What are repeat customers and why are they important?

Repeat customers can be the lifeblood of any business, turning one-time purchases into a reliable revenue stream. They are shoppers who choose to return time and again–whether because they find consistent value in your product or service or because they’ve formed an emotional connection with your brand.

What do repeat customers look like?

Repeat customers consistently choose to make purchases from a business over time. That said, there are a plethora of reasons why they return, and knowing what makes them tick can help you meet their needs more effectively.

Beyond purchase history, enterprises can identify repeat customers by their:

• Engagement with your brand on social media. Repeat customers often follow and actively interact with your brand's social media profiles, showing an interest in your brand's activities, promotions, and content.

• Willingness to share their personal information. One survey found that 44% of executives say that customers sharing their personal information, such as an email address, indicates their loyalty.¹

• Time spent browsing your website. Even without the immediate intention to buy, repeat customers will likely spend significant time on your brand’s website. They may visit it directly or through navigational search queries, bypassing generic searches.

• Involvement in third-party communities. They frequently participate in external communities related to your brand’s industry, where they may share experiences, recommend products, and seek advice.

• Interest in your brand’s culture. These customers may be keenly interested in your brand’s values, mission, and culture.

• Word-of-mouth promotion. 60% of loyal customers share their favorite brand with their social circles.²

Why are repeat customers important?

From increased revenue to cheaper customer acquisition costs, here are some top ways repeat customers can positively impact a company’s financial health.

They spend more

Repeat customers are not just loyal – they’re also more valuable in terms of spending. This is partly due to the trust and familiarity they've built with a brand over time, making them more confident in making larger purchases.

This not only helps boost immediate sales and customer lifetime values (CLV) but also may allow your business to benefit from greater stability and predictability in the long run.

They’re easier to sell to

Repeat customers represent a unique segment significantly more receptive to promotions, cross-selling, and upselling efforts. The success rate of selling to a repeat customer hovers between 60% and 70% compared to a modest 5% to 20% for new customers.³

This trend may be rooted in the psychological principle of trust and familiarity. Once a customer associates value with a brand, they are more likely to explore additional products and services from that brand. They may also perceive recommendations as personalized service rather than aggressive sales tactics.

To effectively leverage this receptiveness, enterprises should focus on leveraging repeat customer insights to tailor their marketing efforts – for example, highlighting products or services that complement previous purchases.

Retaining is cheaper than acquiring them

Industry studies consistently show that acquiring a new customer can be five to 25 times more expensive than retaining an existing one.⁴

This discrepancy arises because the latter does not require the initial outlay for attraction and education that new customers do. Instead, enterprises can focus on nurturing existing relationships via customer satisfaction and loyalty programs, which typically involve less financial investment.

How to calculate a repeat purchase ratio

The repeat purchase ratio is an essential metric for enterprises aiming to gauge customer loyalty and the effectiveness of their retention strategies. It’s calculated by dividing the number of returning customers (RC) by the total number of customers (TC) over the same period. This results in the formula: repeat purchase ratio = RC/TC.

Follow these steps:

1. Define the time period. This could be a month, quarter, or year, depending on your business cycle and goals.
2. Identify returning customers (RC). Count the number of customers who have made more than one purchase within the period.
3. Calculate total customers (TC). Determine the number of unique customers who have purchased within the same period. Include both new and returning customers.
4. Apply the formula. Divide the number of returning customers (RC) by the total number of customers (TC) to find your repeat purchase ratio.

How to encourage more repeat customers

Harnessing the power of customer data insights is a key step for turning occasional buyers into loyal patrons. Deciphering data from point of sale (POS) systems, loyalty programs, and other analytics tools allows businesses to fine-tune their offerings, personalize customer interactions, and design loyalty programs that truly resonate.

Point of sale information

POS information on each transaction uncovers insights into what customers purchase, how frequently they shop, and how long they have been customers. On a macro scale, you can also identify purchasing trends, popular products, and customer segments.

This allows you to tailor marketing strategies, update stocking strategies, and deliver better product recommendations – all of which drive repeat business. You can also recognize and reward loyal customers, enhancing customer relationships.

Some enterprises take this further by integrating their POS systems with customer relationship management (CRM) tools, facilitating more personalized communication and offers.

Take a bookstore, for example. If repeat customer insights reveal a shopper’s affinity for science fiction, the bookstore could send them personalized recommendations when new titles in that genre arrive, enhancing the customer experience and encouraging repeat visits.

Customer loyalty programs

Customer loyalty programs not only reward repeat shoppers for their continued patronage but also encourage increased spending and frequent visits.

While the average U.S. household participates in 14.8 customer loyalty programs, shoppers only engage with 6.7.³ To ensure yours stand out, keep these tips and best practices in mind:

• Personalize the program. Tailor rewards and communications based on customer preferences and purchase history.

• Opt for simplicity and clarity. Keep the program details simple.

• Leverage digital tools. Apps and digital wallets can make participation more seamless and accessible. They can also provide valuable data for personalizing offers.

Learn more about the psychology of rewards.

Other data insights

While point-of-sale (POS) data offers invaluable insights into customer transactions, integrating it with other data sources can provide a more holistic view of the customer journey before a purchase is made – or even if a purchase is not made at all.

Some sources of this shopper data include:

• Web analytics. Understanding how customers navigate your website can reveal what interests them, guiding content and product placement strategies.

• Abandoned cart data. Analyzing why customers abandon their carts can help identify barriers to purchase, such as pricing or checkout process issues.

• Social media interactions. Feedback and engagement on social media offer details about customer preferences and sentiment towards your brand.

To effectively leverage consumer and shopper insights, consider integrating them into a unified customer data platform. This allows for a comprehensive analysis of customer behavior across different touchpoints, enabling personalized marketing strategies, improved customer service, and optimized product offerings.

How to increase repeat customers

Personalization is a major aspect of improving customer retention and encouraging repeat purchases. Keep these strategies in mind.

Offer rewards

Rewards and incentives offer tangible value that enhances the appeal of returning for future transactions. Some common types of rewards programs include:

• Cash back rewards. Offering cash back on purchases, as seen with the PayPal app, provides direct monetary value to customers, making it a desirable incentive for repeated engagement.

• Points-based systems. Customers earn points for every purchase, which they can redeem for discounts, products, or services.

• Tiered loyalty programs. Rewarding customers with increased benefits at different tiers based on spending levels or engagement motivates them to reach higher tiers for better rewards.

• Exclusive access. Providing loyal customers with early access to sales, new products, or exclusive events can increase the perceived value of being a repeat customer.

Regardless of the type of loyalty program you opt for, note that a 2022 survey of U.S. consumers found that 50% of shoppers say it takes too long to redeem rewards, while nearly a third say the leading dislike they have with loyalty programs is the difficulty of earning a reward.⁵

Luckily, strategically streamlining communication can help. Clear and direct messaging not only makes customers aware of the rewards available but also simplifies the process of earning and redeeming them.

Great customer service

Exceptional customer service is the cornerstone of securing repeat business – over 90% of shoppers say that a positive customer service experience makes them more likely to buy again.²

Providing stellar service requires a focused approach to training employees, ensuring they have the skills and mindset to consistently deliver positive experiences. Provide them with comprehensive knowledge of your products or services and equip them with clear, empathetic communication and problem-solving techniques.

Encourage customer feedback

Customer feedback is a goldmine for enterprises seeking to improve their services or products. It serves as a direct line of insight into the customer experience, highlighting areas for improvement and opportunities to enhance satisfaction.

Some ways to collect customer feedback include:

• Surveys. Deploying surveys post-purchase or after customer service interactions can provide targeted insights into the customer's experience with your brand.

• Reviews. Encouraging customers to leave reviews on your website or third-party platforms can offer both positive affirmations and constructive criticism.

• Social media listening. Monitoring social media platforms for mentions of your brand can reveal unfiltered customer opinions and trends in feedback.

Beyond monitoring feedback, responding promptly and appropriately is critical. Acknowledgment shows customers that their input is valued and taken seriously.

Create customer incentives

53% of shoppers say that discounts and loyalty memberships motivate them to stay with brands longer.³ Use these customer incentive ideas to drive repeat purchases:

• Loyalty points. Implement a points system redeemable for discounts, products, or services.

• Exclusive offers. Provide exclusive offers or early access to new products for returning customers. Tailoring these offers to match customer interests enhances their appeal.

• Special discounts. Offer special discounts or free shipping for repeat purchases within a certain timeframe. This can motivate customers to return sooner.

Once you’ve determined your incentives, promoting them is crucial. Email marketing, social media, and personalized notifications can inform customers about available rewards and how they can benefit. You can potentially boost participation and loyalty by highlighting the value and exclusivity of these offers.

Use email efficiently and effectively

Email marketing remains a powerful tool for engaging and retaining repeat customers – 58.7% of marketers say they enjoy between 20 and 50% open rates.⁶

When designing your returning customer emails, consider these best practices:

• Personalize whenever possible. Go beyond using the customer’s name. Segment your email list based on purchase history, preferences, and behavior to tailor content, offers, and recommendations that resonate with each segment.

• Provide timely and relevant content. Whether it's information about new products similar to past purchases, exclusive offers, or updates about loyalty programs, ensure the content adds value.

• Leverage automation tools. Email automation tools can send triggered emails based on specific actions, such as welcome messages for new subscribers, thank-you emails post-purchase, or reminders for items left in a cart.

• Test and optimize: Regularly test different aspects of your email campaigns, such as subject lines, layouts, and call-to-action buttons, to optimize performance.

Getting more from PayPal

The importance of nurturing loyal customers cannot be overstated – through reduced acquisition costs, increased revenue, and word-of-mouth recommendations, businesses can further their bottom lines.

With its advanced platform for enterprises, PayPal stands at the forefront of supporting these customer relationships. From data-driven shopper insights to our smart checkout, which can help reduce checkout times,⁷ PayPal can help you tap into the power of loyalty.

Discover how PayPal's solutions can help transform your approach to customer retention and loyalty today.