When sellers think about increasing revenue, price hikes and spending more money on ads often come to mind. And while those steps are a natural part of running a business, there are more in-depth “back-end” tweaks online retailers can implement to drive revenue.
One of those tweaks is increasing your average order value (AOV). The idea behind it is simple but can be extremely effective.
Your customers have gone through all the stages of the buyer’s journey to make a purchase. But instead of spending on average $50 per order, you can make the most of their willingness to spend by presenting better deals and incentives to get that number up to, for example, $70.
But first, what exactly is AOV and which strategies can you implement to make it grow to boost your overall revenue?
Read on to find out!
The average order value (AOV) is the average amount of money your customers spend when placing an order on your site.
It’s a useful metric that gives businesses an idea about their customers’ spending habits. While an eCommerce store may be enjoying good traffic and high conversion rates, a consistently low AOV indicates that a change in pricing or marketing strategy is needed to maximize revenue on each purchase.
To calculate your AOV, simply divide your total revenue by the total number of orders.
Average Order Value AOV = Total Revenue / Total Number of Orders
For example, if your total revenue is $1000 from a total of 100 orders, that would mean on average, a customer spends $10 per order on your site.
But depending on the offers and strategies you use to get your customers to spend more, it doesn’t necessarily mean higher profit margins. If you offer free shipping for orders over a certain amount, you will increase your AOV but your profit margins will depend on shipping rates and the threshold you choose.
Increasing AOV means more revenue earned from the same number of customers. If you can increase your AOV without increasing marketing and selling costs, that’s when it becomes a powerful way of maximizing each purchase on your site and bringing in more money for your business.
But it’s just one metric of many to consider when looking at the overall health of your business. Alongside evaluating how to increase your AOV, be sure to also look at:
There are a variety of low to no-cost ways of increasing your AOV. Depending on your industry, products, and marketing channels, some will work better than others.
It all boils down to increasing the perceived value of your deals, and as a result, encouraging customers to spend more on each order.
Bundle deals have been around since the ancient times of bartering. Today, they are often an all-in-one solution for buyers that saves them time on product research as well as money since buying each piece separately would be more costly.
But rather than creating any bundle deal, businesses can use existing data and creativity to find the best bundles that result in the highest perceived value.
For example, product bundles were the bread and butter for the DTC health brand Your Super, allowing them to reach a whopping $70 million in eCommerce sales.
They used a number of strategies to promote their product bundles. One way was through a quick questionnaire on the homepage that asks visitors what they need help with. For each answer, potential customers are guided to an all-in-one product bundle for their specific problem, such as:
The bundles were marketed with a story and it was explained how each item in a bundle worked together as a whole for maximum benefit.
Knowing what products work best in bundles or what items customers often buy together is a quick way to offer value, boost AOV, and save buyers time and money.
Free shipping over a certain amount is a common but effective strategy to nudge customers to spend a little more until they hit the mark. In fact, a study showed that customers will spend more money and wait longer for purchases that offer free shipping.
Nine out of ten consumers also say:
The key is finding the right pricing threshold for your customers. Aaron Zakowski suggests setting your threshold at 30% more than your AOV, with the idea being to make free shipping accessible to the greatest number of customers.
A threshold too high will not convince customers to take the offer and risks increasing your abandoned cart rate.
Other ideas similar to offering free shipping are:
Upselling and cross-selling are age-old sales tactics that can increase revenue in multiples when done right.
Upselling is all about offering higher-priced options or versions of a product that include more value. For example, SaaS companies often upsell higher-end alternatives to their basic or standard subscription services.
Apple’s upselling strategy is so developed it managed to create a loyal customer base that instantly gravitates to buying the highest-end version of its products.
Cross-selling is about promoting relevant products that would be a good fit for a product a customer is interested in. If a customer adds an Xbox to cart, it would be suitable to cross-sell Xbox accessories or video games.
Amazon’s “Frequently Bought Together” recommendations is a top-level example of how powerful cross-selling can be. This simple feature alone is estimated to bring in a staggering 35% of Amazon’s yearly revenue.
A reward or point-based customer loyalty program is a great retention strategy that builds your brand, creates a loyal customer base, and boosts AOV. It also helps brands increase their customer lifetime value.
Starbucks has one of the largest loyalty programs in the world with over 24 million active members and growing nearly 50% year-over-year. Their program was a major factor in allowing them to recover from a global pandemic and resulted in 51% of all spending in their US stores in 2021.
But you don’t have to be a major corporation to have an effective loyalty program. With a customer loyalty program integrated into his eCommerce site, famous health authority Dr. Axe was able to:
You’ve likely come across a countdown timer at the top of a landing page, eCommerce site, or one placed before a “Buy now” button.
Limited offers work by leveraging the psychological scarcity effect that makes products or deals have a greater perceived value due to scarcity. Whether it is quantity (Last 2 items in stock!) or time-related (Only 12 hours left) scarcity, limited offers are a fast way to drive sales.
One stark example of the power of limited-time promotions is Black Friday, the busiest shopping day of the year in the US and an event that brings in billions in yearly online sales.
Flexible payment options let a wider consumer demographic buy from your platform, but does it increase AOV?
Klarna, a Buy Now Pay Later (BNPL) service provider to over 200,000 retailers, reported an increase in AOV by as much as 45% depending on the BNPL payment option chosen.
Some payment options are more popular than others depending on the country. Payment through QR codes is common in China and is also starting to trend in Southeast Asia.
Cash on delivery is another option that makes it easier for travelers and people without bank cards to buy products online and contribute to increasing your AOV.
Other different payment methods are:
Choosing a handful of payment options that are the most popular and accessible to your customer base will boost revenue and in turn, contribute to increasing your AOV.
This tip involves a more indirect approach and ties in with your lead generation. If you could advertise or attract an audience that will be interested in many of your products rather than just one, you can quickly boost the AOV on your site.
To illustrate, people who are new dog owners or are ready to purchase a dog will need a range of pet accessories as opposed to veteran dog owners who mainly just buy monthly products like dog food.
A “Dog Owner Essentials” bundle targeting new dog owners will be more effective at increasing AOV than simply targeting dog owners in general.
Coupons and promo codes can be used in all kinds of ways, such as:
A/B testing which coupons and offers work best will help you narrow down to the best models that will increase your AOV.
Most consumers love saving money, and one great way to build upon that is showing how much your customers save on each item as they shop in your store. Sometimes when a customer adds a large number of products to cart, they might feel like they’re spending too much.
By showing how much they are saving overall on their order, they will be more willing to go through with their purchase or even add more items to fill their cart up to a set budget.
There are many areas you can display savings on your site, such as:
When customers see how much they are saving on each order, it makes it easier for them to justify their purchase and recognize it as a good deal.
Customer feedback in all its forms has a powerful impact on a shopper’s purchasing decisions. Search Engine Watch reports that 72% of consumers will only purchase a product after reading positive reviews.
Many eCommerce stores have product reviews integrated that allow buyers to share their experience with a product. Whether it's written, has images attached, or is a video review, good customer feedback eases concerns and makes it easier to win over undecided shoppers.
Since reviews contribute to sales, they also factor into increasing your AOV.
With the steps covered in this article, you can now maximize each order on your site and boost your AOV without spending a dollar on marketing. The beauty of increasing AOV is it allows you to drive more revenue from the same number of customers.
When looking to implement the right strategies for your business, remember: