What is average order value?
Average order value (AOV) is a key metric in eCommerce that measures the average total of every order placed with a business over a defined period of time. It is calculated by dividing total revenue by the number of orders.
AOV is used to understand customer behavior and to frame marketing and pricing strategies. Businesses aim to increase the average order value to maximize revenue from each customer transaction. This can be done through various techniques such as upselling, cross-selling, bundling products, or offering free shipping on orders over a certain amount.
Importance of average order value
Average order value (AOV) is a significant metric for businesses, particularly in the eCommerce sector, for several reasons:
Understanding customer behavior
Average order value (AOV) helps with for understanding your consumers' purchasing habits and behavior. It offers information on the typical amount of money your clients spend during a single transaction. You can utilize this information to segment your customers, modify your marketing strategy, and enhance the customer experience.
Evaluating pricing and marketing strategies
AOV is a great tool for assessing how well your pricing strategies are working. If you execute a new pricing plan or start a marketing campaign and see an increase in your AOV, it's a clear indication that the new strategy is effective. A decrease, on the other hand, may indicate that your strategies are not having the desired impact.
Measuring business performance
AOV is helpful in evaluating the overall success and health of your business along with other metrics like customer lifetime value (CLV) and conversion rate. You can use it to establish benchmarks, track your progress toward your objectives, and get insights for growth.
Identifying upselling and cross-selling opportunities
A higher AOV frequently indicates effective cross- or up-selling efforts. You can use this measure to track which products are frequently bought together and, as a result, can be combined for promotions. Additionally, it helps determine goods that can be successfully cross-sold or upsold.
Revenue generation
In the end, increasing AOV is all about increasing revenue. Businesses can drive their revenue by enticing customers to spend more money each time they make a purchase without necessarily needing to spend money on attracting new customers.
How to measure average order value
Measuring average order value (AOV) is quite straightforward and can be done using a simple formula. Here's the process:
Calculate total revenue: This is the total amount of money made from all sales during a specific time frame. Don't forget to include all sales-related income; but do not include money from other sources, such as interest, investments, or secondary businesses.
Count the total number of orders: This is the total quantity of orders placed during the same period.
Divide total revenue by total number of orders: This calculation gives you the average order value.
AOV = Total Revenue / Total Number of Orders
For example, if your total revenue for the month of January was $10,000 and you had 200 orders, your AOV for January would be $50.
Remember, the period you choose to calculate your AOV can be adjusted based on your needs. It can be calculated on a daily, weekly, monthly, or annual basis. AOV can also be calculated for certain occasions or times of year, such as Black Friday deals or the holiday shopping period.
The majority of eCommerce platforms and analytics platforms, like Google Analytics, will calculate this figure for you automatically, so keep that in mind.
24 Proven Ways to Increase Average Order Value
Increasing AOV can significantly boost revenue without needing to acquire new customers.
Here are the 24 proven ways to increase Average Order Value (AOV):
- Leverage Upselling and cross-selling
- Allow customers to shop the look
- Offer Product bundling
- Offer Volume discounts
- Offer Free shipping threshold
- Create Loyalty programs
- Promote Gift cards
- Offer limited-time offers
- Use Personalized recommendations
- Show savings on bulk buys or bundles
- Offer a flexible returns policy
- Market to buyer “heavy” users
- Build trust and authority
- Offer great customer support
- Leverage Social Proof and Reviews
- Implement Tiered Pricing
- Offer BOGO (Buy One, Get One) Deals
- Create Engaging Product Videos
- Provide Early Access to Sales
- Use Countdown Timers for Urgency
- Personalize Follow-Up Emails
- Highlight Customer Stories and Testimonials
- Use Exit-Intent Popups
- Offer Product Customization
1. Leverage Upselling and Cross-selling
Upselling encourages customers to buy a higher-end product than the one they were considering while cross-selling prompts customers to buy related or complementary items. Both approaches can substantially raise the AOV.
2. Allow customers to shop the look
Shop-the-look experiences allows customers to view a whole outfit or product combination and add the featured items to their cart in a single click. This way, customers can buy multiple products via the shoppable look which they might have not bought otherwise. These shop-the-look experiences can increase the average order value since they result in a larger sale.
Check out the video to discover how to boost average order value by creating shop-the-look experiences with Storyly Stories.
3. Offer Product bundling
Customers may spend more if a product is offered in a bundle at a price lower than the cost of the items alone. Customers acknowledge that they are receiving a deal, and businesses benefit from increased sales.
4. Offer Volume discounts
Offering discounts for buying items in bulk can entice customers to make more purchases, hence raising the AOV.
5. Offer Free shipping threshold
Offering free shipping when a predetermined order threshold is met can encourage buyers to add additional items to their cart to reach that amount. You could, for instance, provide free shipping on purchases of $50 or $100.
6. Create Loyalty programs
Higher order values may be encouraged by rewarding customers who spend more. Customers may be encouraged to increase their spending in order to earn more points, tiers, or rewards.
7. Promote Gift cards
Promoting gift cards can also boost your AOV because people often spend more than the value of the gift card when they redeem it.
8. Offer Limited-time offers
Customers may purchase more in a single order because limited-time incentives make them feel a sense of urgency. This may be a temporary offer or an exclusive item that is only available for a short while.
9. Use Personalized recommendations
Personalizing product recommendations based on consumer information can increase sales. Customers are more inclined to add items to their order if they come across goods that match their preferences and behaviors.
10. Show savings on bulk buys or bundles
Make sure buyers can easily see the savings they will receive from purchasing in bulk or as a bundle. A sense of getting a good deal may lead to increased purchases.
You can encourage your customers to spend more during each transaction by utilizing these tactics, which will raise your average order value. Just bear in mind to pay close attention to your metrics to determine which tactics are most effective for your particular business.
11. Offer a flexible returns policy
When customers have the confidence that they can return products after the delivery, their perceived risk of buying decreases, which motivates them to increase the number of items they order. A satisfying experience can also boost customer loyalty and the possibility of repeat purchases.In order for this tactic to be successful, consumers need to be provided with transparent and efficient information at the beginning. This way, the flexible return policy can help increase average order values while preventing an increase in return rates.
12. Market to buyer users
Marketing to customers who frequently make significant purchases or are regular frequent buyers can improve AOV. These customers may be more willing to add extra items to their orders if you offer them exceptional discounts or deals since they already value your products or services.
13. Build trust and authority
Customers are more likely to buy more from businesses they regard as trustworthy and credible. By providing high-quality products, first-rate customer support, and being transparent about your business operations, you can build trust in your audience. earn people's trust. This process involves sharing expert advice, producing high-quality content related to your products or industry, and showcasing positive customer reviews and testimonials. Customers are more likely to make larger purchases when they respect and trust your company.
14. Offer great customer support
Excellent customer service may greatly enhance the shopping experience, increasing customer loyalty and order values. Customers feel more at ease making larger purchases when they know they can rely on quick, helpful solutions to their questions or concerns. A number of channels, including live chat, email, phone assistance, and even social media, can be used to do this. The key is open, supportive communication.
15. Leverage Social Proof and Reviews
Social proof and reviews play a crucial role in influencing purchasing decisions. Highlight positive customer testimonials, ratings, and reviews prominently on product pages. Showcasing real customer experiences builds trust and can encourage potential buyers to add more items to their cart. Incorporating user-generated content, such as photos or videos of customers using your products, further reinforces credibility and can inspire other customers to increase their order value. Additionally, consider displaying the number of purchases or views a product has received to create a sense of popularity and urgency.
16. Implement Tiered Pricing
Tiered pricing is an effective strategy to encourage customers to spend more by offering discounts or better value for larger purchases. By setting up pricing tiers, you provide an incentive for customers to buy in bulk or upgrade to a higher-priced product. For example, offer discounts for purchasing multiple units, or create packages that combine several products at a lower price than buying them individually. Clearly display the savings customers can achieve by opting for higher tiers, and highlight the additional benefits they receive, such as exclusive features or bonuses. This approach not only boosts average order value but also enhances customer satisfaction by providing more value for their money.
17. Offer BOGO (Buy One, Get One) Deals
BOGO (Buy One, Get One) deals are a powerful way to entice customers to increase their order value. These promotions encourage customers to buy more by offering a free or heavily discounted item with the purchase of another. For example, you can offer "Buy One, Get One Free" or "Buy One, Get One 50% Off" on selected products. This not only increases the quantity of items purchased but also enhances the perceived value of the deal. Make sure to clearly communicate the offer on your website and through marketing channels, and consider applying it to popular or complementary products to maximize its impact. BOGO deals can create a sense of urgency and excitement, driving higher sales and average order values.
18. Create Engaging Product Videos
Engaging product videos can be a powerful way to showcase your products and increase average order value. High-quality videos demonstrate the features, benefits, and uses of your products in a dynamic and visually appealing way, helping customers better understand and appreciate their value. Use videos to highlight product details, demonstrate functionality, and show the product in real-life scenarios. Customer testimonials, unboxing experiences, and how-to guides can also be effective formats. Embed these videos on product pages, share them through email marketing, and promote them on social media to reach a broader audience. Engaging videos not only enhance the shopping experience but also build trust and encourage customers to make larger and more informed purchases.
19. Provide Early Access to Sales
Offering early access to sales is a great way to increase average order value by creating a sense of exclusivity and urgency. Reward loyal customers or members of your email list with the opportunity to shop sales before the general public. This can be particularly effective for limited-time offers, seasonal sales, or new product launches. Early access can make customers feel valued and special, encouraging them to make larger purchases to take full advantage of the exclusive opportunity. Promote this benefit through targeted emails, membership programs, or loyalty schemes, and clearly communicate the start and end times of the early access period. This strategy not only boosts sales but also strengthens customer loyalty and engagement.
20. Use Countdown Timers for Urgency
Countdown timers are an effective tool to create a sense of urgency and drive immediate purchases. By displaying a countdown timer on your product pages or during promotions, you can motivate customers to complete their purchases before the time runs out. This can be particularly impactful during flash sales, limited-time offers, or seasonal promotions. The visual element of a ticking clock encourages a faster decision-making process and reduces cart abandonment rates. Ensure that the countdown timer is prominently displayed and easy to understand, with clear messaging about the benefits of acting quickly. This technique not only increases average order value but also enhances the overall shopping experience by adding excitement and immediacy.
21. Personalize Follow-Up Emails
Personalized follow-up emails can significantly enhance customer engagement and increase average order value. After a purchase, send tailored emails that thank customers for their order and recommend complementary products based on their purchase history. Include personalized offers, such as discounts on items they viewed but didn't buy or special promotions for related products. Use customer data to make the emails as relevant as possible, addressing customers by name and referencing their recent purchases. Additionally, follow-up emails can include reminders about abandoned carts, exclusive early access to upcoming sales, or loyalty program benefits. Personalization fosters a stronger connection with customers, encouraging them to return and make additional purchases, ultimately boosting average order value.
22. Highlight Customer Stories and Testimonials
Featuring customer stories and testimonials is a powerful way to build trust and encourage higher order values. Authentic reviews and personal experiences from satisfied customers provide social proof, reassuring potential buyers about the quality and value of your products. Highlight these testimonials on product pages, in marketing emails, and across your social media channels. Use a mix of text reviews, photos, and video testimonials to showcase real-life applications and benefits of your products. Including stories about how your products have solved problems or enhanced the lives of your customers can be particularly compelling. By showcasing genuine customer experiences, you create a sense of community and credibility, motivating new customers to make larger purchases with confidence.
23. Use Exit-Intent Popups
Exit-intent popups are a strategic tool to capture potential sales just as visitors are about to leave your site. These popups detect when a user is about to close their browser or navigate away and present a compelling offer to encourage them to stay and complete their purchase. You can offer discounts, free shipping, exclusive deals, or personalized product recommendations to entice customers to reconsider leaving. Make sure the popup is visually appealing and clearly communicates the value of the offer. By providing a last-minute incentive, exit-intent popups can reduce cart abandonment rates and increase average order value by converting hesitant visitors into buyers.
24. Offer Product Customization
Product customization allows customers to personalize their purchases, adding unique value and encouraging higher spending. Whether it's choosing colors, adding monograms, or selecting specific features, customization options make products more appealing and tailored to individual preferences. This sense of ownership and exclusivity can lead customers to spend more on their purchases. Highlight customization options prominently on product pages, and provide easy-to-use tools that show real-time previews of the customized products. Offering customization not only enhances the shopping experience but also sets your brand apart, fostering customer loyalty and increasing average order value.
