Your average order value (AOV) is the average amount that your customers spend each time they place an order from your online shop. You can work out the average order value by taking the total value of all your orders in a certain time period (your turnover) and dividing it by the number of orders (an order can contain multiple line items) in that time.
Total of all orders (turnover)/number of orders = average order value
This is an important metric to follow for your ecommerce business because the higher it is the more money you are making per customer. One large order will cost less on packaging, shipping and marketing acquisition costs than several smaller orders that have to be packaged individually and shipped separately, so it’s important that you focus on increasing your average order value as well as acquiring new customers. Your average order value is a good indication of how well you are promoting related items to customers when they’re buying from you, and encouraging them to spend more.
How can you increase your Average Order Value?
Increasing your average order value is a good way of growing your business, that requires you to focus your attention on those shoppers who are already intending to buy from your online shop. Here are some of the key ways to increase your average order value:
Free shipping threshold
Offering free shipping if a customer spends a certain amount is one of the most effective ways of encouraging buyers to spend more. Make your threshold slightly higher than your current average order value to encourage shoppers to add just a little bit more for free shipping.
The downside to this is that while your AOV might go up, you still have to cover the cost of shipping items and this could eat into your profits. Make sure you’re using the cheapest shipping service and that your threshold for free shipping is high enough that you don’t wipe out all of your profits. Not only will a free shipping threshold encourage shoppers to spend more, shipping costs is also one of the biggest causes of cart abandonment - so it can encourage more shoppers to make a purchase in the first place.
Discounts on minimum spend
Similar to a free shipping threshold you could try offering discounts when shoppers spend a certain amount, for example if they spend over £50 they get money or a percentage off their total. It’s very tempting for shoppers to add just a little bit more to their order to receive a benefit or discount. By encouraging shoppers to reach the next threshold for a discount when they’re close you’ll be raising your AOV but also giving customers the impression that they’re getting better value.
Upselling is offering shoppers an alternative, more expensive version of the product that they’re looking to purchase or offering additional upgrades to it. You have to be very careful with upselling that you demonstrate the benefits of the item that the shopper is looking at already, but also make the higher value version enticing.
You should upsell with a more expensive version of the product that they’re buying. Shoppers can easily be tempted by a more expensive version of a product that’s higher quality or has more functions because they were already prepared to spend a certain amount, and the other version isn’t that much more.
Alternatively, you can upsell them with extras or add on items that can be used with the product they’re already purchasing. Any items being used to upsell need to be good value, and have a lot of positive reviews, you have to convince your shoppers that it’s worth the extra cost.
Very similar to upselling, cross-selling is offering similar items to what your shopper is already buying. These products might not necessarily directly relate to what they’re purchasing but they’re similar, and likely to be of interest to your customer.
You can increase your AOV by showing someone another item that they might want and, if implemented correctly, it should improve their experience by helping them discover items that they might be looking for or need without having to search through your site again.
Increasing AOV without discouraging shoppers
While all of these methods can help to increase your ecommerce site’s AOV, you shouldn’t implement them all at once. Too many offers, or distractions with other products can come across as too pushy and put shoppers off. You should test out each of the methods and find out what works best for your business and your customers - different products will suit different kinds of discounts and incentives.
It’s also crucial that you balance your discounts and promotions with a reasonable profit margin. You need to take into account shipping costs and how much any discounts will eat into your profits. Making an overall profit is more important than increasing your average order value in the long run.
If you’re selling across multiple ecommerce channels, Zenstores Insights can help you to track your average order values for each platform and overall. You can also use it to monitor your sales performance and highlight which are you best products, channels and customers. Learn moreabout Zenstores Insights here.