There are two battles to increase sales – you need more people to buy from you and you need people to buy more from you.
Both are crucial directions to focus on if you want steady, stable scaling. While customer acquisition seems more tempting to invest in (after all, this is where everything starts), the latter has the potential for more immediate and sustainable returns, increasing your average order value.
What is the Average Order Value (AOV)?
In its standard form, AOV is a simple metric that calculates the average amount customers spend on each purchase from your online store. It’s calculated by dividing total revenue by the number of orders to understand the average spent by one customer per purchase.
Average Order Value = Revenue from All Sales / Number of Orders
However, in some cases, tracking the mode of all orders (the most common order value) can be more accurate instead of the average. When it comes to averages, outliers can skew the number in one direction or another – for example, if 100 customers spend $10 and one customer spends $1,000, the average order value would be $19. Still, the mode would be $10, which is more descriptive of most orders.
Modal Order Value = Most Common Order Value Among All Orders
Another approach to calculating AOV relies on the median order value, which is the middle number in a list of ordered values. However, this can not always represent the majority of orders, especially for businesses with high-ticket items or a small number of high-value customers.
For example, if 5 customers spent $10, $50, $100, $200, and $1000 – the median order value would be $100, but it’s less descriptive of most orders than the mode.
Median Order Value = Middle Number in a List of Ordered Values
So whether you choose to use the average, mode or median order value, it’s important to understand each approach’s limitations and potential biases. We recommend you check them all to have the most accurate sum that closely reflects your customer’s willingness to spend on one order.
Why You Should Bother Tracking AOV
When you know the approximate sum your customers are ready to spend during one purchase, that’s a very good base for asessing the key directions of your business’s overall performance.
Assess ROI
You spend money on getting new customers from loads of channels. You pay sales fees to e-commerce marketplaces to show your offerings; you invest in packaging, photography, and product copies…you might even consider opening a physical store, which requires significant financial resources.
All of these investments can add up quickly, and it’s important to know if they’re paying off.
By tracking AOV, you can assess the return on investment for each customer acquisition channel and decide where to allocate more resources or make changes to improve your ROI.
For example, suppose the average order value of your Amazon account is significantly higher than that of your brand website while you invest more in your website’s maintenance, SEO, and advertisement. In that case, you might want to optimize the investment. This can either make you put more effort into promoting your Amazon account or optimize your website to attract higher-spending customers in the future.
Boost ROI
There are tons of tactics for making your customers buy more from you! But to keep the thin line between rewarding customers too much and lacking the necessary reward mechanisms to encourage them to buy in the first place, knowing your customers’ AOV is a crucial step.
For example, you can offer free shipping to your customers (which is, in fact, a loss for you) if they spend more than a certain amount on their purchase or give them store credits when they make purchases over a specific amount.
However, without understanding your customers’ spending patterns and average order value, it can be difficult to determine the most effective offers that will boost your ROI while still keeping your customers happy.
If you know that the average order value for your target group is $50, you can find it realistic to offer free shipping for $60-70 purchases because the additional cost of the free shipping is offset by the increased customer spending.
However, if your average order value is only $20 and you offer free shipping for $100 purchases, you might end up with no significant increase in customer spending and a major loss.
15 Tactics that Ecommerce Giants Use to Increase Average Order Value
Think of why your customers buy mostly for specifc budget and what can drive them to add more to shopping cart?
It can be a matter of budget constraints, which means you might rethink your targetting and customer acquisition strategies to attact more high-income customers, or incentivize them to spend more with discounts on bulk purchases.
In other cases, you might just need that small spicy offer that will entice customers to add more items to their carts. And the good news it shouldn’t necessarily include a financial component like discounts or free shipping.
You can offer accessories or related products to hint that there’s more to add, bundle products that complement each other or even create a sense of scarcity.
Let’s see the strategies that are actively used by many e-commerce giants like Amazon, Walmart, Shopify, and more!
1. Offer Free Shipping for Specific Order Amounts
When you choose between paying $8 for shipping and adding one more $15 item to your cart so that you get free shipping, most of the time you’ll go for the second option. This is how psychology works and this is what pretty much all online stores do.
You can also try to offer a specific order amount for free shipping. For example, if your average order value is $50, you can offer free shipping for orders above $60. This will encourage customers to add more items to their cart in order to receive free shipping, thus increasing the overall order value.
This trick will most likely work even if your shipping rates are already pretty low, as customers tend to be drawn towards free offers. This will not only increase the order value but also make your customers feel like they’re getting a good deal.
2. Try Cross-Selling and Up-Selling
Cross-selling and upselling are year-round strategies especially relevant during the holiday shopping season.
Cross-selling involves offering complementary or related products to the one the customer is purchasing. This can be done through product recommendations, bundles, or add-on items at checkout.
Upselling involves offering a higher-end or more premium version of the product that the customer is interested in. This can be done by showcasing different product variations with added features or benefits.
So, when the customer is buying a winter coat, you can cross-sell by suggesting matching gloves or scarves. For upselling, you can offer a similar coat with added features such as waterproofing or fur lining.
These techniques work quite well because the audience is hot and open to making a purchase. And when you hint that the purchase can be better, more complete or a bit more expensive, they are likely to spend more. Just make sure that the additional products you offer are relevant and add value to their initial purchase.
3. Sell Products in Bundles
If your product categories are initially designed to complement each other and customers need the whole line to get full satisfaction, bundling is a great option. It’s when you package multiple products together and sell them at a discounted price compared to buying them individually.
For example, if you sell skincare products, consider bundling a cleanser, toner, and moisturizer for a discounted price. Consider offering the blouse, skirt, and shoes for a discounted price.
Bundle the slow-moving items with the fast-moving ones as the most effective way to clear out old inventory. This strategy also encourages customers to try out new products they may not have considered before, thereby increasing sales and potentially creating loyal customers.
4. Personalize Product Recommendations
We all have items that we can’t resist to buy. Like, one can never spend a penny on a hair accessory but buy the 11th hand cream even if the previous 10 are half full.
That’s why personalization is so powerful when it comes to product recommendations. Using data collected from customers’ browsing and purchase history, you can recommend products more likely to appeal to them individually.
AI and machine learning play roles in understanding customers’ preferences and buying habits. With personalized product recommendations, customers are likelier to add these items to their cart and increase their AOV.
Just have the AI personalize your product recommendations for you, and watch your AOV grow.
5. Have Welcome Offers for New Customers
Make that warm, wholehearted welcome to your new customers by giving them an exclusive welcome offer. This can be in the form of a discount or a free gift with their first purchase. Offer to get a membership card with no costs or a special discount for the second purchase. This encourages customers to make a larger initial purchase and entices them to return for future purchases, boosting the AOV in the long run.
6. Offer Additional Services
The most popular services online stores offer for a few extra dollars are gift boxes and gift wrapping. A small amount of money in addition to the purchase can add a personal touch to a present. It’s easy for customers to justify spending a little more, especially during the holiday season when they want their gifts to be special.
Other services include expedited shipping, installation or setup assistance, extended warranties, and customization options. These additional services can also be used as upselling opportunities at checkout or even as standalone products on your website.
7. Enable the “Buy today, pay later” Option
There is always a wish to buy something, but it isn’t always possible to pay for it right away. That’s why many online stores offer financing options, usually through third-party providers like Affirm, Klarna, or PayPal Credit. This allows customers to make purchases and pay in installments, easing the financial burden of a large purchase.
Just add that option to the product page and gently remind your customers about it at the checkout and via email. This can be a powerful tool to increase sales, especially for high-ticket items.
8. Support a Cause
Having an impact is the desire of our age. Customers want to know that their purchases are making a difference in the world and that their actions are not directed purely to satisfy their own needs.
If you can merge the two sought-after emotions of a buyer – purchasing what they want and making charity – you may have the answer to increasing your sales. Consider partnering with a charity or cause that aligns with your brand’s values and donating a portion of each sale to them. Mention that your brand supports this cause on your website and social media, and let customers know that they can make a difference with their purchase.
That’s a good start to build a community of like-minded customers who form more meaningful relationships with your brand and potentially increase sales through word of mouth.
9. Highlight Bestseller Products on All Pages
What are the items that seem to be most liked by your customers? Chances are they will also appeal to other customers, so you better try highlighting those items on as many pages as possible. This could be done in a number of ways, such as featuring them on your homepage, including them in email newsletters, or showcasing them on social media.
As the final shopping touch, you can include the bestsellers in the checkout process to remind customers of these popular items. This will encourage them to add it to their order before completing the purchase and potentially increase your AOV.
10. Add User Testimonials to Product Pages
We all get that item from the shelf more confidently when the buyer next to us says, “I bought that too, and it’s great!”
It’s better and completely different from when the seller tells you, “It’s great! You should buy it.”
In other words, customers need reviews from other customers to help them make a purchase decision. Adding user testimonials to your product pages can add the last piece of trust and credibility that customers need to confidently complete their purchase.
And if you have reviews stating things like, “I bought this shirt for $20, but it goes great with the pants I also got from here,” – then you’ve already planted a seed in your customer’s mind about purchasing related products together. This can lead to an increase in AOV as they are more likely to add on these recommended items.
11. Initiate Loyalty Programs
FARFETCH offers a membership loyalty program where members get as much as they spend on the platform + special discounts on birthday shopping, access to their exclusive private sale, and more! Rewards for loyal customers add extra ties between you and your customers, where they prefer to buy everything from you rather than distributing their purchases among various brands to get a better deal.
Regular customers also tend to spend more on every purchase, increasing your AOV. Loyalty programs can be easily implemented with the help of AI and machine learning, which can analyze customer data to identify their preferences and create personalized rewards that will keep them coming back for more.
12. Blink with Limited-Time Offers
Many customers know that limited-time offers play on the note of urgency and FOMO (fear of missing out) when driving purchases. Nonetheless, for many, this works as a way to have something that is exclusive and may not be available later. Limited-time offers can increase average order value by creating a sense of urgency and exclusivity. This can be done through flash sales, one-day deals, or limited edition products.
If the offer seems really good, you can make your customers buy the item they don’t need right now. For instance, if a customer was casually scrolling through your website and sees an item they like on sale for one day only, they may be more inclined to make the purchase immediately as opposed to waiting and potentially forgetting about it later.
13. Offer Free Returns
Boosting sales with the offer of getting the item returned for free? It sounds controversial, but it works quite well, especially in online stores. When customers hesitate if the item is as good as it looks or whatnot, this offer of free returns can give them a nudge.
Additionally, knowing the seller is ready to take back the item and reimburse them for it can give customers a sense of security, making them more likely to purchase from your store. This also shows that you are confident in the quality of your products and value customer satisfaction.
14. Have a Live Chat with High-Speed Responses
Sometimes, it’s about getting the answer to just one question that can make a customer indecisive to be confident in their purchase. This is where having a live chat feature on your website can be extremely beneficial.
Buyers at the last stage of consideration can quickly clear their doubts, and it’s more likely that they won’t abandon the cart if a knowledgeable sales representative can provide high-speed and accurate responses.
In the meantime, the train’s gone if the hot lead is left waiting too long. Many competitor stores are out there, and modern customers are too short-tempered to wait for slow customer support. To ensure a product-oriented live chat system has been set up properly to increase average order value.
15. Make Post-Purchase Offers
The game is not over when a customer completes a purchase. From the moment the client pays for the future, a new conversion cycle is on the way to make the client buy again…and buy more!
When making post-purchase offers, remember you have an excited, satisfied customer who trusts you and your brand. This can be the best moment to offer them a related product or an upgrade, a small discount for the next purchase, a 3-month free subscription, a referral program, or anything else.
Many brands show the offer right on the purchase completion page and send a printed offer with the actual delivery of the product. It’s important to ensure you’re not overwhelming your customers with offers but rather providing them with relevant and valuable options to continue their buying journey with your brand.
Helping Businesses Like Yours to Increase Average Order Value
Andava Digital provides Ecommerce marketing services sharpened in 15 years of experience, $9 managed budget and 550% YoY transactions. We know the major marketplaces’ behind-the-scene and the customer journey from first impressions to multiple successful purchases.
With our team of experts, we can help you implement effective tactics like upselling, cross-selling, and personalized post-purchase offers to increase average order value and maximize your revenue potential.
You can also rely on us to build your branded e-commerce platform and optimize it for conversion so the sales and marketing funnels are aligned for the best results.
Let’s discuss your goals for E-commerce growth and how we can work together to make them a reality. Contact us today for a consultation.
