How to Increase the Average Order Value on Your Ecommerce Store
As an ecommerce shop, you always need to come up with new ways to increase your revenue.
But with that said, it’s a common misconception that you need to find new customers to generate more sales. That’s simply not the case.
In fact, there are plenty of ways to increase revenue without acquiring new customers.
Rather than trying to get more transactions on your ecommerce site, you should be focusing on tactics that increase the amount of each transaction.
Don’t get me wrong. Obviously, new customers and more transactions are great news for your business. But it’s not the only way to make more money.
What’s the average order value on your platform?
This is a metric that you should be tracking at all times. If you’re unfamiliar with average order value, abbreviated as AOV, it’s really easy to calculate.
Tactics that improve your AOV work for new customers and existing customers alike.
It’s all about how you display information on your website.
I know what some of you might be thinking. Your current average order value is adequate. Do you really need to make any changes?
When it comes to what’s acceptable as an AOV, the sky’s the limit. Don’t settle for anything less. There is always room for improvement.
Use this guide as a reference for increasing your AOV. Once you apply these strategies, your ecommerce revenue will increase as a result.
Set a minimum for free delivery
Free delivery has a major impact on ecommerce conversions.
In fact, 60% of consumers will abandon their shopping carts during the checkout process if they’re presented with extra costs, like shipping.
So I’m definitely a big advocate of not placing those shipping costs on your customers.
But with that said, you don’t need to offer free shipping for every order. Here’s what I mean.
At the end of the day, someone has to pay for the shipping. It’s either going to be you or the customer.
So those shipping costs should be included in the base cost of your products.
That way, shipping is perceived as free to the customer, but you’ll still be able to cover those costs with their purchase.
If you want to increase the average order value, set a minimum purchase amount for free shipping eligibility.
REI uses this strategy on their website.
Take a look at this shopping cart.
The total cost of the of the cart is $22. But this total isn’t enough to be eligible for free shipping.
REI reminds their customers in two places on this page that they ship orders over $50 for free.
As a result, people will be more inclined to add additional items to their cart.
Why pay for shipping if they don’t have to?
Assuming the customer in this scenario takes the bait, REI was able to increase the purchase amount of this transaction by more than double the initial value.
Upsell on the checkout page
The most successful ecommerce shops find ways to upsell their customers right before they finalize the purchase process.
However, you need to be careful if you decide to implement this strategy. Here’s why.
Upsells shouldn’t take away from the initial purchase intent.
By the time your customers reach your checkout page, they already added items to their cart and want to convert. Don’t let your upsell be a distraction that eventually hinders them from completing the purchase process.
The buying process needs to be as fluid as possible with minimal friction. So don’t make the upsell be an extra step.
Let me show you a great example of an upsell from Jetties Bracelets that conveys what I’m talking about.
Based on what the customer added to their shopping cart, the website automatically generated an upsell of other items that are frequently purchased together.
If the customer wants to add these upsells to their cart, all they need to do is click one button.
This takes the value of this order from $9 to $27.
As you can see, a simple upsell on the checkout page can triple the order amount. Just make sure that it isn’t too distracting or forced upon the customer.
You still want them to convert, even if they don’t go for the upsell.
Offer package discounts
Bundle or package discounts provide an incentive for customers to spend more money.
The concept behind this tactic is simple.
You can generate more profits by focusing on your pricing strategy. Most pricing models make it more expensive to buy a singular item.
But if the customer is willing to buy higher quantities of that item, they’ll receive a discount depending on how much they’re willing to spend.
It’s the basic strategy behind “buying in bulk,” which is common for B2B companies.
However, you can apply the same method to your B2C ecommerce shop. Customers shouldn’t have to buy thousands of an item to get a quantity discount.
Look at how MeUndies accomplishes this.
They use this strategy all over their ecommerce site.
For starters, they advertise that customers can save up to 35% off items by purchasing packs.
Then, if you look at their navigation menu, “packs” is one of the five options for segmenting products.
They reinforce these discounts when a customer clicks on a pack to purchase.
For this pack of underwear, MeUndies offers a discount for buying three as opposed to just one.
However, if they buy a 6-pack, the cost per pair goes down even less. Customers will benefit from additional savings if they buy a 10-pack.
The price of one pair of underwear is $20. But if they buy a 10-pack, it’s $15 per pair.
This strategy encourages people to spend more money because it makes them feel like they’re getting a better value.
Customers can get a 25% discount by spending more money. As a result, you’ll benefit from getting a higher average order value.
Include a gift wrap option
Another way to increase the AOV of your ecommerce shop is by enhancing the value of your products.
What can you do to make your products more valuable?
One strategy that I like is the gift wrap option.
During the holidays, 82% of shoppers plan to buy gifts online. But holidays aren’t the only time of the year when people buy gifts.
People get gifts for birthdays, weddings, graduations, and retirements, as well as other milestones and accomplishments. So your gift wrapping feature should be available 365 days per year.
Look at how Target uses this strategy on their ecommerce store to increase their AOV.
On the checkout page, there is an option for shoppers to select if their order includes a gift.
If the buyer wants gifts wrapped, it’s going to cost them an additional $5.99 per item. So an order with three gifts adds roughly $18 to the shopping cart.
At this point, it’s all about convenience for the customer.
Without this option, the customer would have to get the gift sent to their house, then wrap it themselves before delivering it or re-shipping to the final recipient.
There is nothing convenient about that.
But the gift wrap option eliminates these steps and ultimately improves the customer experience. So they’ll be happy to spend more money.
Charge more for personalized items
Let’s continue talking about ways to enhance the value of whatever you’re selling.
If you can figure out how to apply this concept to your business, it can result in a major increase in revenue.
That’s because consumers say that they are willing to pay 20% more for personalized products.
You need to recognize this fact, and adjust your personalization strategy accordingly.
Check out how The Perfume Shop does this on their ecommerce site.
They give their customers a chance to get custom engravings on certain bottles.
However, this upgrade comes with at an additional cost. But as we saw, customers are willing and able to pay more for customization.
It would be unreasonable for them to expect a premium feature like this to be available at no additional cost.
Incentivize minimum spending thresholds
We talked about minimum spending thresholds earlier. Having a minimum order amount for free shipping eligibility is an example of this strategy.
But with that said, free shipping isn’t the only way to encourage higher spending with thresholds.
You can set up a discount based on spending amounts.
Here’s an example from the Rue21 ecommerce website.
Customers can take advantage of getting 30% off of their order, which is a significant amount.
However, there is a catch. In order to get the 30% discount, they must spend a minimum of $40.
This strategy works well because it also has a deadline.
As you can see, they have a running clock for when this promotion expires. So customers will feel as though they need to act fast to get this discount before it’s too late.
By combining these two strategies, Rue21 is able to increase their conversion rates while increasing their AOV at the same time.
Have you heard of BOGO?
BOGO stands for “buy one, get one.” It’s up to you to decide how you want to fill in the sentence after that.
Buy one, get one free. Buy one, get one half off. You’ve got lots of options to choose from.
The reason why BOGO works so well is because psychologically, it encourages people to spend more money. After all, how could they pass on such a good deal? Here’s what I mean.
If you have a buy one, get one free sale, then that implies that if someone buys two items, they’ll get two free. If they buy three, they’ll get three free, and so on.
Maurices uses this strategy on their website.
It’s the first thing that you see when you navigate to their ecommerce homepage.
Don’t let BOGO limit your creativity here. You can run other promotions based on the same concept.
For example, buy two, get one free would encourage people to spend even more money.
Either way, this strategy can help you increase your average order value.
Give cash back
If you create a cash back system on your ecommerce site, it gives people an incentive to spend more money.
The more money they spend, the more cash back they’ll receive. Ultimately, they’ll benefit from these rewards as much as you will. So it’s a win-win scenario for everyone.
The Kohl’s cash system is a great example.
For every $25 that a customer spends, they’ll receive $5 in Kohl’s cash.
This promotion is valid on their ecommerce shop, as well as in their physical store locations. So for those of you who have brick and mortar shops in addition to your ecommerce platform, you may want to consider a similar structure.
Once customers spend money, they receive Kohl’s cash in the form of a coupon.
These coupons are automatically stored on their customer profiles.
Kohl’s doesn’t have any limit on this spending. So if a customer spends $1,000 on a transaction, they’ll get $200 in Kohl’s cash as a reward.
I know what some of you are thinking. If the cash back eventually gets redeemed, wouldn’t it lower your average order value for those future purchases?
Not necessarily. It’s unlikely that people will spend only the amount of their reward for those future purchases. Plus, you can set dates for when the cash back can be redeemed, which is what Kohl’s does. So there’s a chance not all of these rewards will even be used.
Recommend products to your customers
58% of consumers are more likely to buy from online retailers that recommend products based on their purchase history.
In addition to their previous purchases, you can also recommend products based on what your customers are browsing for.
For this strategy to be effective, it works best if you encourage people to create a customer profile. Then it’s easier for you to monitor their behavior.
It’s also effective for those of you who have a mobile app. In fact, personalized recommendations made my list of the top 10 features of a successful mobile commerce app.
When you recommend products to your customers, it speaks to them. We talked about this earlier when we discussed upselling.
But you don’t need to wait until the customer reaches their shopping cart to offer recommendations. Here’s an example from Sephora’s website.
In addition to recommending and showcasing their bestsellers, they also have a “recommended for you section” on their homepage.
The items displayed will vary depending on who is browsing.
For example, let’s say your ecommerce shop sells sports equipment.
One of your customers recently purchased a new set of golf clubs on your website. The next time they visit your site, you could recommend golf balls, tees, golf spikes, and other similar accessories.
These recommendations will ultimately help you increase your AOV.
Create a loyalty program based on spending tiers
Loyal customers spend more money.
82% of consumers are more likely to shop from businesses that offer loyalty programs.
Plus, repeat customers spend 67% more money than new customers. That’s why you need to learn how to increase sales by implementing a customer loyalty program.
However, there are so many different types of loyalty programs out there.
One of my favorite options is to create a program based on spending tiers. This is the best way to get your existing customers to spend more money each time they shop.
Here’s a look at the Nordy Club benefits, which is a loyalty program from Nordstrom.
As you can see, the benefits get better as customers reach each spending level within a calendar year. These loyalty programs reward your customers that spend the most money.
For the most part, people probably won’t spend $500 or $2,000 in one purchase.
However, they may be willing to spend an extra $50 or so on each transaction to get them one-step closer to the next rewards tier.
By encouraging them to spend more, your average order value will increase.
While new customers are always great for company growth, they are necessarily a requirement for increasing your revenue.
Instead of prioritizing customer acquisition, you should focus on strategies that encourage both your existing customers and prospective customers to spend more money on your ecommerce site.
The average order value is a metric that you should be tracking.
Regardless of your current AOV, I’m confident that you can improve that number.
Not sure where to start? Use this guide as a reference.
If you implement the strategies that I’ve outlined above, you’ll notice a significant boost in your ecommerce average order value.
How is your ecommerce shop taking steps to increase your AOV?
What do you think? Add a Comment:
Rhodel.com gathers a daily roundup of only the best-of-the-web when it comes to creating your digital strategy, online marketing, social media, startups, technology, leadership, marketing trends and Wordpress tips. Subscribe to the Digital Strategy Newsletter for a small weekly digest of only the best tools to improve your online digital strategy. As always, everything is provided free of charge but when you visit one of our sponsors, it helps us to pay the bills at no cost to you. Thank you.
Check out: Gladlii.com for premium, custom web site design and branding services.