How to Increase Average Order Value for Your Ecommerce Store
Every ecommerce store owner has a goal of generating more traffic and turning more website visitors into buying customers. But there’s another important metric that is often overlooked when it comes to reaching your full potential online — average order value (AOV).
Improving your average order value is one of the most effective ways of increasing your sales revenue, if done right. The following article takes a deep dive into AOV to help put you in the best position to boost your turnover.
What’s the Formula for Average Order Value?
Calculating your average order value is very easy to do using the formula below:
Average order value = Total revenue / Total number of orders
In simple terms, the AOV calculation tells you how much each customer spends per order on your ecommerce store. It’s also worthwhile to leverage Google Analytics to track your average order value. You’ll need to set up ecommerce tracking in your account and take advantage of the many features on offer there.
Evaluate Your AOV with Context
AOV refers to your gross sales revenue. That means it doesn’t take your expenses into account. So, if your sales in one month are £15,000 from 113 orders, your AOV will be £132.74 (£15,000 / 113). This figure doesn’t consider any money you’ve spent on marketing and advertising, for example.
What’s more, while higher sales revenue is great, it’s important to look deeper to determine the best end goal for your business. Your objectives may be for the average order value to:
- Deliver higher profits – if your expenses stay at the same level, all the additional income you generate will be pure profit.
- Improve inventory turnover – selling and restocking products at a good rate, results in a healthier cash flow for your business.
- Accelerate profitability – reaching a positive ROI (return on investment) occurs a lot faster when your business has a better AOV.
15 Ways to Increase the Average Order Value for Your Online Store
Now that you understand the basic fundamentals of average order value, let’s look at 15 useful ways to boost yours online.
Establish a Minimum Order Threshold for an Offer
A good approach to improving average order value is to give your customers an offer for reaching a minimum threshold. The offer can be anything including, free shipping or a discount for spending £X. Just make sure you’re setting the minimum threshold above your current AOV. For example, if your current AOV is £132.74 using the same example above, you can offer free shipping or a 10% discount to shoppers that spend over £165. This tactic is often the little nudge your customers need to spend a bit more.
Create Product Packages or Bundles
You can increase average order value by creating strategic packages and bundles that encourage people to spend more. The key here is to package complementary products that make sense to purchase together. For example, a shopper buying a tub of protein powder will likely be interested in a shaker bottle as well. Someone buying a printer may want to get ink cartridges along with it. Bundling the products together at a slightly reduced total price than they would cost purchasing individually, is a great way to increase AOV.
Upsell & Cross-sell Online
Upselling refers to a process of influencing customers to upgrade or buy higher value versions of what they’re looking to buy. So if they arrive on your website with the intent to buy V3 or your smart speaker, you can strategically place a message showing that V5 is now in stock while highlighting some improved features and benefits to encourage more spending.
Cross-selling involves product recommendations that go with whatever a customer is shopping for. For example, if someone is shopping for a pair of jeans, some of the recommended products can be a nice pair of shoes, a cool belt, or a stunning top that completes the outfit. The convenience of getting everything they need in one place alone is enough for most people to dig a little deeper into their pockets.
Use Customer Loyalty Programs to Good Effect
Implement customer loyalty programs to reward your returning customers. You can offer points — to be redeemed later after reaching a certain threshold — or give out discounts for a certain number or repeat purchases. This helps turn normal customers into advocates who will increase the reach of your brand. Loyal customers are also far more likely to spend more money with you and have a higher ROI, thanks to lower associated marketing and advertising costs. This all spells good news for your AOV marketing.
Offer Time-Sensitive Deals
Leverage limited-time offers to increase your ecommerce store’s average order value. Many consumers just can’t pass up on a good deal, especially if there’s a sense of urgency attached to the offer. In this regard, you can introduce a new scent for your popular candles that’s only available for a limited time. Alternatively, you can add a 48-hour countdown offer with a 35% discount as a tactic to clear out your existing stock of wax melts.
Highlight Savings when Customers Buy in Bulk
Everyone loves a good deal that saves them money. You can use this to your advantage by clearly highlighting the savings your shoppers make by buying in bulk. Display the savings your shoppers are making per line item in addition to the overall savings to really drive home the value they’re getting by buying in bulk. The better the value perception, the more they’ll spend per order, which boosts your AOV.
Offer ‘First-Time Buyer’ Discounts
You’ve likely been on websites displaying a banner with an exclusive discount for new customers or subscribers. Not only does this help to improve your conversion rates but it is also one of the best ways you can increase average order value for your online store. When a customer receives a discount, they are more likely to add extra items to their shopping basket since they’ll be receiving better value for money.
Introduce General Product Discounts & Gift Cards
As explained above, product discounts can entice higher spending and increase ecommerce average order value. You can get creative and package your discounts in the form of gift cards, for example. A physical or e-gift card for 15% off your next order makes the offer feel more ‘official’, which increases the likelihood of a customer returning and spending more money with your business.
Incorporate Free Trials for Higher Value or Premium Products
Consumers absolutely love to try a product before they proceed to make a purchase. Knowing that a product does what it says on the tin is very reassuring. A highly effective method of not only boosting conversions but also increasing AOV is to offer free trials for higher value or premium products. Seeing the benefits of a product in action removes any lingering doubt and encourages customers to spend more money with your business.
Build Trust & Authority with Your Target Market
It goes without saying that being an authority in anything can build trust. The perception of your brand improves when you portray a professional image that establishes you as a leader in your respective niche market. If customers genuinely believe in your brand and everything you stand for, there is a trickle down effect that directly impacts your average order value for the better.
Keep the Returns Policy Flexible
A flexible returns policy is another way to get customers purchasing more products from your ecommerce store. Since there is no opportunity to try before you buy, knowing that they can easily send items back for an exchange or full refund if need be, increases a customer’s confidence in your brand. This in turn, helps to drive up your average order value.
Use Analytical Data
Like with any other marketing activity, it’s useful to make informed decisions based on analytic data. Dig deeper into your metrics consistently to make sense of the data. From there, you can try different approaches that will encourage customers to add more items to their shopping baskets.
For example, you can segment your customers by their existing average order value. Thereafter, you can implement tactics like free shipping, discounts, and cross-selling to customers on the lower end of the spending spectrum or loyalty programs to get your higher spending customers to purchase even more.
Target Customers Based on Purchase History
As the saying goes, it’s much easier to sell to an existing customer than it is to sell to a new customer. You can use this to your advantage by analysing your existing customer data and using it to re-target them based on their prior purchase history. If, for example, you’ve just released a new version of a product, you can directly promote this to the segment of your customers who purchased the older version. With emphasis on the new range of benefits and greater value for money, you can quickly increase your average order value before even marketing to your full pool of current customers and beyond.
Introduce Payment Plans & Finance Options
The advent of payment providers like Klarna has made it easier than ever for ecommerce businesses to offer flexible payment options and customers to take advantage of friendly payment plans. Another benefit of flexible finance options lies in boosting average order value. Customers are more comfortable purchasing higher value products when the cost can be spread over a few instalments. It also means you business can secure the sale and avoid customers seeking out cheaper alternatives on the market.
Regardless of your chosen tactics for increasing AOV, you’ll still need to test your different endeavours for maximum effectiveness. You can achieve this through A/B testing (also known as split testing) — a proven method of evaluating different website elements against one another to determine the best one for optimal results. Failure in this regard, can lead to your ecommerce business leaking conversions at an alarming rate. With that in mind, make it a habit to test relevant elements to ensure you’re focusing on the right things.
Evaluate Your AOV to Optimise Ecommerce Performance
The best performing ecommerce brands adopt a meticulous approach to analysing metrics and taking advantage of every opportunity to drive growth. One of the best ways to achieve this is through boosting your average order value.
If you don’t know where to start, hire an ecommerce developer like Vsourz for a professional consultation and the execution of any strategies that are highlighted above. To learn more about increasing your AOV get in touch with one of our ecommerce specialists today.