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Mastering how to increase average order value (AOV) is one of the most impactful ways to achieve business growth. Increasing AOV directly boosts revenue, making it a key focus for ecommerce brands aiming for enhanced profitability and success.
In this article, we'll walk you through how to calculate it, why it's important, who is responsible for increasing average order value, and 21 strategies that your ecommerce store can use to make it happen.
What Is AOV (Average Order Value)?
AOV stands for average order value, a critical metric that measures the average dollar amount spent each time a customer places an order on a website or mobile app. Average order value is an essential indicator for ecommerce businesses, as it provides insights into customer purchasing patterns and helps in strategizing marketing and pricing to boost sales and total revenue. Understanding and optimizing AOV is key to enhancing the profitability and success of an online store.
Why Is AOV Important For Brands?
Your average order value is more than just a number; it's a reflection of a brand's health and potential for growth. An increase in AOV typically signifies enhanced customer trust and preference, which not only suggests a larger share of the customer's wallet but also fosters improved customer retention. This uptick in spending per order positively influences other important metrics like customer lifetime value (LTV), reflecting both heightened customer loyalty and long-term engagement with your brand.
Key Reasons Why AOV is Important:
- Direct Impact on Revenue: Higher average order value directly translates to increased revenue from each transaction.
- Enhances Marketing Efficiency: By focusing on increasing AOV, marketing efforts can yield more revenue without necessarily increasing the customer base.
- Improves Customer Lifetime Value: As AOV rises, it often correlates with an increase in LTV, indicating more profitable long-term customer relationships.
- Indicates Customer Trust and Satisfaction: A higher AOV can be a sign that customers find value in your products, leading to larger purchases.
- Guides Product and Pricing Strategies: Understanding AOV helps in tailoring product offerings and pricing models to encourage higher spending.
- Optimizes Resource Allocation: With insights from AOV, brands can better allocate resources to areas that maximize revenue per customer.
How To Calculate Average Order Value (AOV)
Calculating average order value is straightforward. The formula is:
Average Order Value = Total Revenue ÷ Number of Orders
To put this into action, let's consider an example. Suppose your online store generated $50,000 in revenue from 1,000 orders last month. Using the AOV formula, your average order value would be $50,000 ÷ 1,000, equating to $50. This means, on average, each customer order was worth $50.
This calculation offers a window into your customers' spending habits. By consistently monitoring AOV and comparing it within the same time period across different months or quarters, you can effectively gauge the impact of your pricing, marketing campaigns, and product strategies. An increase in AOV after introducing a new marketing campaign or product bundle suggests a positive customer response.
Maintaining consistency in tracking AOV is key. This consistent analysis, especially when comparing it across similar time periods, helps in uncovering trends and patterns, guiding informed decisions to foster revenue growth and adapt to changing market dynamics.
Who Is Responsible For Increasing AOV At A Company?
The responsibility of increasing average order value at a company is a collaborative effort, involving multiple departments and roles. While it primarily falls under the purview of the marketing and sales teams, the reality is that almost every aspect of the business can influence AOV. From product design to customer service, each department plays a role in enhancing the customer's purchasing experience and, consequently, the average value of their orders.
Key Roles Influencing AOV:
- Marketing Team: Develops and implements strategies to promote higher-value products or bundle deals, and creates targeted campaigns to encourage increased spending.
- Sales Team: Focuses on upselling and cross-selling techniques during customer interactions to boost order values.
- Product Management: Ensures the product mix appeals to customer preferences and encourages higher spending.
- Ecommerce Managers: Optimizes the online shopping experience to make it easy for customers to find and purchase higher-value items.
- Customer Service Representatives: Enhances customer satisfaction and trust, which can lead to repeat purchases and higher order values.
- Pricing Strategists: Sets prices and creates discounting strategies that maximize revenue without compromising AOV.
- Data Analysts: Provides insights into customer behavior and purchasing patterns, helping to tailor strategies that can increase AOV.
Each of these roles contributes to a cohesive strategy aimed at increasing average order value, demonstrating that it's a company-wide objective rather than the responsibility of a single department.
22 Ways To Increase AOV In Ecommerce
Increasing the average order value is a strategic way to boost revenue in an ecommerce business without necessarily increasing the number of customers. Here are 21 effective methods to elevate your AOV:
1. Loyalty Programs
A customer loyalty program creates compelling incentives for customers to spend more. By rewarding repeat purchases with points, discounts, or exclusive offers, these programs encourage customers to increase their order size to maximize their rewards.
The psychology behind loyalty programs is simple: the more a customer spends, the more they gain, fostering a sense of exclusivity and belonging. And by offering rewards for engaging with your brand, you also create loyal customers.
Here are a few ways a customer loyalty program can increase the average amount spent per order:
- Points-based systems where points increase with the purchase value.
- Tiered loyalty programs offering greater rewards at higher spending levels.
- Exclusive discounts for loyalty program members on larger purchases.
- Early access to sales or new products for high-spending members.
Loyalty programs effectively turn occasional buyers into repeat customers and encourage them to spend even more money on each visit.
2. Referral Programs
Referral programs encourage customers to introduce new customers to your brand. This method is effective because referred customers, who often trust the recommendations of people they know, are more likely to make larger initial purchases. Referral programs incentivize and reward both the referrer and the referred customer. This dual benefit not only drives new customer acquisition but also encourages existing customers to engage more deeply with the brand, often leading to repeat purchases and higher average order value.
Here are a few ways to use referral programs to increase average order value:
- Offering discounts or rewards for both the referrer and the referred customer.
- Creating tiered referral rewards that increase with the number of referrals.
- Implementing a points system where points can be redeemed for discounts or special products.
- Providing exclusive access or benefits to top referrers.
- Launching special referral campaigns during holidays or events to boost participation.
- Integrating referral program announcements in post-purchase communications.
- Utilizing social media platforms for easy sharing of referral codes or links.
By implementing a well-structured referral program, ecommerce brands can effectively increase average order value, benefiting from the compounded effect of new customer acquisition and enhanced loyalty among existing customers.
Upselling involves recommending premium or more feature-rich versions of a product that a customer is already interested in. This technique effectively increases the average order value by guiding customers towards higher-priced items that offer more value or better features.
Here are a few ways to upsell to your customers:
- Offering a higher quality version of a product at checkout.
- Suggesting an extended warranty for electronics.
- Recommending a larger size or higher quantity of a product.
- Proposing additional features or customization options.
- Showcasing the benefits of the premium version through comparison charts.
Cross-selling involves suggesting additional, complementary products to customers during their purchase journey. This method works well because it taps into the customer's existing purchase intent. By presenting items that enhance or are related to the primary product, customers are more likely to add these to their cart, seeing the added value in real-time.
Here are a few examples of how to cross sell:
- Suggesting a case or accessories when buying a phone.
- Recommending matching shoes for a dress purchase.
- Offering a discounted hair product bundle with a hairdryer.
- Proposing cooking accessories with kitchen appliances.
- Suggesting a skincare set when purchasing a facial cleanser.
5. Volume Discounts
Volume discounts encourage customers to purchase more items by offering a reduced price per unit for larger quantities. When customers realize they can save money by buying more, they are often motivated to increase their order size.
Here are a few examples of offering volume discounts:
- Discount on buying three t-shirts instead of one.
- Reduced price per unit when buying in bulk.
- Special offers on purchasing multiple units of the same product.
- Tiered pricing for different quantity ranges.
- Bundle deals for buying a set of products together.
6. Bundling Products
Bundling multiple products involves offering a set of complementary products or services together at a discounted rate compared to purchasing them individually. This method effectively increases AOV by enticing customers to spend more to get a better deal.
Here are a few examples of bundling products:
- Offering a skincare routine package at a discounted rate.
- Bundling a camera with lenses and accessories.
- Creating a gift set of various related products.
- Selling a complete outfit bundle.
- Offering a set of books from the same series at a discount.
7. Free Shipping Threshold
Implementing a free shipping threshold is a proven tactic to increase average order value in ecommerce. By setting a minimum purchase amount required for free shipping, customers are often motivated to add additional items to their cart to reach that free shipping threshold. This strategy plays into the customer's desire to get the best value for their money, making the prospect of 'free shipping' a compelling reason to spend more.
Here are a few ways to offer free shipping to increase revenue and your AOV:
- Free shipping on orders over a certain dollar amount.
- Limited-time free shipping promotions for higher order values.
- Exclusive free shipping for first-time customers on higher purchases.
- Seasonal free shipping offers for orders above a set value.
- Member-exclusive free shipping on minimum order values.
8. Time-Limited Offers
Time-limited offers create a sense of urgency that encourages customers to act fast. By limiting the availability of special deals, customers are motivated to not only make a decision quickly but often to purchase more than they originally intended. This urgency taps into the fear of missing out (FOMO), leading customers to capitalize on the deals while they last. Whether it's through flash sales, countdown timers, or weekend-only promotions, these time-sensitive offers can significantly boost the perceived value of a purchase, encouraging higher spending in a shorter time frame.
Here are a few examples of time-limited promotions:
- Flash sales lasting only a few hours.
- Limited-time discounts on specific product categories.
- Countdown timers for special offers on the website.
- Exclusive weekend-only promotions.
- Early bird discounts for a limited period.
9. Exclusive Deals
Exclusive deals targeted at specific customer segments are a powerful way to increase average order value. By tailoring offers to meet the unique preferences and behaviors of different customer groups, brands can create a sense of exclusivity and value. Customers are more likely to increase their order size when they feel they are getting a special deal that is not available to everyone.
Here are a few examples of how to offer exclusive deals:
- Special discounts for email subscribers.
- Exclusive offers for social media followers.
- Personalized deals based on customer browsing history.
- Member-only discounts on selected products.
- VIP customer exclusive sales events.
10. Personalized Recommendations
Personalized recommendations use customer data, such as past purchases, browsing history, and preferences, to curate product suggestions that resonate with individual customers. This tailored approach not only improves the shopping experience but also encourages customers to discover products they are more likely to purchase, often at higher values. Personalized recommendations can lead to impulse buys or add-ons that the customer might not have considered otherwise, effectively increasing the overall order size.
Here are a few ways to offer personalized recommendations:
- Recommending products based on past purchases.
- Suggesting items related to recently viewed products.
- Personalized email campaigns featuring products of interest.
- Tailored homepage displays for returning customers.
- Customized product recommendations in the shopping cart.
11. Gift With Purchase
When customers know that reaching a certain order value will earn them a complimentary item, they are often motivated to add more to their cart. This tactic not only enhances the perceived value of the purchase but also creates a sense of exclusivity and reward. It taps into the psychological principle of reciprocity – customers feel valued and are likely to respond positively by increasing their spending.
Here are a few examples of how to offer a free gift with purchase:
- A free sample product with orders over a specific amount.
- Complimentary gift wrapping for higher-value purchases.
- Limited-edition items as gifts for large orders.
- Exclusive branded merchandise as a complimentary gift.
- Seasonal gifts encouraging higher order values during holidays.
12. Tiered Pricing
Tiered pricing cleverly incentivizes customers to purchase more by offering a lower price per unit with higher quantities. This pricing strategy plays on the psychological principle of perceived savings – customers are more likely to buy in bulk if they believe they are getting a better deal. By structuring prices to decrease as order size increases, businesses can encourage customers to spend more in a single transaction. This not only boosts the AOV but also helps in inventory management and reduces shipping and handling costs per unit.
Here are a few ways to offer tiered pricing:
- Reduced per-item cost for larger quantities of a product.
- Special pricing tiers for different quantity brackets.
- Bulk discounts on products frequently bought in large quantities.
- Graduated pricing for increasing order sizes.
- Custom pricing for wholesale orders.
13. Flash Sales
Flash sales are limited-time offers that typically feature significant discounts or exclusive deals. The key to their effectiveness lies in the sense of urgency they create. Customers, enticed by the fear of missing out on a great deal, are often motivated to make quicker and larger purchases than they normally would. This urgency can lead to an increase in impulse buying, where customers add more items to their cart to take advantage of the sale.
Here are a few examples of offering flash sales:
- Limited-time deep discounts on popular products.
- Site-wide flash sales for a few hours.
- Surprise flash sales announced via social media or email.
- Exclusive flash sale events for loyalty program members.
- Seasonal flash sales tied to holidays or events.
14. Subscription Models
Subscription models shift the customer's purchasing behavior from one-time transactions to ongoing engagement. This model offers convenience and often savings to customers, encouraging them to commit to regular purchases. For online businesses, it translates into a consistent revenue stream and the ability to predict future income more accurately. Over time, as customers become accustomed to regular deliveries or services, their trust in the brand grows, often leading to increased spending and loyalty. This sustained customer relationship not only stabilizes revenue but also typically results in a higher average order value, as subscribers are more likely to make additional purchases or upgrade their subscriptions.
Here are a few ways ecommerce brands can incorporate subscription models in their business:
- Monthly subscription boxes at a discounted rate.
- Subscribe and save options for consumable products.
- Seasonal subscription services offering exclusive products.
- Tiered subscription levels with increasing benefits.
- Auto-renewal discounts for long-term subscriptions.
15. Pre-Orders for New Releases
When customers are given the opportunity to pre-order new releases, they often perceive these items as more valuable or desirable. This perception can lead to increased willingness to spend more, especially if pre-orders are bundled with special offers or exclusive bonuses. Pre-orders also create a sense of anticipation and excitement, which can further amplify the perceived value of the products, encouraging customers to commit to higher-value purchases before the items are even available.
Here are a few examples of how to offer pre-ordering for new releases:
- Special pricing for pre-ordering new products.
- Exclusive bundles available only for pre-orders.
- Early access to products through pre-orders.
- Limited-edition items available for pre-order.
- Bonus rewards for customers who pre-order.
16. Customer Feedback and Reviews
Positive reviews and feedback act as social proof, significantly enhancing trust in your brand and products. When potential customers see that others have had positive experiences, particularly with higher-value items, it reduces their perceived risk and encourages them to make similar purchases. Moreover, showcasing customer reviews can highlight the value and quality of your products, persuading customers to opt for more premium options.
Ilia Beauty includes customer reviews right on its product pages along with customer images so that shoppers can see how the products work in real life:
Here are a few ways to incorporate customer reviews in your customer journey:
- Showcasing top-rated products to promote higher sales.
- Using customer testimonials to upsell premium products.
- Highlighting user-generated content on product pages.
- Creating a 'best sellers' section based on positive reviews.
- Offering incentives for leaving reviews, leading to repeat purchases.
17. Flexible Payment Options
Offering flexible payment options, such as installment plans, is a strategic approach to making higher-priced items more accessible, thereby increasing the average order value. This method works effectively because it reduces the immediate financial burden on the customer, making it easier for them to commit to larger purchases. By breaking down the total cost into smaller, manageable payments, customers are more likely to add higher-value items to their cart.
Here are a few examples of offering flexible payment options:
- Offering buy now, pay later options.
- Introducing interest-free installment plans.
- Partnering with financial services for credit options.
- Providing layaway plans for expensive products.
- Allowing split payments for larger orders.
18. Seasonal Promotions
Holidays and seasonal changes often bring about a shift in consumer behavior, with customers more open to purchasing due to the festive mood, seasonal needs, or the desire to take advantage of limited-time offers. By aligning promotions with these periods, brands can create a sense of urgency and exclusivity, encouraging customers to make more significant purchases or buy in larger quantities.
Ilia Beauty offers holiday gifts sets and free holiday shipping in the weeks leading up with Christmas:
Here are a few ways to offer seasonal promotions:
- Holiday-themed discounts encouraging larger purchases.
- Seasonal bundles offering value during peak shopping times.
- Limited-time offers tied to specific seasons or events.
- Exclusive holiday gift sets.
- Early bird specials for holiday shopping.
19. Exclusive Memberships
By offering premium memberships that come with special benefits or discounts on larger purchases, brands can effectively encourage members to spend more. Members often perceive the benefits as a return on their investment in the membership, leading them to make more frequent and higher-value purchases. Not only that, but the exclusivity of these memberships can also enhance customer loyalty, as members feel more connected and valued by the brand. This loyalty not only drives up AOV but also fosters long-term customer relationships.
MZ Wallace uses Friendbuy's loyalty program software to create a tiered membership with exclusive benefits:
Here are a few examples of exclusive memberships that your ecommerce brand can offer:
- VIP membership programs with exclusive benefits.
- Members-only discounts on high-value products.
- Early access to sales for members.
- Exclusive product launches for members.
- Loyalty points multiplier for premium members.
20. Interactive Product Demos
Interactive product demos and virtual try-ons engage customers more deeply with the product, allowing them to visualize and understand it better. When customers can interact with a product virtually, they gain a clearer sense of its value and relevance to their needs. This heightened engagement often translates into customers feeling more confident and satisfied with their purchase decisions, leading them to opt for higher-value items or additional products.
Here are a few ways to offer interactive product demos:
- Virtual reality experiences for high-end products.
- Interactive 3D models of products.
- Live product demonstrations via webinars or live streams.
- Augmented reality apps for product visualization.
- Interactive size and fit guides for apparel.
21. Retargeting Campaigns
Retargeting campaigns re-engage customers who have already shown interest in your products. By targeting individuals who have already visited your site, added items to their cart, or previously made a purchase, you're reaching an audience that's already familiar with your brand. This familiarity often leads to higher conversion rates and increased order values, as these customers are more likely to be influenced by personalized offers and reminders. Retargeting creates multiple touchpoints with potential buyers, keeping your brand top-of-mind and encouraging them to not only complete their purchases but also to consider adding more items or opting for higher-value products.
Here are a few examples of retargeting campaigns:
- Personalized ads for previously viewed products.
- Special offers retargeted to cart abandoners.
- Email campaigns targeting recent website visitors.
- Social media retargeting with exclusive deals.
- Dynamic retargeting ads based on customer behavior.
22. Enticing Imagery And Videos
Videos showcasing the product in use or offering a closer look at its features can captivate the audience, making the product more appealing. Similarly, crisp, detailed images help in painting a clearer picture of what the customer is investing in. Compelling visuals often leads to customers feeling more confident and satisfied with their purchase decisions, encouraging them to opt for higher-value items or additional products.
Olive & June uses beautiful imagery and product demos to showcase its products, achieving an 18.5% conversion rate with a referral program powered by Friendbuy:
Here are a few ways you can include enticing imagery and videos:
- Dynamic visual content highlighting key features.
- Interactive views allowing full product exploration.
- High-resolution images depicting products in real-life scenarios.
- Authentic customer experiences showcasing product use.
- Educational content demonstrating product applications.
- Exclusive glimpses into the product creation process.
- Visual comparisons emphasizing product superiority.
Average order value is a good indicator of online business health. There are many ways to increase average order value for ecommerce stores, many of which can be automated by your existing marketing tech stack. Whether you cross sell high value products, allow customers to earn points toward their next purchase, bundle complementary products, or offer a free gift, online stores can effectively increase average order value and online sales this very quarter.
Contact Friendbuy to see how we can help your brand achieve more sales and a higher average order value with a customer loyalty program and referral program.