Repeat/rebuy in the ATAR forecast
I tend to use the terms repeat purchases or rebuy interchangeably on this website, as they essentially communicate the same intention. Out of the four ATAR components, this one is the most important and the most critical one for the long-term financial success and viability of the product.
As we know, the prime goal of marketing is to acquire and retain valuable customers. Therefore, our ability to introduce new products that are able to attract ongoing customer loyalty is a key goal.
Let’s quickly distinguish between a product trial and a repeat purchase (or rebuy).
A product trial is a consumer’s first time purchase of a product. That is, they have never purchased the product before – in other words, they are a new customer to the brand/firm.
A repeat purchase/rebuy occurs when that customer decides to buy the product for the second time (and hopefully) on an ongoing basis.
This repeat purchase decision is a key indicator of the likely success of the product long-term. This is because, at this stage, this potential long-term customer has now had direct experience/exposure with our new product. Prior to this direct experience, the consumer was relied upon their understanding of the product generated through various marketing communications and word-of-mouth.
Perceived value to customer satisfaction
Before the initial product trial, the consumer would have had some degree of perceived value, which would have been significant enough for them to decide to initially purchase the product. However, once they have become a customer at least once, they then go through the “customer satisfaction" process and would either result in the customer being satisfied or dissatisfied with the product – and this satisfaction outcome would then determine their likelihood of future purchases.
With a very low repeat/rebuy percentage in the ATAR forecast is unlikely that the product will enjoy ongoing financial success and viability (not applicable to durable products, please refer to the article on ATAR variations).
How to determine/estimate the rebuy percentage?
If the product is a product line extension or product improvement, then the firm can base its ATAR assumption for repeat purchases on its other experiences with similar products.
However, if the product is relatively new, then ideally the firm needs to base his decision on its “product use test" with consumers (is undertaken), or an earlier concept test with consumers.
If neither of these pieces of research were implemented, then the firm may need to generate an estimate based upon competitive products that appear to be similar – which may be able to be derived from various market share industry information.
Generally the repeat/rebuy percentage used is one of the higher ones of the four ATAR components. This is because the % is only applicable to consumers who have trialed the product, not the whole target market. (Please also see the article on trials – purchase or sample – for further guidance.)
Main driver of repeat purchases
Repeat purchases tend to be highly dependent upon:
- the overall quality of the product
- the degree of differentiation of the product
- the ongoing availability of the product
- various sales promotions and discounts and incentives offered
- the reaction of competitors, trying to win back lost market share
- the possible introduction of further new products, losing consumers to them