increase aov

7 Tips to Try for an Immediate Average Order Value Increase

It’s a no-brainer that the more customers your business has, the more revenue it generates. If you’re a marketer or retailer, you should look beyond customer numbers and focus on average order value (AOV) since it can set you on the path to profitability.

For this reason, it’s best to know what AOV is, how to calculate it, how to use it to measure your store’s success, and tips for increasing it. So, let’s get straight to it.

What is Average Order Value?

As the name implies, AOV is the total revenue you generate from a transaction. It measures the profit you generate from a client over time. As a retail metric, AOV measures the amount of money an individual customer spends per order.

Measuring your AOV is essential because it helps determine the number of frequent and loyal customers. A high AOV indicates that more customers are satisfied with the quality of your products and are likely to purchase again in the future. Likewise, a low AOV shows that most of your customers only buy one item from you at a time. Thus, they’re not likely to be loyal clients who return often.

AOV is calculated by dividing customers’ total expenditure by the number of orders received. Suppose a customer buys items worth $100 and is the only buyer in the order. In this case, the AOV will be $100. If the customer buys two more items for $50 each, the AOV will be lower at $75. Nonetheless, if the customer’s purchases total $200 with a single purchase of four items, the AOV will be higher at $66.67.

How to Increase Average Order Value

Here are seven tips you can use to increase your retail store’s average order value:

1. Free Delivery

Free shipping is a common strategy for nudging buyers to spend more. If done right, it can be an excellent tool for boosting your AOV. Data shows that free shipping is among the top 3 factors affecting consumers’ decisions when purchasing online.

free shipping on decision making
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It is recommended to set your free delivery threshold at around 30% higher than your AOV or modal order value. For instance, if most clients place orders in the $35 range, consider offering free delivery for orders over $50. Remember that you can only increase the AOV if the free delivery value is attainable to a higher number of customers. Otherwise, setting an unreasonable threshold comes with the risk of abandoned carts.

A variation of free delivery is providing a discount on orders above a specific threshold. For instance, you may offer $10 coupons for orders above $50. The downside is that your profits are likely to be more unpredictable.

2. Free Gifts

Another strategy for increasing AOV is by offering free gifts to customers. It works well for industries with lots of free samples. In this case, customers will get a free gift with every purchase. Offering free gifts will only increase your average order value if the gifts provide value to customers. For instance, if you sell women’s watches, your free gift could be a complementary bracelet.

If customers derive as much value from the gift as they do from the item they intend to purchase, they’ll keep coming back to your store searching for similar deals. In turn, it will boost your revenue and AOV. As a marketer/retailer, it’s best to ensure that your products are priced in a way that allows you to afford the cost of the gifts while still profiting from the bundle deal.

3. Cross-Sell

When you go shopping for an item, the salesperson may try to sell you an additional product that complements what you want to buy. That’s what cross-selling is all about. Cross-selling makes your customers feel you care about them and want them to return. It encourages them to return to your store to spend their money.

When implementing your cross-sell strategy, ensure you understand your target market. It will help you stock on items customers are likely to purchase after buying what they initially wanted. Placing such products next to your main items or near the cash desk entices impulse buyers. For instance, if someone comes to your store on a hot day looking for shoes, you can offer cold, fresh juice as an add-on item.

In this case, the juice is an additional item they don’t intend to buy but end up buying anyway. Although cross-selling is commonplace in physical stores, it can also work in an e-commerce store. However, it can be a little tricky since you risk upsetting your customers by displaying unrelated products they don’t need in the first place. For this reason, avoid using heavy pop-ups that might turn off shoppers.

The items you’re cross-selling should be visible to them but not intrusive. Determining the products that are more frequently bought together can be difficult. For this reason, consider using a BI platform that helps you create effective cross-sells. You can also implement post-purchase cross-sells if you’re worried about impacting your conversion rates when trying to offer complementary products. This low-risk strategy will help you determine the items people tend to buy together.

4. Upsell

Upselling is another strategy for increasing your average order value. It entails attempting to sell your customers a comparable higher-end product than the one they wanted to buy. For instance, if a customer is shopping for shoes, you may want to offer them a similar pair of shoes, 15 % more expensive.

Like any retail strategy, upselling has its downsides, so keep these best practices in mind:

  • Avoid upselling too much and recommend products as a friend would. You’ll turn off customers if they feel they’re being sold to, so make your upselling appear genuine and helpful.
  • Recommend similar value upsells to increase the possibility of purchase. When customers are out to buy something in the range of $50 to $100, it’s hard to convince them to purchase something else within the range of $200 to $300.

5. Buy Now, Pay Later

Your customers want to feel you trust them, and there’s no better way to do that than offering the order now, pay later option. This strategy is particularly appreciated in markets where customers prefer trying different items before settling on one. With this option, customers are likely to order more items and pay for more.

The Buy Now, Pay Later (BNPL) is quickly gaining popularity among customers as an alternative payment option, driven by greater merchant adoption including Amazon and Shopify. According to Global Insights, BNPL sales are set to reach $576 billion by 2026.

global nuy now pay later market value
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You may also want to offer a partial order now and pay later option. In this case, customers can order items in your store at a fraction of the cost and clear the balance later. This option is excellent for significant one-time purchases such as electronics.

Customers who need to start using the products can pay a fraction of the cost and clear the rest with several payments. This opens the door to customers who would otherwise not be able to purchase specific items outright and helps to increase your AOV.

6. Offer a Flexible Return Policy

In today’s competitive business world, it’s more important than ever for businesses to be as flexible as possible when dealing with customers. An easy way to do so is by offering a flexible return policy. A recent survey by UPS established that over 70% of shoppers point out that the product returns experience impacts their decision to buy from a retailer again.

Implementing a flexible return policy can come in handy for any business looking to increase its average order value. It eases the hesitancies and anxieties that potential buyers have when checking out your products. Once you’ve implemented a return policy, display it on your social media platforms, website banners, and purchase confirmation emails. It will encourage customers to buy more of your products, knowing too well defective ones can easily be returned.

7. Optimize Your Marketing Budget

One of the biggest mistakes your marketing team can make is splashing the cash just for the sake of it. Your marketing efforts should have a return on investment, and an easy way to do that is by spending the ad cash where the biggest spenders are. Focus on customers who give you the highest AOVs. You should create targeted ads that resonate with the audience you’re targeting. The more targeted your campaigns are, the more likely customers are to splurge large amounts, translating into a higher AOV.

Sell more to people who want to buy!

There’s so much you can do to increase your retail store’s average order value. With so many strategies to choose from, you need to establish what works best for your brand. The only way to do so is by accessing actionable and useful data. If you’ve never considered a business intelligence platform for your retail business, you could be missing out on an opportunity to increase your AOV.

The ClicData BI platform is designed to help you determine the strategies that work best for your business. It also helps you create retail dashboards for monitoring your AOV to check whether it’s growing. If you want to grow your business with ClicData’s retail dashboards, create a free trial account to get started. 

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