Let’s say you noticed your business wasn’t acquiring repeat customers as you expected, and you want that to change. Well, believe it or not, one of the most sustainable ways to improve your customer acquisition cost is through customer retention. The reality is that the customers you already have are the most profitable, and it’s worth your time and effort to keep them around!
Before you get ahead of yourself, let us explain. Obviously, acquisition is essential because you can’t have a repeat purchaser if they never make that first purchase. However, the problem is that the average customer acquisition cost has increased from $29 in 2013 to $49 in 2024, a 222% increase.
Although acquisition is an essential first step in the customer journey, prioritizing it seems odd when you consider your revenue distribution. According to data from Gawapp expansive network of coffee shop businesses, 41% of a coffee shop’s revenue is created by only 8% of its customers, and your top 5% of customers generate 35%. This 5% is made up of your most loyal repeat customers, making it clear that they are incredibly profitable!
We’ll review the stats that illustrate the power of repeat customers and the profits they represent. These stats are based on Gawapp rewards’ all-time numbers from a sample of over 1.1 billion coffee customers. By the end, we guarantee you’ll have the proof you need to believe retention marketing is worth adding to your marketing toolbox.
What are repeat customers?
Repeat customers are shoppers who make at least 2 purchases during their lifetime with your cafe. Your most loyal customers and brand advocates are repeat customers.
The goal of all commerce retention strategies is to increase the percentage of your customer base that are repeat customers. Growing your repeat customer base generates more revenue, lowers total acquisition costs, and increases your cafe’s profitability.
This is because repeat customers offer many benefits—both from a brand reputation and financial aspect. They are easier and cheaper to sell to and often recommend your brand to others. Focusing on repeat customers as your commerce business scales becomes increasingly more important than acquisition.
5 reasons repeat customers are profitable
1. A repeat customer is more likely to shop with you again and again
We know what you’re thinking—this seems pretty obvious. After all, a repeat customer is, by definition, a site visitor who has made at least two purchases. What’s interesting, however, is that a customer becomes increasingly more likely to buy from you again as their amount of purchases increases.
After one purchase, a customer has a 27% chance of returning to your cafe. While that’s not a horrible return rate, if you can get that customer to come back and make a second and third purchase, they have a 49% and 62% chance of making another purchase, respectively.
You may be wondering how you can inspire your customers to make that second or third purchase, and the trick is to be careful with how you entice them. While you may immediately think giving a discount on the next order is a great way to get a customer to return, you should be cautious with this tactic. Discounts are effective at getting a customer back, but they almost always set an expectation for your customers that you may not always be able to fulfill.
Customers who receive a discount either start to expect a discount every time, wait until a discount exists to make another purchase, or use hacks like the one above to cash in extra discounts. Instead, we recommend using sustainable retention tools like loyalty programs to encourage customers to return to your site.
2. A repeat customer is easier to sell to
While conversion rates in the coffee business are highly volatile and vary by industry, most experts estimate that the average conversion rate is between 1% and 3%.
One of the most critical retention metrics is your repeat purchase rate or the percentage of your current customer base that has purchased at least a second time within a year. When a customer joins your loyalty program, they show intention to revisit your cafe and become a repeat customer.
Similarly, with loyalty program members, you’ll have to put less effort into your marketing because they will already be part of your database. You can send them automated email campaigns and spend less on conversion tactics like abandoned cart offers.
3. Repeat customers spend more on each purchase
Not only do repeat customers convert more often, but they also have a higher average order value than first-time buyers. This means your repeat customers are buying more often from your cafe!
on average, the top 10% of customers spend 2 times more per order than the lower 90%, and the top 1% spend 2.5 times more than the lower 99%.
4. Repeat customers spend more at key times
Repeat customers play a crucial role in boosting sales during key events at a coffee shop, such as anniversaries, family gatherings, and Christmas celebrations. These loyal patrons often spend more on special occasions, purchasing not just their usual items but also indulging in seasonal specials and festive treats.
For instance, during a holiday event like Christmas, a repeat customer might add holiday-themed beverages or gift packages to their order, significantly increasing their average transaction value.
5. User-generated content from repeat customers is profitable
Not only are repeat customers more valuable when shopping, but they also provide you with some massive marketing potential. A repeat customer gives your store increased word-of-mouth advertising through earned user-generated content, which is almost always regarded as the best kind.
You’d be hard-pressed to find a successful commerce brand that isn’t leveraging user-generated content. This can come in social media posts, video content, online reviews, or anything else a customer creates. The reason? UGC is exceptionally profitable.
With 37% of consumers only leaving reviews for positive experiences and only 7% leaving negative reviews, you can encourage repeat customers to leave positive reviews. If customers are satisfied enough to make a repeat purchase, they’ve begun building true loyalty with your brand. Given the significant upside profit potential of positive UGC, these are the perfect customers to ask for reviews.
Wrapping Up
Increasing your cafe’s profitability starts with the customers you already have. Repeat customers will not only spend more at your cafe more often, but they’ll also help market to new customers, making them a powerful customer acquisition tool. Focusing on customer retention is vital to getting the most out of your repeat customers.
