How to increase customers average order value

+10 things you can do to increase customer’s average order value right now

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According to eMarketer’s Worldwide Retail and Ecommerce Sales report, “eCommerce sales are expected to reach at least $4.5 trillion by 2021.” This huge number has made e-commerce marketing fiercely competitive. One of the most important factors which can drive e-commerce performance is Average Order Value. In this article, we will take a look at just how important AOV is and how it can accelerate e-commerce performance.

What is Average Order Value?

Average Order Value (AOV) is a critical e-commerce metric which helps measure the average revenue of a customer’s transaction within a defined period.

To calculate the AOV, you can divide the total revenue with the number of transactions (orders).

For example, supposing for July’s sales, your online store generated a revenue of £25,000 with a total of 10,000 orders. £25,000 divided by 10,000 = £25. The monthly average order value for July was £25.

Together with the conversion rate and customer lifetime value, average order value is part of the “big three” which are the key metrics used to optimise e-commerce performance.  AOV is a key indicator that online stores can measure to track business performance and know how to optimise their offering.  Additionally, AOV can help online stores prepare personalised sales strategies like cross-selling and upselling.

Quite simply, AOV drives business profitability. The higher the AOV, the higher the marketing return on investment will be.

This diagram shows how to calculate the  average order value by dividing the total revenue to the number of orders taken.
Source: Yotpo

Tips to improve the Average Order Value (AOV)

Retailers and marketers are always looking for ways to increase the store’s AOV. Consider the following strategies to improve average order value:

Know who the VIPs are

High spending customers (VIPs) are assets that any business should be taking care of. The most valuable customers are also these brand’s advocates as they are not just repeat buyers but those who share, recommend and talk about the product or service to their friends and family.  Taking care of the high value customers (VIPs) will not only improve sales but also improve brand recognition and perception.

According to Monetate’s report, What Loyalty Looks Like, “Loyal customer’s order value is typically 5% higher than that of new customers.” The report also stated, “They also engage with the website at least 85% more than those who are on the site for the first time.”

Source: Optimonk

Offer product recommendations

Monetate’s, The Right Recommendation report shares, “recommended products can secure 40% higher AOV than products that are not recommended.”

One of the best ways to encourage customers to increase the size of their carts is to add product recommendations. Product recommendations can either be an upsell or cross-sell which encourages buyers to buy more items or upgrade their purchases. By profiling customers and giving them relevant recommendations, brands will be able to increase average order value.

Create personalised experience

Personalisation is a key tool to raise AOV. Product recommendation, for example, is one tool that online stores can use within their personalisation strategy. The aim is to find a way to ensure that customers enjoy a personalised shopping experience the entire time. For example, promoting products according to the geography or seasons where the customer is shopping.

Offer coupons

Discounting is a great way to gain customers but it is not a sustainable strategy and will only temporarily improve your sales metrics. Nonetheless, when done the right way, offering discounts can reward existing customers and gain new ones. For example, you can offer discount coupons for customers who sign up for an email list, answer a survey, leave product recommendations, or refer friends. This can provide valuable customer insight which can be used to optimise the e-commerce offering and drive operational (and product) improvements. 

Set minimum order amount for discount

An amazing strategy to improve your AOV is to reward customers who spend a minimum amount. For example, some online stores like United By Blue offer free shipping for those who order a minimum of $100 worth of products.

Minimum amount for average order value as shown by united by blue

Consider the shopper’s browsing history

Another way to personalise your buyer’s shopping experience is to remind them of the items that they may be interested in. Some customers may be indecisive when they are shopping online, so keeping recently viewed items is a great way to improve AOV. Consider this example from Fuego, where they give customers an option to clear items from their viewing history or completely turn history off. 

Average Order Value through shopping history

Create product packages or bundles

Packaging or bundling products is a subtle way of cross-selling products or services. When done right, it can ultimately increase a brand’s AOV. Similar to some fashion website’s practice of “get the look”, this practice helps customers who may not know that they need additional products along with their initial intended purchase. 

REI makes it easy for new backpackers to put together items that they need. 

REI AOV browsing history

Start limited time offers

Leverage on customer’s FOMO (Fear Of Missing Out) by creating time-sensitive offers. Brands can create a sense of urgency so customers will buy now. This is not a new tactic but has always been effective. A survey by Broadbandchoices in 2017 on the spending habits of UK citizens shares that, “An average Brit spends £353 a year on items that they do not want to buy but are afraid of missing out on.”

Starbucks effectively applies FOMO in its “enjoy it while it lasts” Frappuccino Blended Beverages campaign.

Average order value through limited time offers

Create a cash back system

An amazing way to improve average order value is to offer cashback rewards. Customers who buy more will enjoy more cashback incentives. Incentivising the shopping experience is helpful because customers feel that they are getting more value for the money that they spend. In the end, both brand and customers will enjoy the benefits of this type of rewards. A good example is how Kohl’s offer cashback rewards.

Kohl's average order value cashback rewards

Start a loyalty programme

Kobie’s report Marketing Loyalty in the Age of the Connected Consumer states that “86% of consumers said they’ve joined a loyalty programme to collect points for future rewards.” Having a loyalty programme encourages customers to shop more and therefore increases a brand’s AOV. Additionally, a loyalty programme is a great way to collect more data about customer’s shopping habits and preferences which a business can use to streamline customer service, sales and marketing initiatives.

Nordstrom has effectively integrated a loyalty program to encourage customers to shop more.

Nordstrom's average order value through loyalty rewards

Strategically use the right tools

Sivana Spirit, a yoga lifestyle brand uses tools like Facebook messenger and Octane AI to improve their AOV by 25%. In just a few weeks, the company was able to get back more abandoned carts than ever. The company used messenger marketing and chatbots to reach out to customers to re-engage them around their abandoned purchase. Knowing full well about declining open email rates, Sivana Spirit messaged customers directly using chatbots which is a smart move, given that chat-bot message open rates are substantially higher than e-mails. 

Test out campaigns

Testing the tactics mentioned in this article to optimise the AOV is a smart approach – not all of these tactics will be right for every business but experimenting with them is sure to have a positive commercial impact. In order to experiment with these tactics, we recommend running a testing programme using A/B split testing. 

An A/B testing, also known as a split testing is a method that can be used to allow brands to display multiple variants of a website to visitors and test the performance of each variant. This helps brands understand the version which works best. There are dozens of tools that you can use to test out campaigns. For example, VWO is a leading website personalisation and testing tool which can make light work of A/B testing. Other tools that you can consider are Google Optimise, Optimizely, Fresh Relevance and Monetate. 

Growing an e-commerce website requires focus, dedication, and knowing the right metrics. Traffic is not the only metric to drive e-commerce business performance. By focusing on the Average Order Value, online stores are able to drive improvement in sales and revenue.