12 Ways To Increase Average Order Value

Gabriel Ryan

also recommends the Evergreen Email Challenge


Updated:
December 12, 2022
Created:
December 12, 2022

If you're seeing a high conversion rate for your leads and healthy traffic levels, it's a sign that your online store business is doing great. However, there is another metric that also holds a lot of weight. This is the average order value, commonly known as the AOV.

Your average order value is a key business metric that can show whether or not your marketing strategies are effective. In addition, the metric allows you to gauge the effectiveness of your customer retention strategies and marketing campaigns.

Today, we will be exploring the topic in-depth. In this blog post, you will learn the basics of average order value: how to calculate average order value and why AOV is important. Additionally, we'll provide answers to some frequently asked questions about AOV. But before we get started, let's understand what the AOV is.

What is the Average Order Value (AOV)?

The average order value (AOV) metric calculates the average amount a customer spends per transaction on a website or within a brick-and-mortar store. eCommerce businesses often use AOV to find valuable sales channels, improve sales performance, and track customer behavior.

Average order value is a metric that can give you insights into the overall health of your business. It can be calculated for an entire company or specific product lines, channels, regions, etc.

For example, a company might compare its yearly average order value or study how special marketing efforts impact the AOV. Understanding how AOV is calculated and what factors play into it helps online businesses increase their average order value - leading to overall growth in profit margins.

How to Calculate the Average Order Value?

It would be best if you tracked your AOV regularly to monitor the health of your online business. The average order value formula is quite simple. To find your monthly AOV, divide your total revenue by the number of orders placed. For example, if your business received 10,000 orders worth $400,000, your AOV would be $40 (or $400.00 divided by 10,000).

Retailers commonly calculate the AOV monthly, but you can use any time frame. If you track a monthly AOV, you can better understand how different seasons affect your sales.

This information is essential to make more informed decisions about pricing and promotions strategies. Also, daily averages give you a good idea of your trends, which is essential information leading up to big shopping holidays like Black Friday and Cyber Monday.

Why is AOV Important?

AOV is a metric that calculates the average dollar amount customers spend on your website per purchase. To get your website's AOV, divide total revenue by the number of orders. Although it may be easy to overlook, the average order value is a fundamental metric for eCommerce managers to keep track of.

An AOV lets you see your loyal customers' spending habits and how it affects your marketing and pricing strategies. 

Boosting your website's average order value not only improves sales and profit margins but also provides key insights into the purchasing habits of your target market.

5 Benefits of Increasing AOV

One of the most significant benefits of increasing average order value is that it will empower you to increase revenue without spending more on marketing and sales. In addition to the benefit mentioned above, here are a few more reasons why you should focus on increasing your AOV:

Boost in Sales

By increasing your average order value, you will then be able to sell more inventory. Ultimately, this will lead to more sales for your eCommerce brand, which benefits your business.

Higher Revenue

As more customers purchase additional items, your company's income will increase. Furthermore, if you use the appropriate strategies, your profits will rise. However, although revenue may increase, this does not guarantee more profits. Therefore, it is important to think about your pricing strategy before making any decisions.

Faster Profitability

By increasing your store's average order value, you can take advantage of the benefits of a shortened sales cycle. If you implement these changes, your eCommerce store will become more profitable in a shorter amount of time. Additionally, you can reinvest money into advertising and other marketing strategies to help grow your business.

Greater ROI

You will need less time to make more profits if you increase average order value. The more revenue growth, the sooner you become profitable and see a return on investment.

Increased Customer Lifetime Value

Customer lifetime value is an important metric for measuring the success of your business. AOV and LTV are not opposing concepts. Instead, AOV impacts how much a customer is worth to your business, affecting that customer's LTV.

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The Top 12 Ways to Increase Average Order Value (AOV)

Using the tips below, you can increase the average order value of your customers. But before you start, look at your data to better understand why AOV is low in the first place. After gathering this information, you can choose the most promising strategies for your business.

Furthermore, try out only some of these strategies simultaneously because you won't be able to discern which ones are effective and which aren't. 

  1. Provide Bundle Deals

Offering your loyal customers bundle products is a great way to increase average order value. For example, your offer might be structured as a promotion where customers receive a free gift after purchasing two items or buy three and get the fourth item free.

Since AliExpress items are already reasonably priced, you'll want to be mindful of giveaways that will only cut a little into your product margins. As an example, if you're a clothing retailer who specializes in selling products for women, your free gift could be a $2 bracelet.

When you want to offer a "buy three, get one free" deal, make sure that your pricing covers the costs incurred from giving away the fourth item while still turning a healthy profit overall.

  1. Upselling

If an existing customer is on the verge of checking out, suggest they upgrade to a more expensive version of the product with additional features. This will increase your chances of making a sale.

For example, McDonald's is notoriously known to encourage customers to spend more by asking if they would like to "supersize" their meal. Even though most people know that supersizing will only add unnecessary calories and cost to their meals, the offer is still tempting enough that many people cave and agree to upgrade.

When customers supersize their meals, they're spending more money. Nevertheless, they walk away with a lot more food, making the purchase feel like a good value.

You can also execute this strategy on your online store by ensuring you carry products to upsell and then suggest them to customers. There's a good chance that your website visitors won't check out your higher-value products, but if you give them a suggestion, they'll at least think about it.

  1. Cross-Selling

This method is commonly recommended and has been proven effective for most businesses. This strategy aims to suggest similar products to your customers before they complete their purchase so that they buy more items and raise the amount spent per order.

The purpose of upselling is to convince the customer to purchase a more expensive product, while the objective of cross-selling is to sell an additional but still related product. For example, McDonald's is well-known for asking customers if they want fries with their orders.

To take advantage of this on your website, look for products that work well together and recommend them to customers during their shopping experience. For example, you may have noticed that retailers sometimes recommend similar products or items that other customers buy when you shop online. This is called cross-selling.

  1. Develop a Customer Loyalty Program

Creating a loyalty program can do wonders for your average order value. Customers can earn points or volume discounts with each purchase in such a way as to show your appreciation for their loyalty.

A customer loyalty program has plenty of advantages. One is that it helps to create evangelists - customers who repeatedly visit your website to shop and tell their friends about it. One report claims that 40% of a store's income originates from return customers.

A measly eight percent of store visitors are repeat customers. Therefore, marketing to existing customers is essential to maintain a successful business. People who have shopped with you are more inclined to make future purchases than those who have heard about your store for the first time.

Developing a system where customers return for more creates a larger customer base and cultivates a fervent fanbase that will order multiple items each time.

  1. Offer Free Shipping Threshold

An excellent way to increase average order value is by promising free shipping for customers spending above a specific amount. For example, orders over $100 meet a free shipping threshold.

After you figure out your average order value, add 30% to it. For example, if your average order value is $100 and you see a 30% increase, that would be an extra $30 on top of the original amount, making the new total equal $130.

This new number will be your free shipping threshold – so if someone spends over $130, their shipping is complimentary. Aaron Zakowski found that raising the expected order value by 30% resulted in the best free shipping threshold cutoff.

If customers' purchases don't reach the free shipping threshold, send them a notification at checkout so they can consider adding more items to their order. This notification system will help you boost your customers' average order value.

  1. Add Social Proof

Having social proof is necessary to encourage customers to buy from your store. But how would this impact your AOV? Including customer reviews and ratings for similar products will help improve your cross-selling and upselling efforts.

Also, consider adding pictures and other social proof to your website to help build trust with visitors. Many products don't take off because no reviews or other social proof exists to show that people have bought and enjoyed the product. Thus, positive customer reviews and social proof drive sales and the average value order.

  1. Financing

Another way to get customers to spend more money on your website is offering a financing strategy for high-ticket items. This is the perfect tactic if you have a storefront and sell big-ticket items like furniture, electronics, or art.

However, it likely will only work well for stores selling larger items. 

Customers are often more likely to purchase an item if they can finance it rather than paying the full amount upfront. Offering a financing strategy allows you to break down the cost of an item into smaller, more manageable payments that customers can make over time.

This makes the purchase more affordable for customers and increases your order value. In addition, customers will likely feel more comfortable adding items to their orders when you do this.

  1. Show Multiple Products Together

You can increase average order value and key metrics such as conversion rate and revenue per visitor by displaying multiple products together. For example, you can generate more income by creating and posting a makeup tutorial on YouTube with product links. Furthermore, this is beneficial for website traffic as well.

One Example would be to display multiple clothing items on a single product page. For example, a model in a product photo might be wearing clothing items such as a top, pants, shoes, and jewelry. Adding a "Shop the look" section to your product pages will entice customers to buy everything they need to replicate the outfit, thereby increasing sales.

Never assume everyone has the same sense of style or ability to put together an outfit. You can generate higher profits by displaying outfit choices to customers and having an "add to cart" function that includes the entire ensemble in their purchase.

  1. Highlight Best-Sellers

If customers are ready to check out, you can add a highlight to your best-sellers in a pop-up form. This is an easy way to increase conversions without bombarding potential customers with too much information all at once.

To do this, you can display your three best-sellers of all time, the three most popular products bought with what they ordered, or similar items they might be intrigued by. Include a badge on this pop-up for low-inventory products to create a sense of urgency.

By displaying popular items to customers, you are more likely to see an increase in revenue as the product has already demonstrated sellability. If customers add best-sellers to their cart, you can give them a particular discount to avoid sticker shock when they see the higher order total. Displaying best-selling items on your website encourages customers to make more purchases, increasing revenue.

  1. Offer Time-Sensitive Deals

You can increase average order value by implementing a time-sensitive deal. For example, you could advertise a 48-hour deal where someone receives a freebie or a significant discount on their purchase when they buy a certain amount of products.

Even though urgency may not necessarily result in a higher average order value, it will boost conversions. Likewise, offering time-sensitive deals is a fantastic method to increase average order value when business is slow. Moreover, these strategies are relatively easy to implement. You can display ads for them on Facebook and Twitter or create a banner notification on your website.

  1. Give Product Discounts

Although it may seem strange, giving discounts can help improve your average order value. In addition, having a minimum purchase allows you to make more funds when giving discounts. For example, receive $10 off your purchase when a customer spends $75 or more.

Some brands offer discounts when someone buys a large quantity. Some discounts are only active when an order reaches a specific value. For example, if you spend $75, receive a discount of $10; if you spend $100, get a discount of $15; and $150 nets you a discount of $25.

  1. Flexible Return Policy

For a long time, people were reluctant to buy items from online stores because they didn't feel confident that the products would be of good quality. People generally prefer shopping in brick-and-mortar stores instead of online because they can more easily return defective items.

Having a store policy that is lenient with returns helps to build trust between potential customers and your business, which will, in turn, encourage them to make their first purchase. Most eCommerce stores have a return policy that lasts 15-30 days. This assurance leads people to purchase more products, knowing they can always return them if something goes wrong.

3 Additional Tips to Help You Maximize Average Order Value

Your average order value affects your profit margin and your total revenue. Increasing your AOV can generate more revenue without spending additional money. Here are some easy ways to increase your average order value in addition to attempting to sell more and encouraging customers.

  1. Segment Your Market 

First, take a close look at the average order value. When you segment your market, you can focus better on those who have already spent money with you. If you want to boost sales, begin by targeting the customers that spend less.

In contrast, customers who make higher-priced purchases would find loyalty programs more appealing. You could also attract potential customers by offering free shipping and coupons.

  1. Optimize Your Website User Experience 

Secondly, aim for a smooth website experience. A website constantly bombarding customers with pop-ups has a slow loading speed or regularly lags or crashes would give customers a negative experience. Instead, focus on giving them a positive experience by ensuring your website runs smoothly and efficiently.

  1. Study Your Customer Base 

Lastly, understanding your target market is crucial to providing a relatable and personalized customer experience. Keep your audience's interests at the forefront of your mind, and map out their customer journey.

Take a closer look at what drives your customers to action by speaking with them directly, studying your competition, and reviewing previous marketing efforts.

Final Words: How Average Order Values May Improve Your Online Store

Your company can rapidly increase revenue with a minimal extra effort by offering customers discounts, sales promotions, and other special deals that encourage them to spend more money.

You can make the purchasing process smoother by offering different forms of payment, including well-known ones used in local areas. In addition, keep your checkout process concise by only requesting necessary information from the customer.

Always remember that you can increase your average order value at every sales funnel stage, leading to greater productivity and profitability.

FAQs

How do you increase the average value of a customer's purchase?

Make more sales by upselling your products, offering free shipping as an incentive, keeping timely offers, tailoring the customer experience to each individual, and creating package deals.

How can I increase the average order value for my eCommerce store?

Offer discounts and free shipping on qualifying orders to entice customers, create your own bundles to make buying easier, and have a return policy to keep them coming back.

Does the average order value include applicable taxes?

Absolutely! The average order value in the orders report encompasses shipping and taxes. Also, remember that there might not be any reference to refunded or returned orders.

Does AOV include discounts?

Yes! Deductions and discounts from customers significantly impact the average order value. Therefore, the average order value is significantly impacted by discounts.

How can businesses increase their AOV?

If you want your business-to-business (B2B) company to make more money per transaction, create opportunities for customers to interact with your product or service. A great way to ensure customer satisfaction is offering a unique experience customized specifically for them. There are several methods of increasing the average order value for B2B customers, like upselling, cross-selling, and product bundling.

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