Average Order Value: Why It Matters and How to Increase It
As we mentioned in our post about the undisputed secret to successful ecommerce there are 3 levers to manipulate your revenue: traffic, conversion rate, and average order value.
AOV is the lever in this equation that is most closely monitored by business owners as it’s in dollars and therefore most easily correlates to revenue. And this is not wrong. If you are able to increase your AOV, you can greatly improve your revenue metrics.
Now, AOV might be an obvious lever to pull that is easy to see, but it is actually the hardest and most complex to influence. It’s not as simple as raising your price (in fact this can often be the wrong move).
How can you increase AOV?
Here are some strategies to try in order to increase AOV.
1) Test Price
You have to be very careful with testing price, but it is a good idea to find out the price sensitivity of your products to find the right price that will drive the most revenue.
Whatever you do, don’t A/B test your prices. This creates a really bad customer experience. If I buy something from you for $100 and then see it on my mobile phone when I check back later that day for 50 or find out that my friend bought it for $50, needless to say, I’m not going to be happy any longer with my $100 purchase.
Instead, test promotional offers or programs. In this way, all customers are still offered the same prices and benefits. Only to some customers you are messaging the promotion and to others you aren’t. This allows you to have visibility into how changing prices will affect sales without risking creating angry customers.
2) Offer Free Shipping
One of the most foolproof ways to increase your AOV is with a free shipping tier. Set a free shipping tier that is just above your current AOV. We recommend starting with 1.25-1.5 x your current AOV.
People just hate paying for shipping. It is one of the few remaining reasons some still prefer to purchase in physical retail stores. So, customers are irrationally motivated to purchase more in order to get free shipping (even if in the end they spend more).
Try creating a free shipping tier, and message it across your entire site in an alert bar, as well as in the cart, letting customers know how far away they are from earning free shipping. We can almost guarantee you’ll see an increase in your AOV overnight.
3) Offer Intelligent Upsells
Upsells that make sense (hence the intelligent qualification) can be a great way to increase AOV. You can work upsell offers in to your product pages and upon add to cart clicks (in the “you may also like” style) or as part of the checkout experience. Just be careful if you include upsells in the checkout as you don’t want to distract too much from the actual checkout process. Monitor your cart abandonment rate closely as you test checkout upsells.
4) Create Tiered Discounts or Promotions
Offer discounts to customers only if they spend a certain amount (in increasing increments). We’ve all received these offers from retail stores: spend $100 and get $20 back, spend $150 and get $30 backs, and so on and so forth. While it might feel like we are getting goods for free, actually this is just a store working to increase their AOV.
5) Bundle Products
Test bundling products that go together (or are often purchased together) at a slightly discounted rate. This can push someone towards buying both together rather than just one of the items.
6) Offer Multiple Product Discounts
Similar to the above, but applying site wide to any combination of products, offer a discount for purchasing several different items. For example, buy 3 and get the 4th item free (or 50% off).
7) Add Post Purchase Upsells
There are now technologies that allow you to offer upsells after the initial purchase (but before they leave your site). This is a great tool because there is no risk of losing the sale by offering an upsell (as it has already been completed), but still allows the customer to add an additional item to their purchase with a single click.
8) Send Post Purchase Coupons
OK, this doesn’t actually increase AOV. But it does incentivize subsequent purchases shortly after the initial purchase by customers. Test offering coupons in your receipt emails or follow up emails soon after a purchase is complete.
9) Try a Subscription Model
Subscriptions are very popular in today’s market, and for good reason. They are a great way to increase the AOV value and establish recurring revenue. You might think that your product doesn’t lend itself easily to a subscription model, but think again. If you get creative, more products than you might think lend themselves to this subscription model.
10) Launch Complimentary Products
Look at expanding your product line to include complimentary products, focusing on products that compliment your existing best sellers. If you have products on your site that well compliment your best sellers, there is a good chance customers will buy them together (especially if the complimentary products are a small percentage of the main products’ price).
11) Encourage Gifting
Remember AOL’s Sign on A Friend campaign? Well, it was highly successful, and this scheme still works today. Try a buy one send one campaign or a campaign to gift a product to your friend when you purchase yours around holiday seasons.
12) Test a Variety of Promotions
Promotions are the lifeblood of ecommerce today, so make sure that you have a healthy promotional calendar to keep your ecommerce store moving. And contrary to popular belief, you can offer promotions without degrading your brand (so long as it’s done strategically).
Looking for more tips on how to increase AOV? Check out this post by Smile.io.