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You can make more money from your current customers rather than spending a lot in acquiring new customers.
The trick is simple—give them a better deal. Give them options, motivation and reason to purchase more items than they originally planned for. This helps you increase the average order value (AOV)
It’s best when the AOV trends upward. However, when it doesn’t, provide extra something to keep it high. In this article, we’ve compiled advice from e-commerce experts and store owners to help you with practical and not-so-conventional ways to increase your AOV.
But before we dive deeper, let’s go through the fundamentals of average order value.
What is the average order value?
Average order value (AOV) is an e-commerce metric that tells the average amount customers spend when they place an online shopping order.
To calculate it, divide the total revenue by the number of orders. Here's a simple example: if a store makes $1,000 and has 50 orders, the average order value is $20. E-commerce businesses strive to increase their AOV as it leads to more revenue from the same customers.
Multiple strategies boost AOV. You can offer discounts on larger purchases, bundle products, use social proof to highlight purchase opportunities or suggest related items on the checkout page. Your chosen strategy depends on your product line and what works best for your industry.
Remember, not every strategy will play out like it did for other stores. You need to experiment, learn, and iterate strategically to optimize the average order value for every purchase.
This article helps you expedite and move over the experimentation phase with the help of e-commerce experts who have already tested the waters. Let’s cover the basics before we dive into optimizing average order value with expert commentary.
How to calculate the average order value
Total revenue and total orders point collaboratively toward average order value. Divide total revenue by the total order placed.
Average Order Value = Total Revenue / Total Number of Orders
However, the math is rarely this simple.
On the e-commerce front, customers purchase several products one time or as a subscription. For example, a shopper might purchase a leash and collar once but purchase a monthly dog food subscription.
You need to calculate the average order value for such purchases with respect to the timeline for which you’re calculating. For subscription products, calculate the revenue coming throughout the subscription and consider it as one order.
Although the underlying concept is the same, the math can differ based on what you sell and how you sell it.
9 best practices to increase average order value
These are tried and tested ideas. You aren’t the guinea pig experimenting with them for the first time. Let these ideas inspire you to increase the average order value in your store. Leverage these insights to learn from other’s experiences.
1. Leverage social proof and push notifications
Social proof lets you build trust and credibility. It shows the purchasing patterns of other customers and encourages target shoppers to adopt the same. With social proof, you can subtly nudge shoppers to purchase more than one item. According to Invesp, shoppers spend 31% more on online businesses with positive reviews.
Create push notifications to deliver the social proof. For example, sending notifications like, “114 Nike Sneakers enthusiasts also bought Nike socks,” tilts buyer’s decision to add more items to their shopping cart. This increases the average order value.
Push notifications help you achieve more than AOV. It keeps customers coming back to your store for their needs, solves cart abandonment issues, and delivers special offers.
2. Provide volume discounts
The more a customer buys, the more they save. It’s the ideology supporting volume discounts. Offer a customer a discount when they buy products in large quantities. They feel motivated to reach the order value that helps them win their discount.
It clears inventory faster and boosts overall sales value per transaction. Customers feel they’re getting a better deal. Volume discounts can increase sales by 73%. Customers are willing to buy in large quantities when they get volume discounts.
James Wilkinson, CEO of Balance One Supplements, an e-commerce store selling diet supplements, suggests providing volume discounts. He sees it as a highly effective way to increase average order value.
For example, a customer who purchases one bottle of supplement pays the standard price. They get a 10% discount when they commit to two bottles. If they purchase three or more bottles, they receive a 20% discount.
Such strategies encourage customers to add extra items, leading to a higher average order value in your e-commerce store.
3. Personalize shopping experience
Prioritizing customer experience helps design an online store where customers can easily find necessary products. It makes it easier for shoppers to add relevant items to their carts without navigating corners. This has an impact on the average order value. You can boost revenue by 15% through personalization.
You can base this personalization on past purchase history and queries on the search box. For example, if a customer regularly buys sports shoes, the store might show them new arrivals or related sports gear when they’re browsing or buying an entirely different product.
Daniel Kroytor, Founder of TailoredPay says, “Customers want to feel they’re more than just a number or anonymous surfer of your e-commerce site. When you hyper-personalize their experience, it lifts the average order value.”
Make the shopping experience more personal and relevant for the buyer. It helps encourage customers to add more items without any potential friction.
4. Showcase trending products
When an online store highlights what's popular or in demand, it grabs customers’ attention. Let customers hop on the trend through items featured on the homepage, in special sections, or through marketing e-mails. It increases the average order value as customers add trending items to their cart along with their chosen products.
Birchbox observed a 10% increase in average order value and revenue per share by showcasing trending products below the search box.
Pepper Home, an e-commerce store offering home goods at affordable prices, makes it easy for customers to shop. It lets them discover trending products to style their home.
Erin Banta, co-founder of Pepper Home, says, “Every product page should have features like similar products or trending items. Your customers should see your e-commerce store as a one-stop shop that makes logical and financial sense to purchase more than just what they came for. “
This keeps trending items easily accessible to add while purchasing other products, increasing the average order value.
5. Provide bundle offers
Bundling groups popular items together to sell them at a combined price. This price is often lower than the prices of separate items in the bundle. Here’s an example of a mixed product bundle.
Customers often perceive them as a better value for their money. Perception fuels the logical sense to purchase the bundle instead of a single item. For example, a laptop comes bundled with a bag and headphones. Several brands observed a 20% increase in AOV for orders that included product bundles.
The price of a bundle is often greater than the price of a single item, increasing the average order value of purchases. Christy Pyrz, CMO of Paradigm Peptides, says, “Most customers don’t shop based on an item goal as much as they do a spending limit. It makes bundling an effective way to increase the average order value.”
If you provide complimentary products, adjust their prices and put them in bundles. It takes customers closer to their spending limits with multiple products rather than just one.”
6. Create a loyalty program and give coupons
A loyalty program rewards customers for repeat business. You can give coupons as a part of a loyalty program that customers can use for future discounts. Keep a threshold for redeeming these coupons. For example, you can keep a 20% discount on purchases above $100.
This threshold helps shoppers add more to their cart to redeem the coupon, increasing the average order value. The loyalty program can add on top of it to provide a membership discount so buyers don’t feel the financial burden of several items in their carts. Here’s an example of Gilt’s loyalty program.
A loyalty program can increase the average order quantity of a business by 319%. Priyanka Swamy, CEO and Founder of Perfect Locks, claims, “A loyalty program incentivizes customers to spend more. It encourages repeat purchases with a higher average order value. This strategy helped Perfect Locks increase AOV and bring customers back to spend more.”
7. Upsell and cross-sell to increase order value
On-page upsells happen when a customer views or adds a product to their cart. The site then shows them related products or better versions of the same item. Upselling can increase average order value by 41%. Here’s an example of an e-commerce website upselling and cross-selling on the cart.
For example, if a customer is browsing a basic gadget, you can suggest a higher-end model or accessories that go with it.
Gareth from Blakely Clothing, justifies, "Product offering and on-page upsells drive our average order value. When we launch a new collection, the items are usually meant to be worn together; therefore, we portray this heavily through our imagery, cross-selling on product pages, at cart level and through retargeting efforts.”
On-page upsells encourage shoppers to buy more or opt for more expensive items. As a result, the average order value increases.
8. Recommend relevant products for future purchases
Suggest items that complement or relate to what a customer has already bought. For example, if a customer purchased a camera, recommend additional lenses, camera bags, or memory cards. You can send them reminders via push notifications or emails. Customers returning to recommended products have a 40% higher average order value.
It simplifies the shopping process for customers. They can quickly locate what product can uplift their experience with the initial purchase. It increases the average order value of their future purchases.
Michael Allmond, Co-founder and VP of Lover's Lane, says, "Due to a large inventory, it’s tricky for customers to know everything we carry. So, our remarketing and email strategy focuses on providing relevant recommendations for future purchases.
Allmond adds, “If a customer purchases a lingerie set, we showcase relevant accessories. This helps customers return to shop with us and increase their order values over time."
Customers appreciate these reminders as they might not have thought of them themselves.
9. Introduce a free shipping threshold
Customers who know they can save on shipping after reaching a specific order value often add more items to their cart.
58% of shoppers add extra items to their cart to qualify for free delivery.
Suppose you offer free shipping on orders over $50. A customer with a $40 cart might add another product to avoid paying for shipping. They don’t get any value out of shipping costs. It shows them they're getting a better deal as they get more products instead.
This approach worked for Amanda, Founder of QueenMee. She says, “In 2022, shipping thresholds helped me increase AOV. I introduced a free shipping threshold over £20 (later increased to £25). This increased my AOV by 20% to £32. In 2023, I have seen an 18% increase in my AOV after introducing another shipping threshold of $50 for free next-day delivery.”
Let AOV rise above and beyond
The average order value reflects customers’ purchasing patterns and behavior. An upward trend in AOV benefits a store, as you need not spend on new customer acquisition costs. You earn more without needing to get more customers.
The ideas above reflect experts’ thoughts and opinions on increasing the AOV of your business. Put them to use, and keep track of the average order value over months. Measure the month-on-month changes and discover what delivers the most significant impact.
Remember, it's not just about making sales bigger; it's also about giving customers a good deal and a great shopping experience. When you aim for both, you’ll see more profits and growth. It's a win-win: customers get better deals, and you earn more from each sale.
Start with the first idea. Try a social proof marketing platform to show and tell the logic customers need to make more significant purchases.
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Frequently Asked Questions (FAQ)
1. What does increase AOV mean?
Increasing Average Order Value (AOV) is all about how much money customers spend on average when they buy something from your website or app. When you work on increasing AOV, your goal is to get customers to spend more every time they shop. How do you do this?
There are several ways, like suggesting related products (that's upselling), offering deals if they buy more than one item (cross-selling), or giving discounts for larger purchases.
By getting your AOV up, you're not just earning more money - you're doing it without needing more customers, which is a smart way to grow your business.
2. What does AOV stand for?
AOV stands for Average Order Value. Think of it as the average amount customers spend each time they place an order on your site or app. To figure out your AOV, just divide your total sales by the number of orders.
Why does this matter? It gives you a snapshot of how your customers shop and helps you see if your marketing and pricing strategies are working. Keep an eye on your AOV – it's a big deal if you want to make more money and give your customers a better shopping experience.