What is the difference between Retention Rate and Repurchase Rate?

What is the difference

The Basics

Customer Retention Rate answers the question: how many of your customers are you retaining over time?

Customer Repurchase Rate answers the question: how many of your customers are making subsequent purchases 2, 3, 4, 5, 10 more times? Which answers the question, "Out of customers who originally purchased in each month, how many made another purchase? And when did they buy again?"

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If we look at month 3 for the Jul 2020 cohort in the Peel demo, known as "Demo". Demo has retained 55.6% of customers and 42.19% of customers in that cohort have made 2 or more purchases by month 3.

If customer came back in Month 6 and repurchased, that 55.6% will increase. The retention numbers can increase to 100% to the left anytime someone comes back and repurchases because it means that you never churned those customers.

Repurchase Rate will tell you that by month 6, 52.7% of you cohort has made 2+ purchases by that point. And then in month 7 - 56.22% made a repurchase. Repurchase rate numbers increase to the right since its looking for how long does it take for them to come back and make another purchase.

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The Differences

The more repurchases that each customer makes will increase these numbers. The goal is to have higher percentages for both as close to 100% or constant growth towards to the left of the chart with purple/pink.

Check out this block this blog post to get more examples of what you can do with the Repurchase Rate & Retention Rate knowledge.

The answer is Returning Customers by Cohort is a non-cumulative metric and Repurchase Rate is a cumulative metric.

Returning Customers by Cohort is not** cumulative. Returning Rate is looking at that amount of customers each month that come back over time, meaning there is more likely to be attrition over this period. Normally the further a customer is from their original purchase the less likely they are to buy.

Returning Customers is also showing you the amount each month individually - again not cumulatively. It is looking at the activity in each month after the initial purchase. Looking at this data may help you craft a retention strategy around when to re-market to customers in order to get them to come back and buy again.

Repurchase Rate is cumulative so it tells you when and how much of each cohort has repurchased and the number grows as time goes on. Each customer is counted once. It looks at how many from the entire cohort - cumulatively have come back at by that time.

Repurchase Rate tells you when the customers that you acquired come back and repurchase. What % of the customers you acquired come back and repurchase. This number is likely to increase unless if there are an abnormal number of returns.