If you find that customers aren’t spending a lot of money on your online store, you may need to take steps to increase your average order value. Doing so will help you increase your revenue while also decreasing the extra costs involved in marketing, sales, and shipping.
Here’s everything you need to know about average order values and how you can effectively increase yours:
What Is Average Order Value and How to Calculate It?
Average order value, or AOV, is an important business metric for online stores that indicates the average dollar amount spent for every order placed within your online store within a given time period.
Even if math isn’t your strong suit, it’s relatively easy to calculate your average order value if you know what to do. All it involves is a few numbers and a simple calculation to provide you with the information you need to grow your business.
To calculate this, simply take your total revenue and divide it by your total number of orders.
Average Order Value (AOV) = Total Revenue / Total Number of Orders
For instance, say you own an online store that sells candles. For the last quarter of 2020, you were able to generate $15,000 in revenue from selling your candles with a total of 1,500 orders during that time. According to the AOV calculation shown above, your average order value would be $10, meaning that on average, a customer spends $10 at your online store.
Why Does Average Order Value Matter?
Still, if you’re not a math whiz, you might be wondering why you even need to perform this calculation in the first place. However, AOV is simply one important business metric that you can use to understand better and grow your business. This is because the goal of every business owner should be to increase their average order value. Why?
Because businesses spend a ton of money getting new customers in the door, by increasing your AOV, you’re able to earn more revenue from the same amount of customers — essentially saving on customer acquisition costs that are constantly rising.
Furthermore, when you increase your AOV, you may also be able to save money on sales costs, including picking, packaging, and shipping if you’re able to pick and package these larger orders altogether.
How to Increase the Average Order Value of Your Online Store
There are many different steps that you can take to increase the average order value of your online store. Depending on which methods you choose, you may not see results right away. Nonetheless, remain patient and consistent with your efforts that will eventually pay off big time!
Use Order Minimums With Incentives
One of the best ways to encourage your customers to spend more on their orders is to implement order minimums with special incentives like free shipping or free gifts.
For instance, you can offer free shipping for all orders over $50. This action is going to increase the number of people who spend at least $50 on your site. You could also offer a free small product if you spend more than a certain amount — like a branded tote bag, lip gloss, sunglasses, etc.
These products don’t have to be fancy or expensive to be an incentive that can increase your AOV. Finally, you could offer a discount in terms of $10 or 20% off any order above $50. All of these can be customized to fit your exact business while still increasing your AOV.
Use Product Bundles and Packages
Another way to increase your online store’s AOV is to create product bundles and product packages. Bundles can make the buying experience more convenient and straightforward for customers when you pair complementary items that make sense together.
For instance, you can bundle lip gloss and lip liners or sunscreen and sunglasses. You can incentivize these bundles by offering them a small discount from the price if they were purchased together.
By making it seem like a great deal, you’re able to entice the customer to spend more on a bundle instead of simply buying a single product. Furthermore, you could offer volume discounts, like buy two get one free to increase your AOV.
Use Upselling
This method is tried and true. In fact, you likely see it all over the place without even realizing it! However, if you do decide to go the upselling route, make sure you do it right. Too much upselling can be very off-putting for customers.
Instead, make it seem helpful and genuine by recommending related products. You should also focus on upselling low-value items to increase the likelihood that the customer will add these extra items to their cart.
Use a Customer Loyalty Program
Initiating a customer loyalty program is another great way to increase the AOV of your online store. This is especially true if your store primarily sells consumable products that need to be replaced on a regular basis.
There are tons of different ways to set up customer loyalty programs; many include cashback incentives, exclusive deals, free birthday gifts, and more. Many customer loyalty programs also have different “levels” or “statuses” based on how much you spend at the store.
The more you spend, the better your rewards are. Overall, you should be incentivizing people to spend more at your online store in exchange for points and rewards.
Use a Customer Service Live Chat Tool on Your Website
Sometimes customers want to buy something but are hesitant due to questions they have about the product. It can be hard to get these questions answered quickly online, which is where live chat comes into play.
Using a live chat support feature on your website, you can provide customers with all the support and answers they could possibly need about your products. As a result, they can feel more confident about purchasing them instead of just leaving them sitting in the cart.
Other Effective Methods of Growing Your Online Store
While these steps are a great start at improving your AOV, there are other things that you should do to improve the overall function and success of your online store. After all, in a world where online options are seemingly limitless, you want to be able to stand out from the competition!
- Focus on search engine optimization (SEO) to get your online store to the top of the search results list.
- Optimize your website to improve your conversion rates by testing landing pages, improving graphics, writing great copy, boosting server speed, improving security measures, and including customer testimonials.
- Grow your presence on social media to include platforms like Facebook, Instagram, Twitter, Snapchat, YouTube, and TikTok.
- Work with marketing experts to get your name out there and present the right content to the right people. Greg Gillman specializes in omnichannel growth strategies for direct-to-consumer brands and has helped his clients generate $4 billion in annual revenue. He has worked with big brands like Adidas, Goop, Lunya, Petco, Ring, Theragun, and more.
Wrap Up
Increasing your average order value puts more money in your pockets directly from orders while simultaneously saving you money in customer acquisition costs. If embarking on this journey alone sounds too overwhelming, reach out to Greg Gillman for all the expertise you need to grow your online store effectively.
Sources:
How Marketers Can Reduce Customer Acquisition Cost | Forbes
5 Ways to Increase AOV | Shopify
3 Ways to Build the Rewards Program Customers Want | Entrepreneur
