Increasing the average order value (AOV) is an effective way to boost revenue and improve the overall health of your online business. AOV refers to the average amount customers spend when they place an order on your eCommerce store. If you can understand your AOV and implementing strategies to increase it, you can enjoy benefits such as increased sales revenue, faster customer acquisition cost recovery, and higher customer lifetime value. AOV helps companies understand the spending patterns of their customers and provides insights into the effectiveness of upselling and cross-selling efforts. The average order value represents the typical amount spent by a customer in each order, commonly placed on a website or mobile app.
Calculating the average order value (AOV):
You need to use the following equation: Average Order Value (AOV) = Total Revenue ÷ Number of Orders Placed For example, let's say that in the month of September, your online store's sales were $31,000, and you had a total of 1,000 orders.
To calculate the AOV, you would divide the total revenue ($31,000) by the number of orders (1,000): $31,000 ÷ 1,000 = $31
In this case, September's monthly AOV was $31. It is important to note that AOV is determined using sales per order, not sales per customer. This means that even if one customer makes multiple purchases, each order would be factored into the AOV separately.
"Monitoring your average-order-value closely, preferably daily or weekly, can help businesses identify trends and make informed decisions about advertising spend, store layout, and product pricing," said Retail Expert, Jeanel Alvarado
Here are five tips to help you increase your AOV:
- Offer free shipping with a minimum purchase threshold: Encourage customers to add more items to their carts by offering free shipping if their order surpasses a certain amount. For example, you could offer free shipping for orders over $50. Be sure to display this offer prominently throughout your website, including on the homepage, product pages, and at checkout.
- Implement upselling and cross-selling: Upselling involves encouraging customers to purchase a higher-priced item or upgrade, while cross-selling involves suggesting related products that complement the customer's current selection. Both strategies can effectively increase your AOV by enticing customers to spend more on each order. Use web design to highlight higher-priced plans and cross-sell related products during checkout.
- Bundle products and offer discounts: Group products that go well together or commonly sell together as "bundles." This encourages customers who were only looking to purchase part of a set to buy a complete (and more expensive) set, thus increasing your AOV. You can also offer slight discounts for purchasing more than one of the same item, incentivizing customers to buy in bulk.
- Create a customer loyalty program: Reward your loyal customers with exclusive discounts, promotions, or gifts based on their spending habits. This not only encourages repeat purchases but also motivates customers to spend more on each order to unlock additional rewards.
- Take an analytical approach to AOV: Use data to create personalized and targeted shopping experiences that will increase your AOV. Analyze customers' order history to create marketing campaigns with messaging and products that resonate with specific audiences. The more targeted and specific your marketing efforts, the more likely customers are to spend larger amounts.
