How to increase average order value for your ecommerce store

ProfitWell Mar 24 2022

More revenue does not always have to come from new customers. Since new customers tend to have a high CAC and long payback period, it's no wonder business owners are turning to existing customers for increasing revenue. By squeezing as much value as you can out of current customers, you will increase your profits with a minimal cost. 

Employing strategies to ensure that you increase average order value will put your business on the path to profitability and growth. For more on how to increase this vital metric, continue reading. 

What is average order value (AOV)? 

Average order value measures the average spend by a customer on a single transaction in your store for a specific period of time. AOV is a crucial metric to track, and you should ensure you calculate it at least every month. For special occasions like Black Friday, aim to calculate it daily. This metric will help you know if your marketing strategies are working. 

Why you should aim for a higher average order value 

One of the main reasons you should aim to increase average order value is because it raises revenue without increasing the marketing and sales cost. Other benefits of improving your AOV include: 

Boost in sales 

When you expand the average order value, you are selling more inventory. As a result, your ecommerce brand will experience a spike in sales, which is good for business. 

Higher revenue 

Since customers are buying more products, your revenue increases. In addition, if you use the right strategies, your profits will also go up. But remember, revenue increase does not necessarily correlate to more profits, so you should consider your pricing strategy carefully. 

 

Faster profitability 

You can reduce the sales cycle when your store increases its average order value. As a result, your ecommerce store will realize profits in a shorter amount of time. Also, you can put more money into advertising and other growth tactics. 

Greater return on investment (ROI) 

Suppose your payback period is one to six months. Compared to other ecommerce stores, you are doing very well. But you can reduce this period even further by expanding the average order value. Increased revenue means an accelerated path to profitability and a greater ROI. 

Increased customer lifetime value (LTV) 

Customer lifetime value is another metric that is crucial when determining your business health. AOV and LTV are not mutually exclusive. Since AOV affects customer value, it indirectly affects customer LTV. Though an increase in average order value leads to improved LTV, the latter's tactics are more long-term and personalized. 

How to calculate average order value 

The formula for calculating the average order value is: 

Average Order = Total Revenue/Number of Orders 

Example:

In the last month, XYZ ecommerce store generated a total of $12,000 in revenue from 900 orders. Let's calculate the AOV.

AOV = $12000/900 = $13.3 

16 best ways to increase average order value 

Before you implement the following tactics in your online store, carefully analyze your data to find out why your AOV is low in the first place. From there, you can choose the most suitable strategy. Also, do not apply all these tactics at once as you won't know what is giving you results and what isn't. 

1. Use appealing design for your product pages 

Your choice of words, colors, layout, and graphics affect your conversion rate. Ensure your products offer bundles, discounts, and higher pricing tiers so they appeal to customers. According to the Baymard Institute, optimization of checkout design gives you a 35% higher chance of converting. 

2. Highlight trending products 

On your website, highlight popular products to give them more visibility. Ensure the photos are flattering on your product pages, and if there are offers, they should be clearly displayed. These strategies can lead to a higher average order value. 

3. Offer social proof 

Social proof, including reviews and feedback, greatly affects buying decisions online. Invesp says shoppers will spend 31% more on online businesses with positive reviews. Strategically place all those amazing reviews on your website to increase average order value. 

 

4. Personalize shopping experience 

Leverage data to create more personalized experiences for your customers, and they will be willing to spend more money on your business. Your customer's order history will tell you their preference, which you can use to tailor marketing campaigns and products to them. This targeted approach produces a higher average order value. 

 

5. Set up free shipping threshold 

A lot of ecommerce stores already use this strategy to expand their average order value. Display the offer for free shipping on your website. Use plugins to add a notification at checkout that informs customers if their order does not meet the threshold. It encourages customers to add more products to their carts to meet the threshold. 

 

6. Include product discounts 

Discounts can help expand the average order value. But instead of simply reducing the purchase price, include a minimum spend. For example, you can offer a $10 discount for every purchase worth $90 or more. Some online stores offer volume discounts that lead to a higher average order value. 

Also, showing customers the monetary savings they are earning by making multiple purchases boosts AOV as customers can justify spending more. 

 

7. Create special new customer offers 

Enticing new customers with special offers is a great way to turn them into repeat customers. You can have bundles for first-time buyers. Once they enjoy the products and shopping experience, they will come back for more, leading to a higher average order value. 

 

8. Bundle complementary products 

Bundling complementary deals is a great way to cross-sell your customers. You can have "buy three for the price of two" or "buy two to get a free gift" sales. Those who were only planning on purchasing part of a set buy the complete set when they know they will save. Ensure your pricing strategy covers the additional products and your profit margin. A product bundle is an excellent tactic to increase your average order value. 

 

9. Create a loyalty program 

A loyalty program is a great way to increase your customer retention rate and create brand ambassadors. Those in the program can earn points or discounts on selected products. You have a better chance of marketing to these repeat customers, and they are cheaper to advertise to. The result is expanding the average order value. 

 

10. Give out gift cards & coupons 

Gift cards and coupons are a great way to encourage repeat customers and increase your average order value. When a customer has a gift card they can use with their next purchase, they will return. Ensure your pricing covers the free gift. Also, inform customers that the gift card can only be used with their next purchase. 

11. Create a contest 

Create a contest in which customers win prize packs if they purchase often. Inform customers that once they make a purchase, they have a chance to win the prize. Many apps are available to help you run the contest. You can expand the average order value periodically when you run such a contest. 

12. Cross-sell & upsell items 

Cross-sell refers to recommending complementary products to customers. For example, if a customer is buying makeup products, you might recommend makeup brushes as a cross-sell strategy. Ensure you have photos of the products together. An upsell encourages customers to buy more expensive versions of the same product or buy multiple products. The two lead to an expanded average order value. 

13. Down-sell add-ons 

Down-selling add-ons mean that you encourage the customer to buy a cheaper product after completing a purchase. It can be as effective as upsell or cross-sells. Supposing you are selling a product worth $75, you can offer a $20 product after the purchase. It always works. Ensure the products add value, and you will have a higher average order value in the end. 

14. Offer reliable customer support 

Customers may sometimes need hand-holding before they buy. If there is no support on your site, they will leave. Incorporating live chat ensures all customer questions are answered, which further encourages them to hit that buy button. High ticket items like furniture benefit from having live chat support. A higher average order value is assured with continued use of live chat.
 

15. Make time-sensitive offers 

Time-sensitive offers are excellent for increasing the average order value, especially during the low season. You can offer discounts for a limited time on certain items. The urgency will make customers add more items to their shopping cart. 

16. Offer a flexible returns policy 

A bad experience when customers return items is likely to affect their decision to buy from you again. Being transparent and flexible will help alleviate a customer's anxieties about buying from you. Display your return policy clearly on your website, and if a customer returns a product they purchased, be flexible to ensure they come again. Repeat customers help to expand that average order value. 

Use ProfitWell to track performance and modify your sales strategy 

Average order value is just one of many other vital metrics that you should keep your eyes on to monitor how your business is performing. A tool like ProfitWell Metrics does the tracking for you for free. Other benefits of using our software include: 

Track important metrics 

We track revenue (ARR and MRR) to help you stay on top of your AOV. Other metrics important to your business, such as CAC, customer LTV, and retention, are not left behind. 

Create customer segments 

Segmentation is crucial when creating targeted and personalized marketing campaigns. At ProfitWell, we segment customers into 107 different segments so that you can better analyze and make sense of the metrics. 

Set the best prices for your products 

We utilize science-backed data from our free tools to help you set the optimal data-driven prices for your products. This feature is available in all our paid products. 

Ways to increase average order value FAQs 

What is average order size? 

Average order size, also known as the average order value, is the average spend by a customer on a single transaction in your store for a specific period of time. 

What affects average order value (AOV)? 

The main factors that affect the average order value are the number of products in each order and the average cost of each product. 

How do you increase order count? 

You can increase the order count by implementing strategies that encourage customers to buy more in your ecommerce store.

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