Acquiring new customers is hard work. It can take a lot of time and money to find people who are interested in what you have to offer and persuade them to become customers. The good news is that customer acquisition isn't the only way to increase your revenue. By making a few adjustments to your ecommerce store, you can increase the average dollar amount each customer brings into your online store: the average order value.
In this article, we'll walk you through what average order value is and give you our top tips for how to improve it. So read on if you want to learn how to encourage revenue growth by making more money from each and every customer!
What is average order value (AOV)?
AOV is an ecommerce metric that refers to the average amount that a customer spends with a company each time they place an order. While AOV may vary significantly depending on the industry and type of business, it is an important metric for companies to monitor as it can provide valuable insights into the effectiveness of their marketing and sales strategies.
Calculate average order value by dividing the total revenue from all orders by the number of orders. This calculation gives you the average amount that a customer spends with a company each time they place an order.
Increasing AOV is a good idea for ecommerce brands looking to grow. A higher AOV means an increase in revenue without the need to spend time and resources on acquiring new customers.
How to increase average order value
There are many different strategies that businesses can use to encourage customers to spend more per order. Let's take at the most impactful methods.
1. Set a free shipping threshold
Imagine you're on the checkout page for an online apparel store. You have $41 worth of clothes in your basket. Shipping is $5.99. Then, you notice that if you spend $9 more on products from the store, you'll qualify for free shipping. That means you can either spend $46.99 to order the items currently in your basket or spend $50 dollars and get $9 worth of extra products. What do you choose?
When you offer free shipping above a minimum purchase threshold, you can entice customers to add more products and therefore spend more money on each order, bringing up your AOV. According to the 2020 Retail Industry Report, most consumers expect to qualify for free shipping if they spend over $50.
2. Bundle products together
Product bundles are when a business offers a set of products that are sold together as a package. By bundling products together, businesses make it easier for customers to purchase multiple items at once, which means they are more likely to spend more money with each order.
Businesses can also offer volume discounts – a discount when you buy multiple products – as an incentive to buy more. This can be an effective way to increase average order value, as customers will be more likely to take advantage of the discount and buy more products.
3. Upsell and cross-sell products
Upselling is when a business recommends a more expensive product to a customer who is already interested in making a purchase while cross-selling is when a business recommends a product that is related to the product the customer is interested in buying. Both strategies are effective at increasing average order value because they encourage customers to buy more and spend more money with each purchase.
Just like how a brick-and-mortar store displays items by the checkout counter, you can add a 'you might be interested in...' section to your checkout flow, allowing customers can browse related products before completing their purchase. Businesses can also use pop-ups or banners to suggest related or more expensive products to customers based on what the customer is currently viewing on the site.
Learn more about post-purchase upsells
4. Create a loyalty program
Another method for increasing average order value is to create a loyalty program or offer discounts for repeat customers. This can help foster customer loyalty while encouraging customers to purchase more items with each order. For example, businesses can offer exclusive rewards or discounts to customers who have purchased from them in the past, or they can provide extra benefits such as free shipping on all orders or free upgrades.
By creating a loyalty program, businesses can build long-term relationships with customers and encourage them to spend money with the business over time — this will also help increase customer retention and customer lifetime value. While implementing this strategy will require additional costs, it can be well worth the investment in terms of increased average order value and overall revenue from sales.
Read our guide on how to calculate and increase customer lifetime value.
5. Personalize customer experiences
Consumers love personalization. Research by McKinsey found that personalization generated positive feelings because consumers were made to feel special. It makes sense that if a customer has a positive association with your brand, they're more likely to want to spend more money on your products.
Personalized customer experiences can be created in a number of ways, from sending targeted emails and product recommendations based on past purchases to offering special discounts or free gifts for customers who meet certain criteria.
6. Improve website design and usability
Improving your website's design and usability is another effective way to increase average order value. If your checkout experience is time-consuming or requires a lot of effort on the customer's part, they're unlikely to add extra items to their order or return to shop with you again.
Aim to offer a simple and intuitive shopping experience, with easy-to-navigate product pages and visually appealing checkout processes. In addition to improving the overall design of your website, it is important to optimize the checkout process and make it as streamlined as possible. This can involve offering multiple payment options, as well as providing clear shipping information and estimated delivery dates.
Upgrade your customer support with SMS
Another way to increase AOV is to upgrade your customer support. If customers are able to quickly get information and answers to their questions, they'll feel more confident about spending more money with you.
Providing SMS-based customer support enables customers to quickly and easily get in touch with a representative via text messages. This can be especially helpful if you have a large volume of sales or if your products are complex and customers may have questions about how they work or how they can use them effectively.
Emotive is an SMS platform that allows businesses to use two-way conversational text messaging with their customers. By upgrading your customer support with SMS, you can offer a better shopping experience that encourages customers to spend more money with your business. Read more about using SMS for customer support.