Average order value, or AOV for short, has become an important factor in how businesses strategize for growth. In fact, increasing your average order value often supports or even leads to business growth. Today, we’ll be exploring what average order value really is, as well as 5 ways you can increase your average order value.
What Is AOV?
Before we dive into how you can increase your average order value, let’s take a moment to fully understand what it even is.
Average order value (AOV) is the average amount that a customer pays when they buy from your business.
It is the total revenue you receive, so it excludes any extra payment that doesn’t go directly to you, such as shipping fees. Many eCommerce platforms have analytical dashboards that can automatically calculate your average order value based on all the orders you’ve fulfilled. However, if you aren’t using an eCommerce platform, or if you’d rather calculate the AOV yourself, you can use this simple formula:
Average Order Value = Total Revenue / Total Number of Orders.
The AOV is an important piece of information when it comes to growing your business, increasing your sales, and improving your marketing. By finding out what your AOV is, you will then be able to strategize better so you can gain more profit from the same amount of customers. Then, once you’ve increased your AOV, you can use the additional profits to grow your business in a way that attracts new, loyal customers.
How to Increase Your AOV
Now that we know what AOV is and how it can help your business, let’s get into the 5 ways to increase your average order value:
- Upsell products
- Require a minimum purchase for free shipping and other perks
- Bundle products
- Create limited time promotions
- Start a customer loyalty program
When you upsell products, you are convincing customers to do one or more of three things:
- Purchase an upgraded version of a product
- Purchase a higher-end version of a product
- Purchase add-ons for a product
However, upselling has to be done with a subtle touch. Upsell as if you’re recommending something to look out for their best interest – not as if you’re desperate for them to buy more from you. It should also be done thoughtfully. Always suggest upsells that are related to the original product they wanted to buy. Also try to suggest low-value upsells so customers are more likely to bite.
Another strategy you can use is post-purchase upsells, similar to what companies do. This lessens the pressure on your customers to buy more, and provides you with data on what customers prefer (which can be used to create future product bundles). You could also offer discounts if a customer buys another product that is related to the one they just bought. By upselling, you can get customers to spend more than they had originally planned – thus increasing your AOV.
Require a Minimum Purchase Price for Free Shipping and Other Perks
Another effective strategy you can use is a minimum purchase price which unlocks certain perks. By having a minimum purchase price, you create a sense of urgency for your customers. Make sure they are informed of the minimum. If you run a brick-and-mortar store, include it in your sales pitch, and if you run an eCommerce business, plaster it on every page of your website. The most common perk to offer is free shipping, since shipping is often the most inconvenient cost for customers – especially if you run an eCommerce business.
Another perk you could offer is a discount, which could either be a set amount or a percentage of their order. The latter tends to attract more customers, but it may cut into your profits more. You could also add freebies to customers’ orders. The trick with these is to use freebies that are appealing but don’t eat up your additional profit. In general, it is recommended to have the minimum purchase price be at least 30% higher than your average order value. This makes sure it still seems attainable to customers.
Bundling products is a great way to get customers to purchase more items without having to convince them through upselling. By creating product bundles, you can create all-in-one bundles that have everything for a certain activity. This attracts customers through pure convenience alone, but it attracts customers even more when you pair it with a discount. You can also offer customizable product bundles. This will ensure customers are attracted by the added value of a discounted bundle perfectly tailored to their needs. Since customers will be buying more products, your AOV will increase in no time.
Create Limited Time Promotions
A great way to urge customers to buy more is to create limited time promotions. This would mean offering coupons, discounts, freebies, upgrades, or other perks for purchases that are ordered within a certain period of time. You could also pair this with the minimum purchase price and upselling strategies to create even more urgency.
Start a Customer Loyalty Program
Finally, if you sell products or services that are consumable, you could start a customer loyalty program. A customer loyalty program is a strategy that helps you retain customers and grow a strong relationship with them. Through the program, you can offer perks that are catered to the preferences of your customer base. Thus, they’ll be motivated to keep buying from you. It’s also a great way to work in minimum purchase prices and limited time promotions as well. For example, customers may get extra perks, discounts, or cash-back if they spend a certain amount during a certain period of time.
Maximize Your AOV Profit with an Affordable Carrier
Once you’ve chosen the best strategies to increase your business’s AOV, it’s time to look for an affordable carrier that will help you maximize your profit. This is especially important if you offer free shipping as a way to increase your AOV. After all, if your carrier’s services are expensive, the shipping costs will cut into your profit! The best way to find an affordable carrier is through a shipping marketplace like GoShip.com. GoShip helps you filter through hundreds of carriers according to your preferences.
Without talking to a single freight broker, you can compare the prices of the best carriers for your business. Head over to GoShip.com, and get your free quote today!