The average order value (AOV) shows the regular average checkout sum. It may refer to website sales, an e-commerce company, or statistics for a certain period. Organizations often use it to track what customers do, find profitable sales channels and market subgroups, analyze and improve sales performance, and set goals for the customer lifetime value (LTV).
You can calculate and analyze AOV for the entire company, a specific product line, a sales channel, or a geographic region. A company can compare its AOV annually or analyze how different advertising methods affect it.
How to Calculate Average Order Value?
Before we skip to our tips to increase your average order value of the cart, we'd like to give an understanding of how AOV is calculated. You can figure out your AOV by dividing the total revenue you made from all orders over a certain period by the total number of orders placed over that period.
For example:
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Total revenue: $1,500,000.00
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Number of orders: 30,000
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Average order value = $1,500,000 / 30,350 = $50.00
Instead of time span, you may use product line, brand, or any other suitable filter.
While AOV patterns vary between trade sectors, one can use the approaches to increase average order value interchangeably. Let's look at five proven strategies to increase AOV and LTV with our customers and grow our business profits.
Set Up Minimum Purchases Required For Free Delivery
Free shipping over a certain budget threshold greatly incentivizes customers to spend more. Many online stores use this strategy to increase the average purchase price. For example, shoppers who spend more than $50 / $75 / $100 are eligible for free shipping.
If you offer free shipping in exchange for a certain minimum purchase amount, make sure your homepage, product pages, and checkout page make this clear.
Provide a More Personalized Experience
Personalization leads to a higher conversion rate. If you increase either the conversion rate (CVR) or the average order value (AOV), your revenue per visitor (RPV) will go up.
Using user data to provide a more personalized and accurate shopping experience for your consumers will help you increase both CVR and AOV. Analyzing previous purchases can help you tailor your marketing to specific audiences with more relevant content and products. Customers are more likely to spend more money if your marketing is personalized to their tastes.
Create Bundle Deals
You may also create a set of items that are often sold together or function well together. Doing so will increase the average value of your order by attracting customers who were going to buy one item to buy a complete (and more expensive) set. You can also encourage bulk purchases of the same product by offering small discounts.
This approach is much more convenient on a smartphone, so it's especially true for mobile buyers. Helping your customers realize they will save money when buying in bulk will motivate them significantly.
Execute First Time Offers
Most customers are considered "newbies" during their first six months of shopping. If you want to increase the average order value, offer discounts to first-time customers. This group might benefit from a one-time discount on large orders of a best-selling product and special package deals that regular customers can't get.
If a returning customer had made several orders before and were satisfied with their purchases, it would be much easier to convince them to buy from you again. Habitulality is your ally here.
Create a Loyalty Program For Your Customers
Loyalty programs can strengthen both the brand and the financial health of a company and increase the average order value by 14%. They are good at motivating people to buy more with their current purchase and the average order value increase.
Using a retail management system, creating a loyalty program is a breeze. With custom marketing and loyalty solutions, you can quickly create a points system to incentivize sales and higher-value purchases.
A loyalty program allows businesses to sell goods without significantly reducing prices, even if not as quickly. Customers who spend enough to earn loyalty currency are encouraged to come back and spend even more.
Be Flexible With Payments
The purchasing power of your customers will affect the size of purchases, making average order values increase. Offering deferred payment options can be beneficial. You can use a "buy now, pay later" service, so if your customers make payments on time, they will not lose money on any interest or additional costs.
Retailers who have BNPL in-store demonstrate better average order value performance. Giving consumers the option to pay in installments helps them buy more of what they want while staying within their budget.
Use Gamification
Games and tournaments are popular methods in the restaurant industry to increase AOV. For example, McDonald's Monopoly game encourages customers to place larger orders and visit the restaurant often to collect more game pieces.
Another element of e-commerce is promotions that reward customers for making multiple purchases. Let customers know they will be entered into a drawing for one of many prize packages by making a purchase.
Implement Upselling and Cross-Selling
These are some of the best ways to increase average value of orders. Let's briefly explain what upselling, cross-selling, and their differences are.
The purpose of upselling is to encourage the buyer to purchase a more expensive version of the product than they intended to buy. If a customer comes to you looking for the cheapest lawn mower, then upselling is trying to convince them that the best investment would be to purchase a more expensive model with better features.
"Cross-selling" refers to selling another product unrelated to the original transaction. An example would be a customer who visits a store to buy a shirt but leaves with pants, thanks to the compelling product description.
Upselling and cross-selling involve recognizing customers' goals and needs and educating them about your capabilities. In addition to focusing on how to make more money, your e-commerce should also aim to provide more value. With this ultimate goal in mind, your representatives will be motivated to select the best products for your customers while increasing your AOV.
Offer Time-Sensitive Deals
To increase the average order value, you can provide discounted or free services to customers who make significant purchases within a certain period.
Although urgency helps increase conversion, it can only increase the average order value within a limited time reach. Limited-time offers are a great strategy to increase the average order value during periods of low demand. Use social media to spread the news and place banner ads on your website to inform visitors.
