The primary benefit of increasing your average value of orders is that you earn more profit from every transaction. Thus, making your store more profitable. Of course, when consumers buy online, they’ll purchase what they’re searching for. But, using the common strategies to increase order value that we’ll cover throughout this piece, you’ll discover how to show more amazing items to customers to make greater sales for each order. This article will help you discover the average value of an order and the best way to improve it. First, let’s take a look at the subject.
Table of Content
- 1 What is the Average Order Value (AOV)?
- 2 How to calculate average order value, and why should ecommerce businesses perform it frequently
- 3 Why does average order value be important for businesses?
- 4 What Is a Good Average Order Value?
- 5 How to increase average order value
- 5.1 1. Give product recommendation
- 5.2 2. Add a Discounted Upsell After Order Completion
- 5.3 3. Cross-sell or upsell complementary products
- 5.4 4. Take an Analytical Approach to AOV
- 5.5 5. Set minimum order value to receive discounts
- 5.6 6. Create a loyalty program for customers.
- 5.7 7. Make use of merchandising
- 5.8 8. Bundle items or make packages
- 5.9 9. Be flexible with payments
- 5.10 Related
What is the Average Order Value (AOV)?
The average order value (AOV) is an ecommerce related metric that records the amount of money a buyer pays when he places an order via the internet or through an application. AOV is considered one of the most significant indicators in e-commerce.
Generally, the average purchase value can provide clues about the customer’s behavior. For instance, a smaller AOV generally suggests that the seller customers tend to purchase small items when they place an order.
In addition, AOV trends impact the business’s most important choices, such as the pricing of products as well as marketing. Because of this, companies must be careful to keep track of their AOV. Because ecommerce is a dynamic and competitive business, companies must analyze their AOV daily or weekly.
How to calculate average order value, and why should ecommerce businesses perform it frequently
The formula used to calculate AOV is the revenue divided by the number of orders.
Total Revenue/ No. of Orders = Average Order Value
AOV is calculated using the sales of each order, not per customer. While a customer could return several times to purchase, each purchase would be considered separately.
AOV does not provide profit margins or gross profits. However, it gives insights into how these figures are calculated. For instance, an online clothing store sells three shirts for $15, $31, $21, and $29, and the AOV is $19. This suggests two patterns of customer behavior at the storefront
- Customers aren’t buying more than one item.
- The shirts that are priced lower make up the majority of the sales.
Why does average order value be important for businesses?
Knowing your company’s average order value can help you assess your overall marketing and pricing strategies by providing you with the data needed to gauge the long-term value of your individual customers.
For a reference point of behavior among customers As a benchmark of customer behavior, the AOV assists you in setting objectives and strategies and assessing whether those strategies are working.
Some marketers put all of their efforts into increasing traffic to a website when it is more effective and profitable to boost their average AOV. But increasing traffic generally costs money, whereas growing AOV isn’t.
Every order has a transaction fee, and a higher AOV is an effective way to increase directly generated revenue and boost your profit margins when customers already shop at your retail store.
What Is a Good Average Order Value?
Each answer will differ. The common metric mentioned above can only serve as an approximate reference point. When you are determining your own goals and KPIs, you should keep these factors in your head:
There are considerable differences in different industries; as per IRP Commerce, the average purchase value for online retailers selling “Agricultural Supplies” was GBP 63.95 in November 2018 (or approximately $80). Compare this to GBP 80.11 (over 100 dollars) in the category of “Pet Care.” It is important to consider the differences in sectors. What could be a great AOV for someone else in another industry could be a lot higher or lower than the average for your industry.
Be aware of any anomalies. Certain retailers will provide unusually high-quality metrics, like the average value of orders. Amazon is a prime example. Amazon boasts an astonishingly impressive conversion rate, which is 13 percent. It’s crucial to remember that no one store can determine the benchmark for all other stores.
When creating your KPIs, it is important to create specific AOVs for different devices; it is important to establish different goals for each device. You can observe in the following data in the section looking at AOVs across all devices there is a significant difference in the figures. The AOV for purchases made via Windows desktops is more than twice that of iPhones.
Consider the season: The average order value will be higher during certain periods during the calendar year (e.g., Christmas), which is important to note.
Suppose you assume that your average order value is within a sensible range based on the industry standards (i.e., it’s not dramatically higher). In that case, it’s probably safe to say that you do not have any significant issues.
In this instance, the definition of the term “good” average order value is simply one that is higher than the one you had before, regardless of whether it’s calculated on a yearly or monthly basis.
How to increase average order value
1. Give product recommendation
Sometimes, customers are attracted by the item they want, so they don’t bother to look for additional. This results in smaller carts and, consequently, lower average order value.
To fix this issue To address this issue, you can add product recommendations to your product pages or checkout pages. By analyzing popular items or items other customers bought in addition to the items currently in the user’s cart, You can reduce friction prior to the checkout process and increase the value of your orders.
To illustrate this point, below is Zaful sharing the products users of other users have seen. This is an excellent method in particular because it integrates social evidence.
2. Add a Discounted Upsell After Order Completion
As per Growth Hackers making use of sales to increase AOV is all about providing customers with the motivation to spend more and creating the impression of urgency about it. When most businesses direct customers to a thank-you or confirmation page for orders following checkout, Onray suggests using this opportunity to sell more.
3. Cross-sell or upsell complementary products
Similar to the first method, this one is to add product suggestions on your page for products. In this instance, instead of just offering other items that are popular from your store, select items that are compatible with the product in the buyer’s cart, such as accessories or accessories. For instance, the mouse that goes with laptops or batteries for remote control.
It’s basically selling and cross-selling. The term “cross-selling” refers to when you are promoting an additional product, while upselling occurs when you advertise an upgrade to the product or a pricey model of the item.
This is why Colorado Crafted uses the cross-sell technique on its checkout page. Customers can purchase the Colorado Water Bottle with just one click and boost their order by $13.
4. Take an Analytical Approach to AOV
Instead of beginning with an instrument or tactic, start by doing your homework first.
Take a look at your most popular items and dig a bit more. Why do people buy them? What are they using them for? What is stopping them from being successful? Then, consider how other products, greater numbers, or even a subscription can aid them in this.
5. Set minimum order value to receive discounts
It is also possible to increase your average value for orders by encouraging customers to buy an amount that is a minimum. It could be a minimum purchase amount that allows receiving free shipping, and it is simple to implement within Shopify. United By Blue is one example. It offers free shipping on all orders of more than $100.
Other examples of minimum purchase incentives are offering coupons or gift cards. For instance, you could offer 15% off orders of $75 or more or a free T-shirt for any order over $100. In addition, you could consider putting a promo button on your site to let people know to customers that the offer offers a minimum purchase incentive.
6. Create a loyalty program for customers.
If you have a store that offers consumable items that customers will need to buy again, like shaving creams or razors–you might consider the possibility of establishing an incentive and reward program.
A customer loyalty program is an effective way to retain customers, which helps you build relationships with your clients that will ultimately encourage customers to make purchases repeatedly.
Programs for loyalty can also increase the average value of your shop. For example, Nordstrom recently upgraded their loyalty program for customers, The Nordy Club, to reward those who make the most of their purchases.
7. Make use of merchandising
Make sure to display the impulse purchase and gift cards in the shopping cart.
The impulse-buying process generally involves three factors such as urgency, value, or excitement. All stores employ this well-known technique.
Combine items that are generally sold together in your store
Grocery stores, specifically, are getting great in these displays. For example, Buehler’s Fresh Foods put their pitters for cherries alongside their cherries and then sold from cherry pitters across all their stores.
8. Bundle items or make packages
If you wish to encourage customers to buy more products, consider creating product bundles that are less expensive than the identical items that were purchased separately.
Bundling products is a way of increasing the value of an individual’s purchase. One way to approach bundle products is to offer a bundle of items to provide the experience you want.
For instance, BioLite bundles with a stove and other accessories, the fundamentals needed to cook meals when camping. This allows consumers to buy all they require in one go and eliminates the requirement to conduct an additional study. Also, you’ve sold multiple items instead of just one.
9. Be flexible with payments
Your customers’ budget directly impacts the amount they spend. So if you make shopping in your shop less “budget-friendly,” you could possibly make them spend more.
One method to achieve this is to provide flexible payment options like installments or lay-by. Suppose you’re not keen on not receiving payment in full. In that case, you might want to consider solutions such as Afterpay, a “buy now pay later” solution that lets you pay for items purchased at a time and let your customers pay over four weekly installments. When they pay on time, there aren’t any additional costs for your customers.