Knowing your stores customer purchase latency can be used to dramatically increase your repeat purchases.
Everyone in business has heard that truthism about how it's cheaper to have repeat customer than to find a new customer.
Knowing your customer purchase latency can improve the chances of repeat sales while also optimizing how much you make from each sale. For more non-technical information on this, read Customer Purchase Latency and capturing more reorders.
In here I'm going to dig into how to calculate your customer purchase latency.
Caution, math ahead! But not that much...
Example data for a store
First, we'll need to set some assumptions so you can understand what we are and aren't covering here:
- we'll look at a handful of customers only
- we'll calculate the average purchase latency
- we're only caring about total purchase amounts
Next we'll need some customer data to work with.
- Sue ordered $100 on Day 0 and $50 on Day 34.
- Bob ordered $50 on Day 0 and $50 on Day 23.
- Jim ordered $50 on Day 0, $60 on Day 24, and $30 on Day 100.
1. Average the purchase times for all customers
- 1st purchase - Day 0 (default)
- 2nd purchase - Day 27 ((34+23+24) / 3)
- 3rd purchase - Day 100 (100 / 1)
2. Calculate the average order value of each purchase
- 1st purchase - $66 ((100+50+50) / 3)
- 2nd purchase - $53 ((50+50+60) / 3)
- 3rd purchase - $100 (100 / 1)
3. Draw some conclusions
Based on this data you now know that:
- your second purchase averages $53 and occurs around day 27
- your third purchase averages $100 and occurs around day 100
- 100% of your customers make a second purchase
- only 33% of your customers make a third purchase
4. Optimize your store
With that in hand, you can set up different marketing campaigns to try to improve things.
Around Day 21 (before the average time for the 2nd purchase) you send an email with no discount reminding your customer about your products. This could improve the speed of the second purchases.
Then sometime around Day 60-100 (between the 2nd the 3rd purchase averages), send another reminder email about your products. This could increase the number of third purchases.
Around Day 100-120 (after the average time for the 3rd purchase) if the customer hasn't made a third order, send them another email but offering 10% off. This would incentive people who wouldn't make a third order to purchase.
Advanced latency strategies
Now, if you wanted to go beyond this simple version, here are some more advanced ways to calculate your latency:
- Personalized purchase latency. Calculate the latency per customer for customers with more than one purchase and look for recurring trends. E.g. John bought on the 0, 30, 60, and 90 day mark. We can expect another on day 120.
- Product latency. Calculate the latency based on orders for each product only. E.g. The premium kit is purchased on the 0, 15, 25 day marks while the basic kit is only purchased on the 0, 25, 50 day marks.
The important thing with customer purchase latency is to calculate it often. It won't change very much from day-to-day but from week-to-week and month-to-month it can vary widely. You can also see how it took a bit of work to calculate it for only 3 customers with 7 orders, once you have a decent volume of sales it would be time-prohibitive to calculate this by hand.
That's why I recommend using Repeat Customer Insights to calculate your customer purchase latency. It'll load the data from your Shopify store and automatically calculate your latency for all customers, across multiple different times and customer segments.