You planned to get a pair of jeans, but a T-shirt matches your style and is discounted. Then you see that you will receive a cashback on your loyalty card if you purchase the lipstick. So you leave the place with bags full of products. That’s what increasing the average order value is all about.
As an eCommerce business owner, you may understand the importance of attracting new visitors to your website. But having people purchase more in every order can boost your revenue. In this article, we’ll discuss the average order value, how to calculate it, and the ways to improve this metric.
The average order value in eCommerce is a metric illustrating the amount of money spent on one order. It’s easy to calculate: divide the total revenue by the number of orders during a specific period.
Suppose you have 100 orders monthly, and the total revenue for this period is $5000. The AOV will be $50. It means every customer spent around $50 at a time. This figure can tell you the following:
AOV is a critical benchmark. But shouldn’t I focus on customer acquisition instead, you may ask? The answer is yes; having much traffic to the store may lead to conversions. And a more significant number of conversions result in higher sales. However, what if you could generate more revenue from the same amount of traffic? Increasing the AOV can help you with that.
A great deal of sales relies on psychology. You need to persuade others to choose your brand over dozens of others. For this purpose, you may boost your authority in the field, promote the company on social media, or capitalize on positive word of mouth.
However, increasing the AOV requires a deeper understanding of customers’ motivations and roadblocks. They already want to buy in your store, but why must they add more products to the cart? That’s why you should consider how you treat your shoppers.
Now that we’ve defined the average order value and why improving it should be a top concern, let’s look at some tested strategies for raising the AOV on your eCommerce website.
What do customers avoid the most during shopping? They don’t like thinking a lot. So if you provide them with a convenient deal to get something as a package, they will more likely buy it instead of looking for these items in your assortment separately.
For example, getting a burger is nice. But getting a ready-made lunch combo with a burger, fries, sauce, and a drink with one click is much better, right? Fast food restaurants understand and leverage that, and so could you. Bundling products lets you earn more and boost your average order value. Instead of paying $5, the customer may pay $25 for the package.
Pro tip: Let clients select the desired features or add-ons in their order, i.e., to customize the package. It will make them feel special that you put their needs first. For example, Boscia empowers buyers to construct custom bundles and receive a discount on these products and a gift.
Screenshot taken on the official Boscia website
Statistics show that upsells and renewals account for between 70% and 95% of a company’s overall revenue. And upselling increases revenue by 10% to 30%.
Let’s define cross-selling and upselling. Upselling denotes persuading customers to buy a more expensive item other than what they are looking at (to make the order value go up). For example, a visitor comes to buy cheap mascara because it runs out fast, and this person doesn’t want to spend much money on it. You can step in and offer another product at a higher price, explaining its extra benefits, such as:
Cross-selling, in turn, is about suggesting clients order complementary goods. It can involve displaying “Complete the look” and similar sections on product pages or creating post-purchase offers at checkout. Let’s take the previous case. Suppose you don’t offer more luxurious mascara. You can show the user an eye-makeup remover, lipstick, or a palette of eye shadows. Colourpop leverages this tactic in the shopping cart pop-up.
Screenshot taken on the official Colourpop website
A loyalty program revolves around engaging existing customers, that is, retaining them. It’s one of the most profitable strategies. Because once you’ve persuaded someone to trust your company, it’s worth shifting your resources to develop strong, long-lasting relationships. Here are some points to back up these ideas:
But the reason why you should introduce a loyalty program is to boost the AOV. Suppose a shopper has added the desired things to the cart and is ready to check out. But then they see they can earn rewards by purchasing a particular product or reaching a set threshold. These can be a discount on the following order, a gift, or early access to a new product line.
So they may buy more, leaving more money in your store. Moreover, they will keep returning to your business to redeem the earned points. A case in point is The Body Shop. It provides a free-to-join loyalty program, where you can make 1 point for every dollar spent. In return, the company offers $10 for 100 points, $10 birthday gifts, access to exclusive events, etc.
Screenshot taken on the official The Body Shop website
Free shipping is one of the most powerful incentives to buy goods, being a decisive factor for 75% of American adults who shop online. However, shipping implies additional costs, so you may hesitate to make it accessible for shoppers. That’s where free shipping thresholds may help.
Suppose you’ve found out that your AOV is $50. Some resources advise setting the threshold 30% higher than the AOV. So you may ask customers to spend $65 to deliver items at no cost.
Share this information on the homepage, product pages, and at checkout or display notifications of how close or far away the shopping car is from that sum. You can observe how Tease Tea informs users about the availability of free delivery on the homepage.
Screenshot taken on the official Tease Tea website
When shopping online, people need evidence that others have tried products. Even better, if these buyers enjoy using the goods, that’s what social proof and reviews are about.
They show other customers’ experiences with the brand, highlight essential features, and increase trust in the company. And these factors can contribute to boosting the AOV. When potential customers see that a product has positive reviews, they may be more willing to invest in the higher-priced version of the product, increasing the overall AOV.
Apart from reviews, you can leverage the following:
Ulster Weavers puts consumers’ reviews front and center on the homepage so visitors won’t doubt purchasing.
Screenshot taken on the Ulster Weavers website
Creating time-sensitive deals is another strategy for improving sales and the AOV. It’s beneficial during periods of less active sales and lower demand. For example, you can incentivize visitors to buy with a gift or special discount if they purchase a specific quantity of products within 48 hours or so.
This strategy creates a sense of urgency for customers to make a purchase. It also relies on the fear of missing out (FOMO) and scarcity to persuade those interested. And by promoting these deals on social media or using website banner notifications, you can encourage shoppers to take advantage of the offers.
Time-sensitive deals are straightforward. Consumers want to get the product before the sale expires, adding more items to their cart, even if it wasn’t their plan in the first place. You can check how it works in the screenshot from Overstock below.
Screenshot taken on the official Overstock website
Your eCommerce website can collect extensive data on visitors and customers. You can analyze large data chunks using artificial intelligence and machine learning and display more specific content. Utilize this fact to make better, more tailored shopping experiences and raise the AOV.
For example, you can look at the browsing or purchase history to learn about consumers’ preferences. This information will let you develop marketing campaigns that appeal to the target audience.
The “You May Also Like” section is one of the most widespread personalization implementations. You can find an example in the screenshot from Contarmarket below.
Screenshot taken on the official Contarmarket website
Suppose a visitor has come to buy a dress. Once they start browsing, the AI program detects their behavior patterns, prior transactions, demographic information, location, and other details. Then it shows boots or shoes that are a good fit for this person according to their style.
Average order value is one of the metrics to measure your store’s performance. The higher this parameter, the better income. Does it convert visitors into customers? And if yes, how much money do they leave?
How can you start boosting the AOV? The first step to optimizing the AOV is calculating it to determine your starting point. After that, you can implement the tips from this article. Whether you leverage cross-selling or free shipping, you enhance the overall shopping experience, improving customer satisfaction and loyalty along the way. So don’t hesitate to begin generating income now.