What is the average order value (AOV) and why should you never neglect this?
The AOV is the average amount of money your customers spend when they place an order on your website.
So, what is the benefit of knowing what your AOV is?
Knowing what your average order value is can help you to better plan your marketing and pricing schemes, and increasing your AOV directly impacts your revenue growth target.
You can generate your average order value under the reporting dashboard in Shopify and Magento.
How can you calculate your AOV?
AOV = total revenue/number of orders
Let’s suppose for a moment that your total revenue for the month of May is $60,000 and the total number of orders on your website is 1,950. Based on this example, your AOV for May is $30.77.
If every customer spends more money on every transaction, that translates to more money coming into your business.
Here are some tips you can use to increase your AOV:
1. Upsell and cross-sell.
One of the fastest ways to increase your AOV is to, of course, push more products. Upselling is the simple method of offering an upgraded or premium version of the product. For example, use FOMO (fear of missing out) psychology to get customers to buy the premium version of whatever product they are purchasing instead. Showing them what they are missing out on can convince them to purchase the more expensive version.
On the other hand, cross-selling is the act of recommending a product that will complement whatever it is they are already buying. This is in the form of “customers who bought this item also bought” and “frequently bought together” Mechanics.
Shopify and Magento have marketplace apps to do this work for you. No coding involved. It’s never been easier to upsell and cross-sell to your customers.
2. Create a customer loyalty program.
It’s fairly expensive to acquire new customers. Instead of ignoring your loyal, existing customers, it’s high time to provide them with more value.
The most common loyalty program to date is the point system. For every dollar they spend, they earn the equivalent point, and they can use these accumulated points to purchase more items in your store.
Another good system is sending out “free gifts” to your top buys. It can be in a form of a free shipping voucher with no minimum order or an exclusive “Buy 2 Get 1 Free” offer.
3. Discounted pricing.
Who doesn’t like discounts?
Offer discount codes on low-traffic pages to entice visitors to spend more in your store. You can also set up opt-in promotions in exchange for their email address so you can give your customers a discount code that never expires.
One popular practice is to discount the price when making a minimum order. For instance, for every $100 they spend, they’ll get 10% off the total purchase.
4. Mix the high price with low-priced products.
Put your most expensive product between two lower-priced products. Here’s how this works:
When a consumer scans the first and second price, their mind will register that product as expensive. When they see the price of the fourth and fifth product, it will establish the fact that those have a reduced price, thus “saving” them money.
5. Offer free shipping
Did you know that 57% of online shoppers say they would rather pick up their purchases rather than spend money on expensive shipping fees?
Use free shipping as an incentive for shoppers to spend more money on your products.
But how can you offer free shipping without affecting your profit margin?
Use the “free shipping threshold” tactic. Offer deals like “Free shipping for orders above $100.” But be sure to calculate your margins and shipping costs, as it is important to know how much higher you need to set your free shipping threshold.
6. Bundled Products
Product bundling is a common practice among retailers. Say you’re shopping for a new phone and the price is around $999. Would you buy it as a stand-alone offer or would you be more enticed to buy this phone if it came with a pair of wireless ear buds, a Bluetooth speaker, and a free case by adding $15 to the price tag?
Most shoppers think about the “savings” they will receive, in which case they will decide to spend just a little bit more.
Keep in mind that every bundle should feel like “they belong” to one another. If you are selling a $999 phone, why would you bundle it with a bottle of hand sanitizer and a baseball cap? That doesn’t make sense. Think like a customer and bundle products accordingly.
7. Offer incentives on the next purchase.
Incentivize your customer by offering rebates or gift cards on their second purchase. You can offer a $10 cash back bonus if they buy $90 worth of products. You could also give a gift card worth $20 for every $200 they spend.
Doing so encourages them to return and spend more money, because they feel valued. Offering incentives make your customers feel important and valued.
So, when all is said and done, are you still struggling with your average order value?
Try out these surefire ways to increase your AOV and see the difference for yourself.