Getsitecontrol Insider

5 Ways to Boost Your Average Order Value (AOV)

January 20, 2021 Getsitecontrol Episode 26
Getsitecontrol Insider
5 Ways to Boost Your Average Order Value (AOV)
Chapters
0:37
What is average order value (AOV)
1:16
Why average order value matters for your online store
2:37
How to calculate your average order value
3:06
How to increase your AOV
3:25
Tactic #1. Create upsell and cross-sell notifications
4:12
Tactic #2. Bundle items together
4:57
Tactic #3. Offer free shipping over a certain price threshold
6:05
Tactic #4. Add a loyalty program
6:55
Tactic #5. Test out pricing strategies
Getsitecontrol Insider
5 Ways to Boost Your Average Order Value (AOV)
Jan 20, 2021 Episode 26
Getsitecontrol

If you own an ecommerce store, one of the most important metrics you want to keep track of is your average order value or AOV. 

By itself, AOV is just another number. But once you start analyzing it in the context of you cost per sale, your conversion rate, and other metrics, the average order value helps you determine:

  • If your pricing strategy is working
  • If you can be profitable in the long run
  • And where you should focus your growth efforts

In most cases, it is only natural to want to increase the average order value in your store.  And that's exactly what we're discussing in this episode. Stay tuned!

Prefer the text version? The read about the ways to boost your average order value on our blog.

Show Notes Transcript Chapter Markers

If you own an ecommerce store, one of the most important metrics you want to keep track of is your average order value or AOV. 

By itself, AOV is just another number. But once you start analyzing it in the context of you cost per sale, your conversion rate, and other metrics, the average order value helps you determine:

  • If your pricing strategy is working
  • If you can be profitable in the long run
  • And where you should focus your growth efforts

In most cases, it is only natural to want to increase the average order value in your store.  And that's exactly what we're discussing in this episode. Stay tuned!

Prefer the text version? The read about the ways to boost your average order value on our blog.

Hi,

You’re listening to Getsitecontrol Insider where we discuss ways to increase ecommerce revenue. In this episode, we’ll talk about average order value and how you can boost it in your store. Stay tuned!

Keeping track of the right metrics is key to growing your ecommerce business.

If you’re new to this, it may seem there are quite a few of them to keep track of: lifetime customer value, conversion rate, cost of sale – the list goes on and on…

One of these metrics, especially important for you as an ecommerce website owner, is average order value or AOV.

Just like the name suggests, AOV is the average value of each order placed on your ecommerce store.

What does that mean? So, let’s say you just received $1500 of orders this past month, with a total of 50 orders. If you divide the total value by the number of orders – or 1500 divided by 50 – you get a total of 30.

This means that on average, each customer that submits an order can be expected to spend $30.

However, if you have the same total order value, but only three orders, then your AOV is $500. See the difference?

Now, here is why average order value matters for your online store:

By itself, AOV is just another number.

However, it can be useful for many things.

First off, you can compare your cost per sale – or how much it costs you, as a business owner, to generate one sale – to your average order value to see how profitable you currently are.

For example, if your cost per sale is $10, but your average order value is $50, then you’re golden!

On the other hand, if you have the same cost per sale of $10 with an average order value of $15, that doesn’t leave you much for operating costs, the cost of your products, and your profits.

In short, your average order value helps you determine:

  • If your pricing strategy is working
  • If you can be profitable in the long run
  • And where you should focus your growth efforts

However, your average order value isn’t the only metric you should track to measure your growth.

For instance, the conversion rate of your online store matters, too. How many people who land on your website actually convert into paying customers? A low conversion rate means that increasing your traffic won’t help you raise your average order value.

Conversely, your revenue per visit, which calculates how much sales revenue you can expect every time one person visits your store, is a good indicator of whether or not increasing traffic will help you increase your profits.

How to calculate your average order value

You should always calculate average order value in a given period of time. You can choose to calculate your monthly, daily, weekly, or even yearly AOV depending on what you’re trying to achieve.

To calculate average order value, divide your total gross revenue by your number of total orders – in a given period.

And that’s your AOV!

Moving on to more exciting questions à How to increase your AOV

Now that you know your average order value, what can you do if you want to increase it?

By increasing your average order value without decreasing your website’s conversion rate or cost per sale, you’ll increase your revenue.

Here are some pointers to get you started.

Tactic #1. Create upsell and cross-sell notifications

When your customers add one item to their cart, there are two things you can do to increase that order’s value:

Suggest a product that will complement their existing purchase – just like Amazon does with their ‘Frequently Bought Together’ feature. That is called cross-selling.

… or suggest a more expensive upsell that will improve the value of the product they picked. Such an upgrade can consist of better features, or a more expensive version of the item in the cart.

You can offer cross-sells and upsells:

  • Directly in the shopping cart when your customer checks out
  • On the product page, just like the Amazon example
  • Or on any other page as a pop-up notification when customers add certain items to cart

Tactic #2. Bundle items together

Bundles are similar to cross-sells because they offer similar items together. However, instead of offering said items only when the customer adds something to their cart, bundles already exist in your ecommerce store as a feature or an item.

It’s so much easier to purchase more than one item when they already come pre-bundled together, or if you can get a better price for them! Right?

This increases the perceived value of your products and will entice visitors to add more to their cart before checking out.

You can create a bundle offer by yourself or you can let you customers create their own bundles.

Keep in mind that a bundle CAN be a good cross-sell or upsell idea, too.

Tactic #3. Offer free shipping over a certain price threshold

It is so much more cost-effective for online shoppers to spend more – and thus increase your average order value – to qualify for free shipping.

This is especially true if you have shoppers from outside of your country who may have to spend more money on expensive shipping and customs import fees.

Now the big question is: how much should your customers spend to get free shipping?

There’s no magic number or easy answer to this question because it depends on so many factors.

For example, the minimum order amount for free shipping should definitely be higher than your current average order value, especially if you want to increase it.

You should also consider your cost per sale. The more expensive your cost per sale, the higher the minimum order amount should be for free shipping. 

But those aren’t the only considerations to take. For example, how much does it cost you and your business to ship products? Are there any additional costs involved?

In other words, don’t look at other stores and decide you should do the same – evaluate your own situation and come up with a number that makes sense for your brand.

Tactic #4. Add a loyalty program

So you want to increase your average order value, but what do your customers actually get in return for spending more and thus increasing that metric for you?

A good incentive for your customers to purchase more can be a loyalty program.

Consider a company called David’s Tea. Their loyalty program is called Frequent Steepers. Their customers get 50g of tea for free for each $100 spent.

However, this $100 needs to be spent in a single month. This nudges customers to purchase higher values each time they make their monthly tea orders.

For daily tea drinkers – or frequent steepers, this is actually a great value! It’s much more encouraging to bump your order up to $100 or more when you know you’ll get an extra bag of tea.

Tactic #5. Test out pricing strategies

Every audience will have a different optimal pricing point. And without testing out your pricing strategies, you’ll never know what that is for YOUR audience.

There are no magic numbers here, unfortunately. Increasing or lowering your prices may work, but you won’t know until you try it.

For example, increasing your product prices could decrease your conversion rate, which would also increase your cost per sale. This isn’t so good, unless it dramatically increases your average order value.

On the other hand, if you decrease your prices, you could lower your average order value because items are cheaper, while also increasing your conversion rates. However, it could also lead to increasing your AOV because your customers may add more items to their cart due to the more affordable price points.

See? It’s difficult to know what will happen unless you try it yourself.

Do some research in your niche and see what other stores similar to yours are doing to get an idea of what your audience may be looking for.

There you go – by trying these tactics, you will be able to increase your average order value and thus grow your ecommerce business.

But remember: if your AOV is going up, but your other metrics are going down too drastically, take a step back and reconsider what you are doing, because AOV is not the only metric that matters.

This is it for today,

Thank you for listening, and don’t forget to subscribe.

Until next time!

What is average order value (AOV)
Why average order value matters for your online store
How to calculate your average order value
How to increase your AOV
Tactic #1. Create upsell and cross-sell notifications
Tactic #2. Bundle items together
Tactic #3. Offer free shipping over a certain price threshold
Tactic #4. Add a loyalty program
Tactic #5. Test out pricing strategies