If you want to know more about your customers’ behavior and how attractive your products and services are to them, you have to know the purchase frequency.
Let’s learn how tracking this sales indicator helps you control the number of times a user makes a purchase.
What is purchase frequency?
Purchase frequency is the number of times an average customer purchases a good or service from the same seller in a given period. This is a segmentation element widely used in direct marketing.
Consideration of purchase frequency can also be used to adjust marketing pressure, for example in email marketing. This is an important sales KPI because it will help you develop revenue projections and forecasts.
This KPI is often analyzed in conjunction with KPIs for a supply chain, such as units per transaction, to understand how to meet consumer demand.
Advantages of measuring purchase frequency
Here are some of the benefits of monitoring purchase frequency:
- By understanding consumer purchasing behaviors, you can develop strategies to reinforce certain trends, such as incentivizing consumers to purchase higher-end products.
- Purchase frequency is a useful KPI when developing a sales growth strategy. A common strategy is to increase the value of each sales transaction, for example by selling more expensive products. If your average purchase value increases, and you maintain the same number of customers, you will see an increase in sales revenue.
How to calculate average purchase frequency
If your company receives 10,000 orders in a month from 8,000 unique customers, your average purchase frequency is 1.25, which means that most customers made purchases between one and two times that month.
Purchase frequency can be used in different ways by changing the time period. As a general rule, data from a one-year period should be looked at to get an overview of consumer purchasing patterns (such as holiday shopping and sales). Whatever timeframe you choose, it’s important to include “one-time” buyers to avoid duplicate purchases being included in the calculation.
Now you know what percentage of your customers return and how often they make purchases during a given period. The important thing is to take these measurements and use them as a reference to influence how often these customers make another purchase.