The key benefit of increasing average order value is that you make more money from each transaction. Thus, making your store more profitable. Often, when a customer shops online, they’ll only buy exactly what they’re looking for. However, with some of the average order value strategies that we’ll share in this article, you’ll learn how to present more great products to customers to generate more sales from each order. In this article, you’ll learn what average order value is and how to increase it. So, let’s dive into it.
- What is Average Order Value?
- Benefits of Increasing Average Order Value
- 10 Ways to Increase Average Order Value
- Want to Learn More?
What is Average Order Value?
Average order value (AOV) is the average dollar amount a customer spends when placing an order on your store.
You can calculate your store’s average order value by dividing your store’s total revenue by the number of orders taken. This formula is the easiest way to calculate it. Keep in mind that it doesn’t take into account marketing costs.
Benefits of Increasing Average Order Value
- Increase revenue and profit: When the average order value rises, you’ll see an increase in revenue and profit. The more you earn per order, the more your business makes altogether. If you can see a positive change in average order value, you’ll be able to reinvest more money into your business’ growth and pocket more too.
- Cost-effective marketing return: If you spend $20 on marketing and the average order value is only $50, you haven’t earned much after you deduct product costs and taxes. However, as you see a positive change in average order value, your marketing spend becomes more profitable. Thus, why it’s crucial to have an average order value strategy in place.
- Sell more inventory: This doesn’t apply to dropshippers. However, if you own stock for a brick and mortar store or even an online store, you can sell more of your inventory by executing a proper average order value plan. By making changes to see a boost in AOV, you’ll be able to sell more of the products you carry.
10 Ways to Increase Average Order Value
1. Offer a Free Shipping Threshold
The easiest way to increase the average order value is to offer a free shipping threshold. For example, free shipping on all orders over $75.
Once you’ve calculated your average order value, add 30% to it. For example, if your average order value is $100, with the 30% increase, it becomes $130. This new number is what you’ll set your free shipping threshold at – for example, free shipping on all orders over $130. Aaron Zakowski found that a 30% increase to your average order value worked best as a free shipping threshold.
You can also add a notification when customers check out and their purchase doesn’t add up to the free shipping threshold. By having this notification, you’ll be able to help increase average order value. You can easily do this using apps from the Shopify App Store.
2. Give Product Discounts
While it seems counterintuitive, providing discounts can help change your average order value. However, when offering discounts, be sure to add a minimum spend. For example, get $10 off when you spend $75 or more.
Some brands also have volume discounts. This is when specific order value brackets result in a particular discount. For example, get $10 off when you spend $75, get $15 off when you spend $100, and get $25 off when you spend $150 or more.
3. Provide Bundle Deals
Providing customers with bundle deals can affect average order value. For example, your offer might be a buy two and get a free gift or buy three and get a fourth free promotion.
As products on AliExpress are affordable, you’ll need to ensure you choose free gifts that won’t impact your product margins too much. For example, if you sell women’s products, your free gift might be a $2 bracelet. If you offer a buy three get a fourth free deal, you need to make sure you price your products in a way that you can afford to cover the costs of the fourth while still making more profit from the bundle deal.
4. Give a Gift Card
Gift cards are a great way to increase average order value, even when giving a small one away for free. For example, if your retail price is $35 or higher, you can offer a free $5 gift card for a customer to use with their next purchase. Since they have a gift card, they’ll be more likely to spend again.
However, you need to make sure that your product prices are high enough that your gift card doesn’t result in a free purchase for your customer, as that would cause a profit loss. Also, remember to make sure that customers know they can’t use the gift card on the current purchase or shipping (if you offer free + shipping on certain products).
Lastly, offering gift cards encourages future purchases, which helps reduce future ad spend. It’s a great bonus to give customers when sales are seasonally lower. Don’t offer this deal year-round as it can lose its effectiveness over time.
Keep in mind that even if you don’t give a free $5 gift card, gift cards still help increase average order value as most don’t spend the full card or end up paying much more than their card provides them.
You can offer a gift card to customers directly from the Shopify admin.
5. Execute First Time Offers
If you’re a relatively new brand, under six months old, most of your customers will be first-time visitors. Offering deals to new visitors can help increase average order value. You can provide this particular audience with a one-time discount when they buy multiples of a popular product or exclusive bundle deals just for people who haven’t shopped with you before.
If your customer orders several items and loves what they receive, it’ll be even easier to entice them to shop again. They’ll already have experienced shopping on your site first hand. Thus, you have a better chance of turning them into repeat customers.
6. Show Cross-sell And Up-sell Items
A cross-sell is an item that a customer may like that’s different from the product they’re viewing. For example, if your customer is looking at a dress, you might have a recommended product of a pair of earrings that pair with it.
An excellent idea for cross-selling is to add the products the model is wearing to the recommended products. For example, if the product photo is selling a tank top, you might add the skirt as a cross-sell. Since the customer sees the two together, they’ll be more likely to purchase them in combination.
An up-sell is when you encourage customers to buy more expensive items or additions to increase average order value or profit. For example, if you sell pillows, you might up-sell with comforter sets, a duvet, or other items.
An effective way to upsell products is to sell more of the same product. For example, if you sell essential oils, you would upsell by recommending the same scent and a couple of other popular scents to the customer. The reality is, people are likely to buy more of what they love, especially if it’s likely to run out at some point. This works well for beauty products as well.
7. Have a Loyalty Program
Having a loyalty program in place can help increase average order value. Each time a customer orders, they can earn points or discounts just for being loyal customers.
The benefit of having a loyalty program is that it helps build brand evangelists, customers who keep coming back to your website to shop. According to The ROI from Marketing to Existing Customers report, 40% of a store’s revenue comes from repeat customers. Only 8% of all store visitors are repeat customers. Repeat customers are more likely to buy more from your store than people who are unfamiliar with your brand.
By encouraging repeat sales, you help create a more massive fanbase who will likely order larger quantities of products. They’re also cheaper to advertise to via retargeting, social media, or email marketing. Thus, these evangelists help increase average order value.
8. Offer Time-Sensitive Deals
You can offer a time–sensitive deal to help increase average order value. For example, you might have a 48–hour deal where someone gets a free gift or a special discount when they’ve ordered a specific quantity of products.
While it might not increase the average order value for a long duration, urgency helps increase conversions. Time–sensitive deals are great for boosting average order value during slower periods. And they’re relatively easy to execute. You can promote them on social media or include a banner notification on your website.
9. Show Savings With Bulk Orders
People love saving money. However, when your customers order large quantities, they sometimes feel guilty about it. You can maintain a high average order value from a customer through the display of overall savings. This can prevent abandoned carts or cart modifications, which can lower the amount they planned to buy.
However, if you show customers how much money they’re saving per item with each addition, they’ll feel like they’re scoring a deal. Showing people the monetary savings they get from buying multiple items can help increase average order value, even if it acts as a preventative measure.
10. Creating A Game Or A Contest
The food industry often creates games or contests to increase average order value. For example, McDonald’s has the Monopoly Game, where customers are incentivized to order more frequently and upgrade their meals to get more game pieces. With the game pieces, they have a chance of winning big prizes.
In ecommerce, you can also run contests where customers have a chance to win prizes when they buy often. You can let customers know that if they’ve made a purchase, they enter the contest where they can win one of several prize packs. Then, you can search the Shopify App store for the contest app that works best for your campaign.
Calculating your average order value can help you understand how well your store is performing. After you’ve calculated your average order value, you can try executing some of the strategies in this article to increase it. Whether you create bundled deals or create a free shipping threshold, you’ll be on track to seeing higher order volume on your online store. So are you ready to see those sales rise? Then, it’s time to get started on implementing some new changes.
Want to Learn More?
- 50 Ways to Get Sales with Dropshipping [EBOOK]
- The Ultimate Guide to Sales Forecasting
- I Have $0 In Sales After Months Of Trying. What Am I Doing Wrong?
- How to Get More Sales with Ecommerce Conversion Optimization
What have you implemented to help increase average order value? What’s your average order value goal for your store? Let us know in the comments!