Customer Retention and Repeat Purchase Rate Calculator

A shop can look busy and still be on a treadmill, winning new customers just to replace the ones who do not return. Two simple measures show whether that is happening: how many customers buy more than once, and how many of the customers you had at the start are still there at the end. This page works out both, along with churn, the number of orders per customer, average order value and a simple estimate of what a customer is worth.

Two different questions

Repeat purchase rate looks inside one period and asks what share of the customers who bought did so more than once. Retention follows a fixed group: take the customers you had at the start, and ask how many of them remain at the end. To find that group’s survivors the page subtracts the new customers you won during the period from the customers at the end. The two rates can move in different directions, which is why the page shows both and explains the difference.

What you enter

The customers who bought in the period, and how many of them bought two or more times. The orders in the period and the revenue. The customers at the start and at the end of the period, and the number won during it. The gross margin on your sales. The page checks that the numbers can be true: repeaters cannot exceed customers, orders cannot be fewer than customers, and new customers cannot exceed the customers at the end.

A worked example

The default is a shop quarter with 2,000 buying customers, 520 of them repeat buyers, 3,100 orders worth 155,000, and a customer base that went from 1,200 to 1,500 with 600 new. The repeat purchase rate is 26.00%. Retention is (1,500 − 600) ÷ 1,200 = 75.00%, so churn is 25.00%. Customers placed 1.55 orders each, the average order value is 50.00 and revenue per customer 77.50. The expected lifetime is 4.0 periods, and with a 40% margin the simple customer lifetime value is 50 × 1.55 × 0.40 × 4 = 124.00. A loyal base, with 800 buyers, 470 of them repeat, 1,900 orders worth 112,000 and a base moving from 900 to 950 with 120 new, has a repeat rate of 58.75%, retention of 92.22% and churn of 7.78%. Each customer places 2.38 orders worth 58.95 on average, stays 12.9 periods and is worth 990.00.

Using lifetime value

The figure is in gross profit, not revenue, so it can be compared with what you pay to win a customer. If it costs 60 to acquire a customer worth 124, the first order alone may not cover it, but the repeat orders do. That is the case for working on retention: lowering churn from 25% to 20% lengthens the lifetime from 4.0 to 5.0 periods and raises the value to 155.00 with nothing else changed.

Edge cases

If retention comes out negative, the counts are inconsistent, perhaps because “new” and “customers” use different definitions, and the page warns you. A churn of zero gives an unlimited lifetime and no lifetime value. The customers at the start must be above zero, and the margin from 0 to 100. Revenue of zero gives an average order value of zero.

Limits

Lifetime value assumes that customers keep buying at the same rate and that churn stays the same, which is rarely true over long periods. Customers who are inactive but not gone, seasonal buyers and one-time gift purchases all blur the picture. Treat the figure as a way of comparing customer groups or periods, rather than as a forecast of what any one customer will spend.

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