How to Increase Average Order Value for Ecommerce


How to Increase Average Order Value for Ecommerce

The eCommerce market is constantly changing and expanding to accommodate new players, making it difficult for online stores to get more value out of their customer orders.

However, it is far easier for online stores to get their current customers to carry out more transactions than it is to get new customers to place orders. With the right remarketing and targeting strategies, online stores can expect their revenue and profitability to rise significantly.

Considering all these factors, let us start with average order value definition, and then move on to discussing the different ways to increase it.

What is the Average Order Value (AOV)?

The average order value or AOV, refers to the amount of money customers spend on a specific transaction. Average Order Value for eCommerce stores calculation entails dividing the total revenue generated by the website by the total number of orders received.

Along with important metrics pertaining to order fulfillment, Average Order Value is often considered a crucial metric to track and should be monitored by you periodically. Not just this, you should keep an eye on AOV (Average Order Value) every day during sales and extended discount periods. Doing so will let you know whether the marketing strategies you are deploying for your online store are working.

How to Calculate Average Order Value?

To understand this metric better, here is the Average Order Value formula:

Average Order Value (AOV) = Total Revenue Generated/Total Number of Orders

Say, you have an online store selling electronic products across categories. If your website receives 100 orders every month and generates a revenue of $40,000 every month, your average order value can be calculated as $400. 

The calculation will go like this — 

Average Order Value = $40,000/100 = $400

This means that a customer spends $400 every time they purchase from your online store.

Why Do You Need to Improve Your Average Order Value?

Now that you know the definition, and the formula to calculate the average order value, let us look at why exactly you should be calculating or working on it. Average Order Value metric plays a pivotal role in shaping some of the most important strategies and decisions for your business. 

Here are the primary advantages of calculating and improving your average order value:

1. Better Profitability

When your store has a higher average order value, you do not have to constantly focus on increasing the number of customers you sell your products to. You can also reduce the sales cycle, which will materialise into profits for your online store in a shorter duration. This way, you will also have more money to spend on advertising and other growth strategies.

2. Boost in Revenue

This one is an easy correlation to wrap your head around - more products being purchased by customers translates into more revenue for your online store. Along with this, if you implement other marketing and sales strategies effectively, your profits will increase. However, remember that you will need the right pricing strategies at your disposal, as an increase in revenue does not always mean an increase in profits.

3. Greater Return on Investment (ROI)

The payback period on the investments that your online has sought will influence the way your business is likely to perform. Say, for a specific investment, your payback period is 6 to 8 months. This is actually pretty good for a business, but you can shorten this payback period even further by increasing your average order value. The increased ROI will help you gain confidence and credibility within the market.

4. Increase in Customer Lifetime Value (CLV)

Like Average Order Value, your Customer Lifetime Value (CLV) also plays a crucial role in determining the health of your business. The two metrics are not mutually exclusive and impact each other. AOV will directly impact the customer value, which will then indirectly affect the customer lifetime value. Increasing your average order value can improve your CLV, however, you will also need other tactics and strategies for consistently improving it.

12 Best Ways to Boost The Average Order Value of Your Online Store

Now that you know the merits of boosting your eCommerce average order value, let us look at some of the primary ways in which you can improve the AOV of your online store. 

1. Design Your Product Pages Aesthetically

The way your product pages are designed will determine how well they are likely to perform. Remember, that the colours, words, layouts, and graphics that you utilise on your page will impact your conversion rate as they should appeal to your customers.

An attractive web page design will also ensure that your customers trust your products more and are more likely to buy from your website. This can be a game changer, especially for products that are of higher value.

2. Showcase Social Proof

Social proof, such as reviews and feedback can be especially instrumental in impacting online buying decisions. Shoppers end up shopping and spending more on websites that have a lot of positive reviews. All you need to do is showcase these positive reviews on your website and social media channels so that you can increase average order value of your store.

3. Find Creative Ways to Cross-Sell and Upsell Products

Cross-selling and upselling products can be quite beneficial in increasing the number of purchases a customer is likely to make on your website. Here, you want to try and cross-sell products to your customers effectively. 

For instance, if you just bought a Samsung smartphone, cross-selling a charging cable or Bluetooth earphones at checkout will increase the likelihood of customers going through with the purchase.

4. Experiment With Product Bundling Strategies

Like cross-selling, using good product bundling strategies can help you increase your average eCommerce order value significantly. Here, you want to create a bundle of products that will be worthy of interest to customers, and provide great value to them. You can increase your AOV significantly by bundling related products together.

In addition to this, if your customer believes that you are getting a good deal, they are more likely to spend more money overall, making it a lucrative strategy to improve average order value. This does not necessarily mean that all the products should be of the same category or brand.

Rather, you should consider bundling two valuable products together and offering a discount on the total price, making it a great deal for the customer as well as raising the average order value. Win-win! 

5. Implement a Minimum Order Value for Free Shipping

This one is a rather common strategy to get customers to spend more on your website. You implement a minimum order value on which customers will be able to avail of free shopping. If they spend less than the minimum order value, they will have to pay a negligible amount for the shipping and delivery.

We have all been there, right? Trying to find a small item worth $10 on the website so that we can avail the free shipping. This works brilliantly when the customer is already close to the threshold for free or discounted delivery. 

Alternatively, you can also partner up with top courier services to offer expedited deliveries on minimum order value to encourage customers to add more to their orders.

6. Personalise The Shopping Experience

Personalisation goes a long way in convincing your customers to buy a lot of products from your online store. As a growing online store, you should focus on leveraging all the valuable data and related insights at your disposal, so that you can curate highly personalised shopping experiences for your customers.

You will want to derive these useful insights from your customers’ order history which will also give you a better understanding of their preferences, and help you tailor marketing campaigns to them. You can also personalise the packaging materials for your deliveries to add that extra touch. This targeted approach towards personalisation and impressing customers can maximise your average order value.

7. Create a Loyalty Program

Loyalty programs might seem like a stretch just for increasing your AOV, but considering the many benefits they can offer for online stores, having one is not a bad idea. Loyalty programs can increase your customer retention rate as well as create brand ambassadors among your customer base.

Leverage your loyalty program to increase your AOV, by letting customers earn points, or avail discounts on selected products. You will be able to market your products in a better way to your repeat customers, which in turn can increase your average order value.

8. Offer an Upsell on Discounted Price After Checkout

Some customers are harder to upsell products than others. There will often be people who would want to stick to their purchase list without adding anything else. But the best way to increase your average order value even with such customers is to give them reasons to buy more by creating urgency around it.

Let us understand this with an example. Say, a customer shopped for $500 on your website and is about to leave the website. So, instead of sending them a thank you note or screen, you can direct them to an upsell page. This upsell page will sell one of your other products related to the purchases that the customer has just made, and offer it at a 30% discounted price.

You can rest assured that most people will buy the upsell, and contribute to a higher average order value.

9. Provide Gift Cards and Coupons

To increase your average order value, you want to target repeat customers more aggressively. For this, you need to ensure that customers who land on your website even once feel the need to return quite soon.

Now, when a customer has a gift card, they can use it with their next purchase which will make them want to return to your website. The same logic applies to coupons as well. You need to ensure from your end that the pricing set for the products covers the price of any gift cards or coupons as well.

10. Down-sell Add-on Items

So far, we have talked quite a bit about upselling and cross-selling products when customers are shopping from your online store. However, the next major term that you should be aware of is downselling.

Depending on the nature of the products you sell, there might be add-on items that potential customers might be interested in buying. You can encourage customers to buy a cheaper item that complements the costlier item they have just purchased. This usually works and is as effective as cross-selling or upselling products.

You should also ensure that the products add value, and will account towards a higher average order value. 

11. Promote Time-Sensitive Discounts and Offers

When you want your customers to add products to their current orders and increase their average order value, time-sensitive offers and discounts can be very helpful. These offers can especially come in handy when you are experiencing a low season in terms of sales.

Offer discounts on specific products for a limited duration. This sense of urgency that you create in customers will make them want to add more products to the orders and also increase the average order value.

12. Have Flexible Return and Exchange Policies

In several instances, customers keep their order value on the lower end because they do not want to risk dealing with difficult return and exchange policies in online stores. While you should work to reduce product returns, you should also have a strong mechanism to deal with them.

Your transparency and flexibility in return and exchange policies will reassure your customers that they should purchase from you. Make sure that your policies are displayed clearly on your website, and be flexible so that if a customer does have to return or exchange a product, they still come back to your website for another purchase.

Boost The Average Order Value For Your Online Store

Your average order value is a major determinant of your online store’s performance and profitability. By deploying the right strategies from the ones mentioned here, you can boost your AOV and subsequently your revenue. While you deal with getting larger orders for your website, you do not have to worry about fulfilling those orders.

PACK & SEND is fully equipped with local and international courier services to deliver your big shipments as well as small ones, whether they are domestic or international.

Post by Topic