Digital Horizons
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Digital Horizons
Boost Your E-Commerce Profits: Unlocking New Revenue Streams with Strategic Bundling and AI-Driven Insights
We promise you’ll walk away with strategies that can transform your business by boosting your average order value without depending on price changes. Explore the magic of free shipping as a powerful incentive for increasing purchase sizes, and learn how setting strategic thresholds can entice customers to spend more. Our discussion highlights AI-powered product recommendations, featuring a compelling case study from Dan Murphy that reveals how individualized shopping experiences can skyrocket revenues.
Navigate the lucrative world of product bundling with us as we uncover how thoughtfully curated packages can simplify customer decisions and elevate your sales game. By crafting appealing bundles like themed collections for special occasions—with a nod to cross-category collaborations—you can meet diverse customer needs while enhancing AOV. Brian and I emphasize the importance of highlighting the value of these bundles, along with leveraging free shipping to further motivate buyers. Equip yourself with these actionable strategies to see marked improvements in your conversion rates and set the stage for e-commerce success.
The Digital Horizons Podcast is hosted by:
James Walker - Managing Director WHD
Brian Hastings - Managing Director Nous
Welcome to Digital Horizons, the channel for digital marketers, e-commerce entrepreneurs and business owners who want to know what's working in the digital marketing space. Right now, I'm joined here with Brian Hastings.
Speaker 2:I'm your host James.
Speaker 1:Today we are getting into part two of our five-part series. We're actually at part three because we did the overview at the beginning, but we're talking about the second lever for e-commerce growth, which is average order value.
Speaker 2:Yeah, and we've got a few quickfire strategies within the average order value lever a bit of content to get through. So we're going to try to be as efficient and succinct as possible on each one and give you some real, usable ideas and tactics to increase the average spend of each customer at checkout.
Speaker 1:Absolutely, and we're not getting into simple stuff like as well, not as simple. It's not a simple strategy, but pricing, because I think pricing is a whole different ballgame. This is more elements that you can do within your actual marketing strategy or your website strategy to try and encourage people to go through the process to spend more. Yeah, absolutely.
Speaker 2:I think that's an umbrella over everything. Of course, we know that you can increase your price and that will increase the average order value. But that's very market specific and product specific 100%.
Speaker 1:So when we're talking about the first one here, it's going to be using free shipping, and it kind of sounds a little bit counterintuitive, because if you're offering free shipping, you're obviously going to increase your average order value because you're now not charging for shipping. But when used in the right way, in terms of using it as a lever to encourage people to spend more to access the free shipping, this can be an extremely powerful tool. When you're doing this, though, you don't want to just look at it as all right, I'm just going to offer free shipping. Now there's got to be a lot of strategy behind it, because you can really shoot yourself in the foot with this style, because you could potentially be either blocking current customers or people who are potentially going to buy, but then your threshold is going to be set too low so that you can't actually people. It's deterring sales. So the way you want to approach it is place it just below your average order value within your website, because you don't want to stop people from checking out, but you want to lift people who aren't there to spend more. So that way, you're not hindering your current sales and you're elevating the people who are sitting underneath the way that we do this, though, though, is we're not going to look at a site-wide average order value, because you are going to have some big spenders who really blow out your average order value, and they're not going to be a high volume of them, though.
Speaker 1:So we want to look at our cohorts and look at the highest volume cohort that we have within our website, and then, by looking at that, you're going to see all right, cool, there's a whole bunch of people that, on average, are, say, spending $80. And know that the biggest chunk of our customers are spending $80. So let's set our threshold at $75. So then you're not impacting that large group of it, because they're going to spend that anyway. It's not going to impact them. That's cool. But then all the people that are spending $60, they're going to go oh, I need to spend an extra $15 or more to get the free shipping. So now you've lifted and elevated that lower cohort of people who weren't quite spending your average of your largest base of customers. So this strategy really, then, will lift up your overall sales. You're not impacting your current base, and your big spenders are going to keep spending big anyway because you're not impacting them, and so this strategy is really going to help you elevate your overall revenue through average order value.
Speaker 2:Yeah, absolutely, and it is seen as beneficial to those customers who are spending 60. It is common practice to see that if you spend over this threshold, you're going to get a discount and they will get additional value. They get more stuff that they want rather than spending on shipping.
Speaker 1:Well, that's it. And I guess, if you're looking at it, if they were spending $60, just to your point before about eBay if they were spending $60 and then you're going to charge $10, so that's going to get them to $70, but it's only an extra $5, then they're going to get free shipping. It's almost like a no-brainer. It's like, well, fuck it, I'm just going to spend an extra $15 on product, as opposed to having to pay that towards shipping.
Speaker 2:Yeah, exactly, it's like paying a fine. So yeah, absolutely, exactly.
Speaker 1:So that's one thing, and I think that's probably one of the more immediate things that you could do and implement, but looking at where your biggest group of spenders are not your biggest spenders, because your biggest spenders are going to spend anyway. Correct Like a bell curve to find that median so we're going to move on to the second tactic now, and that's AI product recommendations 100%, and if you're not using AI within your Shopify store or within your e-commerce store, now is the time to start thinking about it.
Speaker 2:This is something we covered in a brand news a couple of weeks ago that Dan Murphy's has recently had huge success in using AI product recommendations.
Speaker 2:If you've ever shopped at Dan Murphy's I would presume a lot of our listeners and well we do you'll know that you enter your phone number and they connect to you as a customer and you get a discount on some wines and some spirits. What they're doing with that information, though, is building up a profile about the typical products that you usually buy. They can then target you in the app with the best suggested offers and recommendations tailored to what you like, or you might step sideways and buy. That has caused them to massively increase the total purchasing over a period of a year from their customers by dropping in those right offers at the right time to the right people. So it is effectively learning what your customers like by tracking what they're spending and buying from you and then producing the right offers to not reduce what they're going to spend anyway, but to increase it. We've seen it work at scale for Dan Murphy's, and these sort of tools are going to become more and more available, and they're already available to connect into Shopify right now.
Speaker 1:That's right. There's one that we've found that's called Product Yield. We haven't tested ourselves, but this is one that is using AI recommendations based on your previous Shopify data, so it's going to then recommend products within your product pages, within your shopping cart and within your checkout process for relevant products that people have previously purchased in the past. That is very likely to go with whatever is in the person's cart at the moment. So, again, there will be a cost into this. But if you think about well, if this is going to increase my average order value, say, by 10, 20%, then it's going to be offset very quickly.
Speaker 2:Yeah, I think the days of you just picking what the recommended products for each product yourself should be. Maybe trial this tool alongside that, so that you can let data decide on what the next best thing is. I feel most people don't even actually pick anything do they yeah, no, it's just other things from the category that is. I mean normally it's like hey, this category goes with this category.
Speaker 1:It's the majority of what we see our clients and most businesses do, so I feel like stuff like this just gives you an edge on the competition.
Speaker 2:Yeah, so this is of use to the customer. They're going to enjoy getting the corresponding or relevant supporting product to add to their cart, rather than getting suggested an alternative to what they've already got in their cart.
Speaker 1:Yeah, 100%. You need to make sure it's complimentary. So let's move on to the next one, Next one. So the next one we're talking about is one click up sales, and this is. These have been around for a long time, but I just don't see them often enough.
Speaker 2:Yeah, I agree. When I've seen it work well once, I was like why isn't everyone doing this? It gets me every time when I see it.
Speaker 1:It does, and I think that you offer, but it's a high consideration product and so you sit in there and you put a timer on it and they can't make a decision because it's not an impulse buy. So you want to make sure when you're considering what it is you're going to put on your cart as well on your completed checkout page, make sure it's an impulse purchase, so it's a low cost, high margin product. So that way you can just bump your average order value up, customer doesn't have to think too much about it and you're adding something that's complementary to what they've already purchased.
Speaker 2:And to give some clarity around how that process actually works. When you've checked out normally at a store and you get the thank you page instead of just getting a thank you page, the site and the app that's connected to do one click upsell remembers all of your credit card data and your postage information and just asks if you want this extra product, you can add it to the order without having to go through the process again. We've got it all here, ready to go. Just click this button once and it will add to your total order. It's pretty amazing because you go, yeah, why not? That's it.
Speaker 1:That's it, and it's just got to be the right product there, doesn't it? Because you don't want to have to think too much about it, and so selecting that product is key Sort of hack around this as well, because the platforms that do do this they, I think, simplified pages. They charge a percentage of the actual upsells, so it can be a bit of a it's not costly.
Speaker 1:I mean, if you're going to get the sales anyway I mean you're still increasing your sales you will get those extra fees. But a way around this that we found that can work as well is set up an email automation, a post-purchase automation. Then what you do there is people complete their purchase. They don't see the one click upsell there, but then you can have an email that will go out immediately and say hey, by the way, would you like to add this to your order? If you complete the purchase within the next two hours or four hours or whatever it is, that is going to give you enough time to identify this is linked to this order so it's not duplicating your orders. And then you're sending out two packages, double shipping. So it is a hack around. It's not exactly as clean cut because they do have to go back through and purchase. It's not going to be a one click, but it is getting you around that percentage that you're going to have to pay as a free option there.
Speaker 2:And look, it could even be worthwhile testing both. You know, if you didn, I'll get them on the next one as well.
Speaker 1:There's something that I hate, though, when I see these one-click, like we were saying when it's done well, it works really well, but I hate the ones that are just like hey, would you like this? No, would you like this?
Speaker 2:No Would you like this and it just keeps going.
Speaker 1:You just fuck off and give me my confirmation. I just want worst.
Speaker 2:Do you want a car hire?
Speaker 1:I'm like what's going on. It's got to be relevant and just make it easy.
Speaker 2:Yeah, absolutely so. As far as platforms goes for this, james mentioned one but you can just search One Click, upsell and Shopify and it's going to be multiple platforms.
Speaker 1:I think it's actually called One Click Upsell Shopify, like that's basically the app plugin, that the app plugin, that's the other option, so that works.
Speaker 2:The next one loyalty programs, but with a twist. Do you want to take us through the twist, james?
Speaker 1:Yeah. So I mean you just want to make sure you've got exclusive tier perks. You don't want it to just be like hey, join our club, sign up for an email and now you're in. You want to have it kind of, I guess, like here in Australia, the Qantas Club or your frequent fly airline point programs, where you're sort of always striving for the next tier because you know that there's added benefits that you're going to receive from it. So if you can picture, you're in the cart and you're like all right, cool, if you purchase XX and X, you're now going to get access now for lifetime free shipping. Or you're now going to get early access to our sales if it's a very high demand. You sell out quickly in sales periods, so make sure that you're setting getting people to want to add more points, add more spend to be able to level up into the different categories.
Speaker 2:Yeah, it monitors your customers and shares with them how much you value them by allocating them points and giving them extra perks. I think it's fantastic. One of our clients is very advanced in the e-commerce space is Jericho. They sell beard butters and oils grooming products for your beard. They have a platform in place that is building this tiered approach and people advocates of the brand take it really seriously. They want to see their tier getting up to the next level and they're buying all different scents and it's important to them. It becomes a really valuable thing to have that ongoing connection with the customer 100%.
Speaker 1:And yeah, I mean it's adding value, right. So all these things that we're talking about here are trying to add value to the customer's well. It's not trying to just extract extra dollars out of it just for the sake of increasing your IRB. Every one of these strategies is also trying to provide something that is of relevance, it's in line with what they're looking for and you're not just adding bullshit extra charges or whatever just to increase that average order value.
Speaker 2:And, I think, the loyalty programs. They're going to be tied to our next lever, which is lifetime value, or customer lifetime value as well as average order value. So a double hit there, yep, 100%. So let's move on to the last one for today.
Speaker 1:Okay. So bundling products and this is one that I think it kind of feels like a no-brainer. I feel like it's like you know it makes sense. If you're going to, you've got products that are complimentary, why not put them in together into a package and get people to purchase them? Just don't see this done well enough or often enough. It can have such a massive improvement in your average order value, especially if they are hey, like if you buy this thing, that everybody else is buying this other thing. Why not just put a slightly cheaper price and then make it so it's just a single purchase, rather than have a comeback and do it as an upsell or something else and just bundling up your packages to be able to increase AOB?
Speaker 2:Yeah, an example that same client the Beard Oil and Beard Butter, beard Care brand Jericho. They introduced what they call the wall of Jericho, which is all of their scents together in one box, just smaller, almost tester size versions, droppers of the scents. But people who love the brand they might already have one or two of those scents. They're buying this wall of Jericho to have the whole set. It's more than just bundling existing products. They found a way to bundle them into one box, so there's creative ways of doing it. And then there's the old-fashioned way of going. Well, if you're buying a beard oil, maybe you'd want a beard butter as well, and potentially you'd want a brush or a beard straightener. Let's turn that into a Father's Day bundle or a gift bundle.
Speaker 1:Well, that's it, and gifting for the purpose of gifting. That's another reason to be doing it, because sometimes you just don't know what to buy and you jump on a store and it's very clearly packaged up and it's like the perfect bundle for the person who has this need. Then why not You're just going to buy that, rather than a single product or trying to work out what you need to buy for this person?
Speaker 2:Yeah, absolutely, and you could go. Well, I know they like this brand or this thing. I'm just going to get this and they get a bit of everything.
Speaker 1:Yeah, and I think when you're actually looking at your bundling strategy, think about it in as many different ways as you can. So looking at it as per the gifting solution, or looking at as per well, this is for your beard one, it's a whole solution for your grooming needs. Yes, it's making it convenient, but then when we're looking at see how big you can go as well, because then maybe look across categories as well so you might find all right, well, if they buy this and this is also going to be very relevant for the person ideally going to get them into and interested in the other category they have so if you're talking about beard oil, so if you're talking about beard oil, you might have some hair grooming products or something.
Speaker 1:This could be an entry-level product to get people interested, and then they could become a fan of this product category too.
Speaker 2:I think it's also important to share the value delivered if you bought it as a bundle.
Speaker 1:Yes.
Speaker 2:And also keep in mind that if you have that free shipping over a certain threshold in place, this is another way of getting that user over that threshold. So they're going to be thinking well, I get $10 off for free shipping and I'm getting this added value anyway by getting it in a bundle. It's win-win and the average order value goes way higher than if they were just coming for that one thing. That's it. Do it Okay.
Speaker 1:So if you're not doing any of these things. Obviously, you're just not getting the amount of sales that you could be from every visitor that's coming through your website, each one of these episodes. At the moment, what we're talking about is if you look at implementing a number of these different things. Like we said right at the start, we're trying to even just set the baseline as increasing each of these metrics, just say by 10%, as a starting point. So if you think about what your average order value is right now, implement any one of these. It's likely to increase your AOV by 10%. Next week we're going to be covering off on conversion rates.
Speaker 2:That's a big one that's just a direct lever to more money. That's right.
Speaker 1:So we want to make sure that now we've got people that are coming through. We've talked about the traffic channels. We're now increasing our average order value. Now we want to be converting more of them. Yeah, great.
Speaker 2:So we covered free shipping, ai product recommendations, post-checkout, upsell, loyalty programs with tiered perk levels and bundling into packs. That's the average order value session for today. That's Digital Horizons for this week. Thanks for watching, thanks.