasonal changes, holidays, and other time-related factors.

One thing to note: your goal shouldn’t be to decrease it in an underhanded manner. You don’t want to lower the quality of your product or anything like that just to get your customers to purchase from you more often. Rather, you want to use time between purchases to gain a decent understanding of when a given customer is likely to return – and to present them with marketing materials just before they reach out to you, in the hopes of reaching them at the exact right moment.

Once you’ve determined your average customers’ purchase frequency, repeat purchase rate, and time between purchases, you’ll want to compare these numbers to your industry’s averages – and prepare to take action.

Three Ways to Keep Your Customers Engaged and Increase Purchase Frequency

While there are certainly any number of ways to get your customers to buy from your company more often, we’re going to discuss three of the most effective and efficient ways of doing so:

  • Staying in touch with them
  • Providing additional value
  • Incentivizing consistency

Let’s take a closer look at how to make each of these things happen.

Use Omnichannel Marketing to Stay in Touch and Top-of-Mind

We’ve talked before about the importance of omnichannel marketing in 2018 and beyond.

When it comes to increasing purchase frequency, a robust approach to omnichannel marketing is huge. Case in point, Fluent discovered that 62% of customers who engage with a brand via ten or more channels make more purchases per week than those who engage with less than ten channels; this number dips to about 40% when looking at customers who engage with up to four of a brand’s marketing channels.

One of the keys to a successful approach to omnichannel marketing is personalization across the board. You need to be present where your customers want you to be, when they want you to be there – and to provide the exact value they’re looking to receive at the current moment. To do all this, you’ll need to dig into everything you already know about a specific customer: their preferred marketing channel(s), the products they’ve purchased from your company, their average time between purchases…anything at all that will allow you to engage further with them in a meaningful way that provides value to them.

Using the above information, you can formulate a personalized marketing plan that defines:

  • When you’ll reach out to them
  • How you’ll reach out to them
  • What you’ll offer them when you reach out to them

In doing so, you’ll not only increase the probability of them making a subsequent purchase – you’ll also gain a bit more control over the timing of these additional purchases, as well.

Use Supplemental Offers to Provide Additional Value

As we’ve mentioned, frequent purchases over a short period of time may or may not be all that common for the company depending on the industry it operates in. For example, the average consumer will almost certainly purchase new sneakers more frequently than they purchase a new vehicle. And that same individual will probably purchase multiple toothbrushes within the span of time it takes to wear out a single pair of sneakers.

While, of course, car companies make much more money off of a single sale than toothbrush companies, we want to focus on how companies in any industry can use supplemental products and services as leverage to increase their purchase frequency. Using an example from my personal life, I recently purchased a used 2017 Subaru Legacy this past April. Since then, I’ve received a number of offers from Subaru via email, such as the following:

 

Obviously, I’m no longer in the market for another automobile (and hopefully won’t be for quite some time). Knowing this, Subaru has been reaching out from time to time not with information about the newest cars in stock, but with supplemental offers and deals that may enhance my experience with my current car. If I were to take the company up on any of these offers, I’d certainly provide Subaru with additional revenue much sooner than I had originally anticipated.

It’s also worth noting that I’m not exactly a “car guy.” I’ve never had much interest in making changes or adding anything new to my automobiles once they’re off the lot. But, in all honesty, these emails have planted at least the smallest of seeds in my mind in terms of making a few modifications to my car over the year. At the very least, the people at Subaru have found a way to keep me engaged with the company months after my initial purchase – which will likely play into my decision to purchase my next vehicle (hopefully many, many years from now…).

Now, another tactic you might choose to implement is the use of loss leaders to generate more frequent repeat purchases. A loss leader is a product that is sold for very little (if any) profit, with the idea that the company will more than make up for the loss by selling other supplemental products more frequently (and for much higher profits).

Examples of loss leaders include:

  • Manual razors
  • Printers
  • Video game systems

Each of these products essentially require the use of a supplemental product (i.e., razor blades, ink cartridges, and video games) in order for the consumer to actually use the initial product. As anyone who’s ever shaved or owned a printer knows, the supplemental products aren’t exactly cheap – and need to be replaced relatively often. If you’re not exactly the “gaming” type…well, let’s just say that one $60 game is never enough.

At any rate, you should always look for ways to supplement your customers’ experiences with your brand, as this will provide additional opportunities for you to sell to them that wouldn’t have existed had you “left well enough alone.” The more you have to offer your customers, the more likely they are to engage more often with your brand.

Incentivize More Frequent Purchases

You also may want to consider incentivizing frequent purchases through the implementation of a loyalty program or other such gamification strategy. As we’ve spoken about before, loyalty programs can keep your current customers engaged and coming back to your brand on a consistent basis. Taking things a step further, done well, loyalty programs can also get your current customers to come back even more frequently than they already do.

Without a doubt, the king of increasing purchase frequency via loyalty program is the coffee giant, Starbucks. Again, let’s get personal. Here’s the “challenge” I recently undertook from the coffee supplier:

Basically, if I visit Starbucks ten times in the next seven days, I’ll get 175 bonus stars (125 stars earns you a free food or drink item, so finishing this challenge will get me one free item and get me closer toward another one). If Starbucks can get me to make what comes out to 1.4 purchases per day over the next ten days, it’ll certainly be worth it for the company to throw me a freebie or two.

Another way that Starbucks ensures its loyal customers at least maintain their purchase frequency is by adding scarcity to the mix. No, there’s no shortage of coffee, but those bonus stars expire if left unused for a certain period of time.

 

(Source)

It’s pretty simple: If I had collected about 120 stars and knew I had one more day to get up to 125 before my stars reset to zero, you can be certain I’d be heading to my local coffee shop – even if I hadn’t originally planned on doing so that day.

One last thing to mention regarding loyalty programs and gamification is to not underestimate the power of offering “badges” or “awards” to customers who accomplish certain “tasks.” While these rather superfluous rewards should be secondary to rewards that actually provide value to your frequent customers, they may still add that extra “oomph” that gets a given individual to engage more frequently with your brand than they had in the past.

Wrap Up

As we wrap up, here, it’s important to reiterate that you want to increase your customers’ purchase frequency not drastically, but rather ever-so-slightly. Again, the goal is to make them comfortable with increasing the amount of business they do with your company.

You definitely don’t want to bombard your customers with excess marketing content and offers, promote products or services that are unrelated to their purchase history, or require them to completely change their purchasing habits in exchange for an incentive or reward. At best, these forceful tactics will be ineffective; at worst, they might backfire and cause certain customers to cease doing business with your company altogether.

The trick is to determine the most effective way to get your individual customers to push their own spending boundaries little by little – almost to the point where they don’t even notice. As long as the value you provide outweighs their increased spending in their eyes, they’ll be more than happy to pay a little extra from time to time.

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