As an ecommerce seller, you may have high site traffic, great conversion rates, and even good customer retention. But are your order values consistently low? If so tracking your AOV is an important metric if you’re looking to increase revenue.
How to Measure AOV? Why is it Important?
Tracking average order value is an important measurement of overall growth. It’s helpful to evaluate your pricing strategy and profit margin. Once you’ve established a benchmark for your order value you can work toward increasing the AOV which will directly increase profits and revenue.
To calculate your AOV you divide the total revenue from your store by the number of orders placed within the same time frame. Using an example, if you make $1000 total per day from 25 orders, your average order value is $40. That means your customers purchase, on average, $40 for each order. If you were to try to increase that, you might set a goal of $45 or $50 per order (depending on the value of most of your products).
Ways to Increase AOV
The name of the game when increasing AOV is incentivization. You need to entice your customers to purchase more or higher valued items, or both. Here are a few reliable methods.
Free or Discounted Shipping
The number one, highly effective way to boost orders (both in volume and average value) is to offer free shipping. Before you jump in, there are numerous considerations to make. Free means it is free for your customers, but that also means the cost of shipping needs to be absorbed somewhere.
By offering something for free, customers may be influenced to believe they are getting a better deal than they actually are. For example, Amazon’s Prime service offers members free shipping yet there is an annual or monthly fee. While shipping may feel free at the checkout, Prime members are still paying some portion of that through their membership dues.
Most sellers set a minimum order value for free shipping. To do this, you might take your current AOV and set your order minimum 20% higher than that to incentivize customers to purchase more. Only the customers who reach that order minimum will be offered free shipping.
Read more about the many ways to offer free shipping to customers.
Bundle Complimentary Products Together
Bundles increase the perceived value of your products. When products are bundled together customers will spend more money than if they purchased only one item. You can offer your customers bundles for promotions and limited time offers to test if they sell, or do a small batch of a few kits and test which your customers seem to like best.
Other than increasing the average order value (and cart size!), offering bundles is also a great way to expose customers to wider variety of items, introduce loyal customers to new things, and promote a unique product mix that may not be available from other sellers.
Kits and bundles are conducive to beauty products (makeup and their applicators, seasonal color scheme, night or day kit, etc.) and consumer packaged goods (flavor variety pack, items for each day of the week, etc.).
How Magic Spoon improved their customers’ experience with virtual bundles.
When working with your fulfillment provider to create product bundles, it is important to do it efficiently cost-effectively. Some 3PLs may need a seller to pre-kit (or pre-assemble) the product bundles before sending them to the fulfillment center. This requires a long lead time, and the seller could end up losing money on products if the bundled products don’t sell well. More modern 3PLs can set up virtual bundles, which are a faster, more efficient way to execute this fulfillment project.
Major benefits to virtual bundling include:
- Help offset shipping costs by increasing average order size which leads to greater profits.
- There’s no additional cost to do virtual bundling (versus pre-kitting bundles).
- Create bundles on the fly, which gives you more flexibility.
Read more about how to set up virtual bundles.
How beauty brands use virtual bundles to increase average order value.
“We sell a variety of bundles on our websites—we use them as upsells because they increase our average order value quite a bit. Plus they give us a lot more flexibility. Being able to bundle products has been really helpful for us. Plus it took less than a week to be up and running.”
Upsell, Upsell, Upsell
“Would you like to supersize your order?” is the classic upsell. It’s easy for a customer to be willing to spend a small percentage more if they think it’s a better deal.
Aim to incentivize your customers to buy marginally more expensive items than they may have intended. Instead of one box of cereal, why not get a four-pack? Instead of the simple 1.0 model, get the 1.2 model for only 20% more.
Upselling is not to be confused with cross-selling, which is adding complementary items to an order. The classic cross-selling tactic is, “Would you like fries with that?” Cross-selling can also work to increase average order value, but it is a method closer to bundling and can be a bit more difficult operationally.
How Aftershokz increased their revenue with customized holiday gift messages.
If you are a startup with only a few SKUs, or a seller with high-ticket items that aren’t conducive to the “supersized” order, there are still a few ways to add value. These don’t involve getting more or different products, rather adding value to the products your customers are already interested in.
- Personalization – whether it’s initials on a camera strap or a sticker on a cereal box, adding a personal touch can be simple to execute and an easy way to mark-up your product.
- Gift wrapping – if your products lend themselves to holiday gifts offering to pre-wrap items is a big upsell and profit-maker.
- Custom messages – everyone loves to send a note with their items; Amazon capitalized on this early, and it’s something consumers have come to expect.
No matter what your upsell method is, it’s easy to give your customers the idea with a simple pop-up in the checkout area or place higher-value goods in ads and at the top of your site.
At DCL Logistics we provide customer-centric fulfillment for high-growth brands. If you are looking for a fulfillment provider who can help create custom programs for your growing ecommerce business, we’d love to hear from you. Reach out for a quote.