As a retail or eCommerce business owner, your customers are your lifeblood. If you take care of your customers and consistently meet their needs with your services and products, you will enjoy a steady boost in sales.
If your business has a reasonably steady flow of customers and a solid product range, you’re on the right track. But, to take your business to the next level, taking measures to increase average order (AOV) is essential.
Since the start of the pandemic, consumer buying habits have changed. During the early COVID-19 lockdowns, people began to make more conscious buying decisions, spending less on non-essential items across niches.
But, as the world continues to open up, online shopping is on the rise, with online retail expected to surpass the $1 trillion mark in 2022. If you’re an eCommerce business looking to make your mark, now’s the time to strike. And, that’s where average order value comes in.
So, what is average order value and why is it important? Here we answer these important questions while exploring practical ways of increasing average order value for your business.
What is Average Order Value (AOV)?
Average order value (AOV) shows how much each of your customers spends on a purchase, on average.
Expressed as a numeric value, the average order value is calculated based on customer purchases or orders over a specific date range.
The reason AOV is so valuable to an eCommerce store is the fact that it’s simple to work out and will give you a wealth of insight into your highest as well as lowest value customer segments.
Armed with this information, you can make strategic tweaks to your sales and marketing strategy to meet your customers’ needs head-on, highlight the right products, and ultimately, increase your average order value.
How to Calculate Average Order Value
Before focusing on how to calculate order value, let’s look at a quick eCommerce business example:
If you have a retro shoe store and your revenue for the month is $3,000 split between 100 orders, your AOV is $30.
Based on this calculation, your customers spend an average of $30 on a single purchase or order. You can use this information to set a benchmark to ensure your sales and marketing efforts drive enough consistent revenue to the business.
Based on the example above, to calculate average order value, you simply add up your total revenue for a specific time period (weekly, monthly, quarterly or annually) and divide it by the total number of orders.
It’s a straightforward way to discover the general value your customers are offering your business, based on their perceived value of your brand, service, and products.
Why Does Your Average Order Value Matter?
For an eCommerce store or business, the average order value is a powerful top-line means of measuring your success based strategies including:
- Product pricing
- Product promotion and merchandising
- Brand communications and marketing
As three essential pillars of sustainable business growth, periodically calculating your AOV is vital. Another key benefit of calculating average order value is that it will give you a clear indication of how to set your sales and marketing budgets.
If you know your average order value, you can make sales and marketing-based investments that are likely to offer a healthy return on investment (ROI), rather than ploughing your efforts into campaigns or activities that offer poor results and drain your budgets dry.
How to Increase Average Order Value: Top Tips
To set about increasing your average order value, you should first set a realistic target or benchmark.
Depending on the size of your business and your sector or niche, your AOV target will vary. But, by calculating your current average order value, you can set a benchmark that will give your AOV growth strategies a clear-cut direction.
There are many ways of boosting your average order value—and these are among the most effective strategies:
- Offer free shipping
- Try cross-selling and upselling
- Build on your returns policy
- Focus on A/B testing
Successful Strategies For Boosting the AOV For Your Online Store
We’ve outlined the best ways of boosting your AOV and, as a result, your store’s revenue—now let’s dive in a little deeper—starting with free shipping.
Offer Free Shipping
One of the most simple yet effective ways of raising your AOV is by offering your customers free shipping.
You can either raise your retail prices slightly to offset the cost or absorb the costs on the notion that your new free shipping initiative will raise your AOV and drive more revenue to your business.
Another key AOV-expanding approach is to offer a minimum threshold for free shipping. Presented with a free shipping incentive for a minimum purchase of $35, say, a healthy portion of your customers are likely to make an additional purchase to reach the minimum threshold.
The point is: 9 out of 10 shoppers are inspired to shop online when brands offer free shipping—so it’s an AOV-boosting strategy worth exploring.
Try Cross-Selling & Upselling
Another proven way of increasing your AOV is by cross-selling and upselling.
By sharing personalized product or service recommendations to different segments of your audience and adding plenty of opportunities to upgrade or add complementary products to the shopping basket during your customers’ sales journey, you will see a steady increase in your AOV.
Cross-selling
Cross-selling is focused on offering your customers products or add-ons that are relevant to the item they’re looking to purchase. Here are a few tips to help you maximize your cross-selling efforts:
- Incentivize your customers by showing them how much they will save by upgrading or adding complementary products to their basket.
- Experiment with cross-selling and upselling across different channels from your online store to your email and social media marketing channels.
- Offer carefully curated bundles of products that offer personal value to your audience If you’re a camping store, for example, you might bundle a water canister, waterproof jacket, and lightweight solar-powered portable stove with your latest range of family tents.
Upselling
Upselling is focused on offering your customers an upgraded, higher priced version of the item they’re looking to purchase. Here are a few tips to help you maximize your upselling efforts:
- Incentivize your customers to upgrade to a higher priced item by offering a complementary service like an extended warranty or free item that’s relevant to their purchase.
- Display other upgrade items on your checkout page which outlines their USPs (reasons to upgrade), coupled with a call to action button for each (‘Upgrade’ or ‘Buy now’, for instance).
- Apply a slight discount to the upgraded item recommendation to offer your customer a perceived level of value. E.g. “You can enjoy all of these extra laptop features for just $60 extra with this exclusive discount.”
Volume discounts
Rolling out volume discounts is a practical means of increasing AOV for your eCommerce store.
By allowing your customers to buy a large number of goods or products at a discounted price, you will see a boost in your average order value over time.
One of the best ways of offering volume discounts is through tiering. If you sell organic health products, for example, you could offer a different level of discount depending on the number of goods purchased. Your volume discount tiering offer may look something like this:
Bag of chia seed & flaxseeds: Buy five for a 10% saving.
Bag of chia seed & flaxseeds: Buy 10 for a 15% saving.
Bag of chia seed & flaxseeds: Buy 15 for 20% saving.
This level of perceived value works and as long as you pay attention to your margins— setting your discounts accordingly—this savvy tactic will help you build your AOV.
Build On Your Returns Policy
Your returns policy is an often overlooked method for building customer trust and boosting your average dollar amount per purchase.
A simple tweak allowing your customers to send their items back hassle-free if they’re unsatisfied, will inspire confidence in your brand and help to further boost your AOV.
Coupons
Customers are incentivized by deals and offers including coupons. If you offer a coupon for money off a repeat purchase (for example, “spend $50 and get $5 off your next purchase) you will encourage customers to invest in your business again.
The coupon-based discount incentive will offer a great deal of perceived value and usually encourage customers to spend more, increasing your average dollar amount in the process.
Try A/B Testing
Building on our last point—if you know which parts of your customer experience journey are affecting your average order value, you can make specific tweaks or changes that will drive revenue to your business.
Working A/B testing into your eCommerce strategy will give you the insight you need to make the tweaks necessary to drive revenue while increasing your AOV.
A/B testing is where you take two versions of the same store or web page, each with slightly different variations.
For instance, you could run an A/B test on your store’s checkout page—one with a cross-selling button and caption and one without. By serving both versions of your checkout page to your audience, you can analyze which performs better.
Through A/B testing, it’s possible to extract a wealth of insights that will keep your customers engaged, increase conversions, and increase your business’s average order value. Through A/B testing, eCommerce analysts have discovered, for example, that a static hero image encourages more click-throughs than a scrolling banner.
Using an A/B testing platform, IT brand Server Density increased its revenue by 114% by transforming its pricing plan product page design from a gauge that relied heavily on price only, to a package-based aesthetic outlining the USPs (highlighting its mid-tier plan above its cheapest):
By running both pages, it was clear that version two earned better results, increasing the brand’s AOV in the process.
Through heat mapping, you can also see where on your store’s web or landing pages people are engaging least, and most.
Armed with this visual knowledge, you can change where you place certain images, call to action buttons, promotions, and pieces of product information and encourage consumers to buy higher value items.
You can run A/B tests across every channel, touchpoint, and page element imaginable, gathering the intelligence you need to make your sales, marketing, and AOV-increasing strategies as successful as possible.
Here some A/B testing ideas that will help to increase your AOV:
- Test your upselling and cross-selling images, captions, and content in different page positions.
- Place your call to action copy and buttons both above and below the fold to see which earns more click-throughs.
- Try different color, design, and placement variations of your AOV incentive content such as free shipping, volume discounts, and email subscription sign up offers (once your customers are signed up, you can deliver personalized deals and product recommendations to them directly) and track which version yields the best revenue.
Increasing your brand’s AOV is a strategic process that takes time and consistency across channels.
By taking the time to test these essential tips and strategies, you will see a healthy increase in your store’s average order value.
We wish you the best of luck and if you’re looking for a platform that will help you roll out your AOV-based strategies while helping you to launch product and marketing campaigns will pinpoint precision, explore our cutting-edge eCommerce management solution.
Average Order Value FAQs
What is the meaning of AOV?
AOV means the average order value. In business and marketing, this term refers to the average value or the average amount spent by customers during each transaction or purchase.
What is a good average order value?
Well, a good average order value varies according to industry, but it’s also calculated and benchmarked by the source of traffic or device. Our above advice on AOV calculations and metrics will help you gain a better understanding of what makes a good average order value.
Why is average order value important?
Knowing your average order value offers a window of insight into customer behaviors as well as how much they are spending on your products. By studying how your clients are spending on every order, you can organize your marketing and pricing strategies to further increase your AOV and make your business more profitable.
What is the average basket size?
is an eCommerce-based metric that measures the average number of items sold per transaction. ABS essentially benchmarks the increase or decrease in the number of items purchased per customer purchase.