What is a good return customer rate?

Returning customer rates can vary based on your industry, customer personas, products, and business strategies. It also depends on your primary sales and marketing channels.

For example, FreshKatch, an exclusive app-based seafood delivery service,  increased their returning customer rate by 33% using a mobile app as their primary sales and marketing channel.

In this article, you’ll learn:

• What a return customer rate means
• How and why you should calculate your return customer rate
• Factors that contribute to customer retention 
• How you can work towards meeting Shopify standards

What is a returning customer rate?

A returning customer rate shows you how many of your acquired customers turn into repeat customers. A high return customer rate means you have a strong relationship with your customers. A low returning customer rate may imply that customers don’t use your products often or have chosen other stores to get similar products.

Good return customer rate for a Shopify business

There is more than meets the eye to a “good” return customer rate. It is not as simple as a high percentage being good and a low percentage being an issue to resolve. 

In general, Shopify suggests that a returning customer rate should range between 20 and 40%.

The ideal repeat purchase rate depends on your industry, the type of products you sell, the current market trends, and several other factors. A lower customer retention percentage may not be bad but rather the nature of your specific business.

How do you calculate a returning customer rate?

Your returning customer rate (RCR) is calculated by dividing the number of customers who have made more than one purchase by the total number of customers during that period. Multiply this number by 100 to express it as a percentage. 

The returning customer rate formula looks like this:

RCR = (Returning customers / Total customers) x 100

Let’s look at an example of an e-commerce home decor store. If this online store had 1,000 customers in April, let's say 200 of these customers made a repeat purchase in April. The returning customer rate can be calculated as follows:

Returning customer rate = (200 / 1000) x 100 = 20%

This home decor store has a returning customer rate of 20%. 

Shopify makes it easy for you to know your returning customer rate from their dashboard. Go to Analytics > Returning Customer Rate, where you can download the report to slice and dice the data.

Benefits of knowing your returning customer rate

Returning customers are the backbone of an e-commerce business. When a customer is loyal and purchases from you at regular intervals, you have a more secure revenue stream. Keeping track of return customers gives you an idea of the overall success of your business, and brings many benefits to improve your current practices. Here are some of them:

Make confident business projections

When you know your returning customer rate, you can expect a set number of customers to return to your business every month. When you have a predefined revenue estimate, you can create an adequate budget and business plan.

Identify your strengths and areas for growth

A returning customer rate helps you see what is working for your company and what strategies may need extra care. For example, if you see that you have a high returning customer rate, you know your company is great at building relationships with your customers. You infer that your price and product or service quality are satisfactory, and customers see you as reliable.

Improve customer retention/acquisition strategies

Once you identify your business strengths and areas of growth, you can focus on your retention and acquisition strategies. If you have a lower customer retention rate, you can analyze customer churn and find areas to improve retention. 

Or, maybe it’s time to shift focus toward attracting new customers. This could look like improving the initial shopping experience or engaging new customers to stay top of mind. You can also focus more on sales and marketing to evaluate what is more beneficial to your business – acquiring new customers or increasing the number of repeat customers. 

What contributes to a returning customer rate

There are a few key factors that contribute to your repeat customer rate in addition to your customer retention and acquisition strategies. Some are factors that are not easy to manipulate, such as:

Your industry

By nature, some industries have higher returning customer rates than others. The average coffee shop customer consumes a new cup of coffee regularly. However, the average person who recently purchased a vehicle would not be planning to purchase another one for 10 years.  

The range of products you sell

The range of products you sell and your customer base will also play a part in your customer retention metrics. If you have a niche range of products, such as a few lines of candles, existing customers may only return to your store every few months to purchase the same candle once they are finished with the old one. 

However, if you sell products like vases, candles, and table runners, customers may return to your store more often for different products.

For example, check out how FreshKatch from our previous example took an innovative approach to upselling by bundling different products like seashells, dried seafood snacks, and ready-to-cook snacks into their existing product categories:

How to increase your returning customer rate

If your returning customer rate shows that it is time to focus on your existing customers and improve your retention percentage, there are several ways to do so:

Create a customer rewards program

Loyalty and reward programs are a great way to encourage customers to return. These programs incentivize customers to return for a future purchase to redeem any points earned from past purchases. Many brands integrate loyalty programs with their mobile app to reward returning customers through personalized shopping experiences and customized perks.

‘’A loyalty program is essential for a post-checkout experience that customers can connect with both offline and online,’’ says Jonathan Roque from Smile.io in this article. ‘’A loyalty program can make your customers feel valued and more than just a customer.’’

Engage your customers and build a community

Once you acquire a new customer, keep them updated on new promotions and products at your store. Engaging your customers with personalized push notifications is a key way to stay top of mind, strengthen their relationship with your brand, and increase loyalty. 

Palette of Threads, a women’s clothing store, uses in-app live selling and push notifications as their primary sales channels. They first create a buzz about their live sale through push notifications. During the live session, they showcase products in real time and offer viewers special giveaways, driving instant sales. As a result, Palette of Threads saw a 69% increase in returning customers with a mobile app.

Maintain post-purchase relationships

If a customer purchases something online, they want to ensure they’ll receive their package within a few days. You can keep your customers at ease and show your reliability by keeping in touch with them about the product's journey to their doorstep. 

As you can see from these customer reviews on the Vintage Boho app, good customer service and prompt delivery lead to positive customer experiences. A happy customer is sure to return to your store. 

You can also use this opportunity to show you want to hear about customer experiences by asking for their feedback through a survey. Customers will appreciate this and will be more likely to choose your store in the future.

Increase your customer retention with Vajro

There is no one accurate answer to what a good return customer rate is. But to be successful, you need the right tools to execute your customer retention strategies. 

Vajro can help. As a mobile app builder that integrates with Shopify, Vajro helps more than 5,000 brands increase their returning customer rate. You can reward and engage your loyal customers with exclusive shopping experiences to keep them coming back. To learn more, schedule a free demo today. You can also try our 30-day free trial to get hands-on experience with Vajro.

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