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How To Increase Average Order Value In Your eCommerce Store

How To Increase Average Order Value In Your eCommerce Store

There are 4 major ways to increase the profitability of your eCommerce store:

  1. Acquire more customers
  2. Increase conversion rates
  3. Increase lifetime value of customers (retention)
  4. Increase average order value per customer

In this article, we’ll be focusing on point #4 – increasing average order value per customer for increased revenue.

 

What Is Average Order Value (AOV)?

The average order value (shortened AOV) is the $ amount that each customer spends (on average) when they buy from your store.

For example:

  •   If your current AOV is $40 with 200 purchases per month = $8,000 in sales per month.
  •   If you increase your current AOV to $50, keeping purchases constant at 200 per month = $10,000 in sales per month

It’s a direct increase in revenue when your AOV rises.

But few eCommerce store owners really focus on this metric.

Most tend to focus on acquiring new customers. But getting more customers is usually quite expensive.

You need to have a sales process, marketing and a funnel – all of which are time consuming and costly.

On the other hand, increasing AOV can be a great return on investment because it only requires simple tweaks.

increase average order value

6 Methods To Increase Average Order Value (AOV)

Method #1 To Increase Average Order Value –  Upsell

You may have heard of the term “upselling” before.

It’s where you offer product(s) to the customer that is a premium version of what the customer is buying.

This allows customers who are willing to spend more, get a premium version with extra features.

For example, if you sell laptops – you could upsell a better laptop with more processing power, newer model etc.

Or if you sell supplements, you could offer a “plus” version of the original supplement with more potent ingredients.

The main idea is to offer a “premium” version of your product to capture the segment of your market who are willing to pay more for higher quality.

In many cases, people are willing (and want to) pay more for a better product.

Upselling allows you to satisfy this audience by offering a premium version.

For upsell ideas, check to see what Amazon and other large-scale eCommerce stores do.

If you accept orders by phone, you can train your salespeople to upsell additional products to increase average order value.

Amazon’s product page is littered with upsells, cross-sells and other AOV increasing tactics

Method #2 To Increase Average Order Value – Cross-Sell

Cross-selling is much like upselling.

But where upselling focuses on a “premium” version – a cross-sell is where you offer a similar, related product.

The most famous example is McDonald’s “would you like fries with that?”

This simple line has been responsible for a huge revenue boost for McDonald’s.

Eventually, they realised it’s better to bundle the entire thing together with a soft drink.

They also dis-incentivized people to purchase products separately by making the individual products more expensive to buy than the combo.

And predictably – most people buy combos (burger + drink + fries) therefore increasing the AOV.

Compare this to if they sold burgers, fries and drinks all separately. They would’ve lost many sales because individual product sales means lower AOV.

Yet this is what most eCommerce stores do.

For cross-sell ideas, check out Amazon’s “Customers who bought this item also bought” and the “frequently bought together” section, for products like yours.

This will give you a great idea on what people often buy together and you can bundle these into a cross-sell package.

You can also offer additional cross-sell products on the product description page or in the cart page.

Some websites even use pop-up windows to cross-sell products as customers check out or after the payment process.

Method #3 To Increase Average Order Value –  Down-Sell

The down-sell is also much like the upsell and cross-sell.

The major difference is, you should down-sell a product that is cheaper with less features.

The idea behind this is to capture a segment of the market who want to buy your product, but aren’t willing to purchase at the current price.

They have a different price ceiling in mind – due to lower perceived value or financial constraints.

The down-sell attempts to get sales to this segment of the audience by offering a cheaper product that they’d be willing to buy (even with less features / benefits).

Essentially, these offers are for price sensitive customers.

We don’t recommend down-selling on the main product page as this can potentially lower AOV by persuading customers to spend less.

To clarify – this means that customers who were willing to purchase the normal or “upsell version,” were persuaded to buy the cheaper, down-sell version.

We don’t want this to happen as it will decrease AOV.

To prevent this, only offer down-sells on pop-ups that detect exit intent.

Exit intent is when people are about to leave the page or close the tab / window they’re browsing.

Specialised plugins can detect this behaviour and quickly show a pop-up window before the user quits.

This exit intent pop-up window should show a great down-sell product that may convince the user to buy.

For example, the Beeketing Plugin is one that detects exit intent.

Example of an exit intent pop-up

In most cases, we recommend focusing on upsells and cross-sells as that’s where you will increase average order value the most.

 

Method #4 To Increase Average Order Value – Offer Product Bundles

Product bundles can encourage customers to buy a set of products (which increases average order value) instead of just one.

The McDonald’s example we gave in #2 is a great example of product bundles. They incentivize customers to buy a combo (burger, fries, drink) instead of buying just the burger.

You can use product bundles in your eCommerce store by offering discounts for X + Y purchases.

Or you can give discount coupons that only apply when X + Y are purchased.

We also recommend adding a “time limit” component. It adds a sense of urgency and compels the customer to act quickly to get their discount.

It’s even more effective if you can have a ticking countdown timer.

Doing these will increase average order value.

Amazon’s Add-on Bundle

Method #5 To Increase Average Order Value – Offer Volume Discounts

This is a simple AOV increasing tactic – provide different levels of discounts when customers bulk purchase the same product.

However, make sure you take into account your profit margins when offering bulk order discounts to ensure you don’t get in the red.

Also consider the increased shopping costs with higher volume orders and factor that into your pricing.

Amazon’s Free shipping offer

Method #6 To Increase Average Order Value – Offer Freebies For $X Thresholds, Bundle Purchases Or Bulk Purchases

The final recommendation for increasing AOV, is to offer freebies if customers meet certain thresholds.

For example, you could offer free shipping for orders over $75. You could also offer free express shipping for orders over $100.

Or you could offer a limited time freebie product for those who purchase a bundle of products and/or bulk purchases.

You can get really creative here – try to offer a freebie that would really appeal to your target audience.

Some businesses offer amazing free gifts and premiums that convince buyers to purchase, just to get the freebie!

The key here is to understand your profit margins and know how much you can offer your customer.

 

Other eCommerce Articles You May Find Useful

 

In Conclusion

The 6 methods listed should help increase average order value and therefore increase revenue for your eCommerce store.

It’s a good idea to look at Amazon and see what kind of AOV increasing tactics they use for your product category.

Also watch your competitors and other successful eCommerce stores to see how they improve AOV.

We hope you were able to learn how to increase your revenues by raising AOV.

 

 

 

Would you like help in building your eCommerce store?

Get in touch with us – OPMC has specialised in the eCommerce industry for 14+ years.

We run our own successful eCommerce stores and would be happy to share our wealth of experience with you.

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