How to Increase Your Average Order Value in Ecommerce
Increasing average order value (AOV) for your online store makes a lot of sense as a business owner. Not only does a higher average order value bring in more total revenue, but it can lower your customer acquisition costs and ultimately reduce the amount you need to spend on marketing.
To calculate your average order value, divide the total revenue by the total number of orders in the same time period. This number will help you to track customer behavior and measure improvements in your AOV over time.
11 Strategies to Increase Average Order Value in Your Online Store
1. Free Shipping Threshold
Everyone loves free shipping, and many people will pay more to get it. To encourage customers to spend more, offer free shipping with purchases above a certain threshold such as $50 or $99. Then, display the offer in several key places:
On the home page
On the product page
At checkout
There are even plugins that will automatically notify customers of how much more they need to spend to qualify for free shipping. Factor the cost of shipping into the price in order to ensure that you don't adversely impact your profit margins.
2. Cross-Selling and Upselling
Cross-selling and upselling increase the average dollar amount spent at the checkout by suggesting related (or more expensive) products that might add value to the customer's purchase.
Cross-Sells
For a cross-sell, suggest related products that will add value and convenience for the customer, such as a memory card that goes with the Xbox in the customer's cart or a pair of pajama pants to match the customer's chosen pajama top.
Upsells
Upsells—rather than adding to the customer's cart—allow him or her to swap out the current selection for a higher-quality, higher-cost version. For example, you might offer another laptop computer from the same manufacturer that offers more RAM and storage than the laptop in their cart.
Top Tip
When offering cross-sells and upsells to increase average order value, it's essential to keep in mind that you want to add value for the customer—not just make more money for the store.
To use these strategies effectively:
Analyze the best timing for the offer—on the product page, at the checkout, or after the purchase in the confirmation email.
Offer the cross-sell at a slightly discounted rate.
Make sure the cross-sell or upsell is relevant and adds value for the customer.
Easy Cross-Selling Strategies
If you're not quite ready to add a cross-sell plugin, you can bring related products to customers' attention by:
Linking to related products on each product page (as part of your ecommerce SEO and marketing strategy)
Positioning related products close to one another on each category page
Creating dedicated sets, each with their own sub-category page
3. Bundle Deals
Product bundling is a very effective strategy for getting more value out of every transaction. Amazon routinely employs this strategy to boost its sales. A bundle can include:
Several complementary products, such as a "new parent bundle" that includes diapers, wet wipes, diaper cream, and a changing mat
More of the same, such as two or three books on related topics
When creating bundles, make sure to offer a slight discount compared to purchasing each product separately. This increases the perceived value for the customer, leading to more sales.
4. Volume Discounts
If a customer already loves a particular product, why not encourage him or her to buy more? Volume discounts or bulk buys can help you move your product while allowing customers to save money. Examples of volume discounts include:
Buy two and get 10% off
Buy four and get one free
In addition to advertising the promotion on your home page, add a reminder on the relevant product pages with the offer highlighted on the quantity drop-down list.
5. Customer Loyalty Program
It's much more cost-effective to invest in customer retention than it is to attract new customers who may only make a single purchase. To encourage more customers to come back—and spend more when they do—create a customer loyalty program that rewards customers for spending more.
For example, customer reward programs are extremely effective. You could give points for every dollar spent over a certain threshold (such as $20) and give rewards for total points accrued rather than the total number of transactions. Once the threshold for a reward is met, give the customer a gift card or discount with an expiration date to encourage them to place another order soon.
6. Personalize the Customer Experience
Personalizing the customer interface and communication via email fosters customer loyalty and can increase average order value as well:
Website Customization
On your website, artificial intelligence plugins allow you to personalize the customer's view of your store to display items that are relevant to a past purchase or product search—or to display suggested cross-sells under the heading "related to your search" or "customers who bought this also bought..."
Personalized Email Marketing Campaigns
Personalized email campaigns keep your customers informed about the items and product lines that are of most interest to them without boring them with items that aren't. You can take advantage of a marketing email to offer a personalized discount code, bundled offer, or volume discount to encourage the customer to come back and buy more.
7. Promotions with a Time Limit
There's nothing like a sense of urgency to motivate customers to buy. And when your promotions reward a higher spend, time-sensitive promotions can go a long way to increasing your average order value.
Often timed just before a holiday or the end of the tax year, time-sensitive promotions can include:
Discount codes sent to newsletter subscribers by email
BOGOs or "buy one get one free" in which the lower-priced product is free
Threshold discounts, such as "spend $100 and get $25 off"
Volume discounts (as explained above) such as "buy 1 ounce and get 10 grams free"
8. Exit Intent Popups
It may seem counter-intuitive, but placing a popup when new customers are about to leave your website can be effective for helping them proceed through the sales funnel and even spend more money than they planned. While exit intent popups can include all kinds of offers, you'll want to include:
A discount, such as "20% off your first order"
A time limit, such as "if you purchase in the next 30 minutes"
Just as a time limit on a particular discount encourages customers to make a decision, extremely short-term time limits encourage customers to "pounce" before they miss out on a great deal.
9. Prominently-Displayed Social Proof
According to recent research, 72% of customers will only place a purchase after reading positive reviews. If you want to increase your average order value, use social proof to increase trust and encourage customers to spend more.
One of the best ways to build up social proof is to email customers a week or so after they purchase products to check whether they are happy with the product and request that they leave a review on a third-party website like Google My Business or Yelp. Then, display these ratings, reviews, and testimonials in a prominent place on your homepage together with a summary such as: "We have 2,000 five-star reviews."
10. Allow Your Customers to Pay in Installments
Offering gradual payment solutions automatically increases the average order value because customers don't need to have all of the money up-front. If you sell software-as-a-service (SaaS) and can afford to accept monthly payments, offer a payment plan that costs slightly more in total than paying for a year at a time. Alternatively, you can accept third-party settlements from companies like Klarna and PayPal's Pay-in-4 to reduce the customer's upfront cost.
11. Offer an Easy Returns Policy
There is always a risk in placing an order online. The greater the order value, the greater the risk. To reassure customers, have a clear, easy-to-follow returns policy that's prominently displayed and cover the return shipping costs if you can. The returns experience affects 73% of customers' decisions to buy from the same retailer in the future, so an easy returns process is a must.
Tips for Implementation
Knowing how to increase your average order value is the first step. Having a few tips and tricks to implement these strategies effectively can help you obtain the best results:
Analyze your past sales and build on your strengths. Focus on your loyal customers and best-selling product categories first.
Try one new strategy at a time and measure its impact on your ecommerce KPIs before trying the next strategy on the list.
Perform alpha and beta testing to fine-tune each strategy and make sure everything displays correctly on both desktop and mobile.
Determine how much you can afford to offer in discounts and free shipping without cutting into your profit margins.
Focus on offering quality products, excellent customer service, reliable shipping, and easy returns, and your loyal customers should be more than happy to continue making high-ticket purchases in your ecommerce store.
A Few Simple Strategies Can Boost Your Earnings
As long as you have a solid product, you can increase your average order value through threshold-based offers, cross-sells, upsells, bundled deals, special promotions, buy-now-pay-later strategies, easy returns, and personalization. Just remember to implement one strategy at a time, observe its impact, and improve or fine-tune it before taking on your second strategy and so forth.
The most effective techniques will be those that have the most significant impact on average order value at the lowest cost. Strike the right balance and you should see improvements both in customer satisfaction and in your bottom line.
