The goal of an ecommerce store is to make money. When you increase average order value, you make more money from each transaction making your store more profitable. Average order value is the average dollar amount a customer spends when placing an order on your store.
You can calculate your store’s average order value by dividing your store’s total revenue by the number of orders taken. This is the easiest way to calculate it. However, keep in mind that there are business expenses such as advertising that aren’t taken into account in this formula.
You should want to increase your average order value for a few reasons. First, you’ll make more revenue and profit by doing this. Second, it makes your ad spend affordable, allowing you to continue reinvesting to grow your business. Third, you sell more products – this is mostly helpful for those who carry inventory though.
According to Volusion, the top performing ecommerce businesses have an average order value of $102. You might need to grow to that number if your product prices are much lower than that. However, by following the steps below you can increase average order value bringing you closer to the top.
Offer a free shipping threshold to increase average order value
The easiest way to increase average order value is to offer a free shipping threshold. For example, ‘free shipping on all orders over $75.’
Once you’ve calculated your average order value, add 30% to it. For example if your average order value is $100, with the 30% increase it becomes $130. This new number is what you’ll set your free shipping threshold at. For example, ‘free shipping on all orders over $130.’ Aaron Zakowski found that a 30% increase to your average order value worked best as a free shipping threshold.
You can also add a notification when customers check out and their purchase doesn’t add up to the free shipping threshold. By having this notification, you’ll be able to help increase average order value. You can easily do this with Bold’s The Motivator app.
Offer product discounts to increase average order value
While it seems counterintuitive providing discounts can help increase average order value. However, when providing discounts be sure to add a minimum spend. For example, get $10 off when you spend $75 or more.
Some brands also have volume discounts. This is when certain order value brackets result in a particular discount. For example, get $10 off when you spend $75, get $15 off when you spend $100, get $25 off when you spend $150 or more.
You can use the Product Discount app from the Shopify App store to implement this easily.
Offer bundle deals to increase average order value
Providing customers bundle deals can help increase average order value. For example, you can provide a buy 2 and get a free gift or buy 3 and get a 4th free. You can easily do this with the Free Gifts app in the Shopify app store.
As products on AliExpress are affordable, you’ll need to ensure you choose free gifts that won’t impact your product margins too greatly. If you provide a buy 3 get a 4th free deal, you need to make sure your products are priced in a way that you can afford to cover the costs of the 4th while still making more profit from the bundle deal.
According to Inc., there are numerous benefits of bundling. First, it can increase the customer experience. Second, it can make decision making easier for customers. Third, it can validate a customer’s decision.
Offer a gift card to increase average order value
Gift cards are a great way to increase average order value, even when giving a small one away for free. For example, if all products in your store are $25 or higher, you can offer a free $5 gift card for a customer to use with their next purchase. Since they have a gift card they’ll be more likely to spend again.
However, you need to make sure that your product prices are high enough that your gift card doesn’t result in a free purchase for your customer as that would cause profit loss. Also, remember to make sure that customers know they can’t use the gift card on the current purchase or on shipping (if you offer free + shipping on certain products).
Lastly, having gift cards offered encourages future purchases which helps reduce future ad spend. It’s a great bonus to give customers when sales are seasonally lower but you shouldn’t offer this deal year round.
Keep in mind that even if you don’t give a free small gift card, gift cards still help increase average order value as most don’t spend the full card or end up spending much more than their card provides them.
You can offer a gift card to customers directly from Shopify. In your admin, click on ‘Products.’ Then, look down the menu. ‘Gift cards’ will be the last item in the menu.
Giving first time offers to increase average order value
If you’re a relatively new brand (under 6 months old) most of your customers will be first timers. Offering deals to new visitors can help increase average order value. You can provide this special audience with special discounts when they buy multiples of a popular product or exclusive bundle deals just for people who haven’t shopped with you before.
If your customer orders several items and loves what they receive, it’ll be even easier to entice them to come shop again. They’ll already have experienced your brand first hand. Thus, you have a better chance of turning them into a returning customer.
You can offer one time discounts with the One Discount app by Ori Kremer in the Shopify App store.
Show cross-sell and upsell items to increase average order value
A cross-sell is an item that a customer may like that’s different from the product they’re viewing. For example, if your customer is looking at a dress you might have a recommended product of a pair of earrings that look amazing with it. You can use the Cross-Sell app by Keeping Shop Ltd.
A great idea for cross sell is to add the products the model is wearing to the recommended products. For example, if the product photo is selling a tank top, you might add the skirt as a cross-sell. Since the customer sees the two together, they’ll be more likely to purchase them in combination.
An upsell is when you encourage customers to buy more expensive items or additions to increase average order value or profit. For example, if you sell pillows you might upsell with comforter sets, a duvet or other item. You can use the Free Gifts app by Secomapp.
An effective way to upsell products is to sell more of the same product. For example, if you sell essential oils, you would upsell by recommending the same scent and a couple of popular scents to the customer. The reality is people are likely to buy more of what they love, especially if it’s likely to run out at some point. This works well for beauty products as well.
Show cross-sell and upsell items to increase average order value
Having a loyalty program in place can help increase average order value. Each time a customer orders they can earn points or discounts just for being loyal customers.
The benefit of having a loyalty program is that it helps build brand evangelists, customers who keep coming back to your website to shop. According to The ROI from Marketing to Existing Customers report, 40% of a store’s revenue comes from repeat customers. Only 8% of all store visitors are repeat customers. Repeat customers are also more likely to buy more than people who are unfamiliar with your brand.
By encouraging repeat sales, you help create a larger fanbase who will likely order larger quantities of products. They’re also cheaper to advertise to via retargeting, social media or email marketing. Thus, these evangelists help increase average order value.
You can create a loyalty program with the Loyalty Reward Points app by Sweet Tooth.
Offer time sensitive deals to increase average order value
You can offer a time sensitive deal to help increase average order value. For example, you might have a 48 hour deal where someone gets a free gift or a special discount when they’ve ordered a certain quantity of products.
While it might not increase average order value for a long duration, urgency helps increase conversions. Time sensitive deals are great for boosting average order value during slower periods.
You can show time sensitive deals with the Sales Countdown Timer app. In the app, you’ll be able to specify exact dates.
Show savings with bulk orders to increase average order value
People love saving money. However, when your customers order large quantities, they sometimes feel guilty about it. If they feel they overspent, they might ask for a partial refund lowering the average order value.
However, if you show customers how much money they’re saving per item with each addition, they’ll feel like they’re scoring a deal. Showing people the monetary savings they get from buying multiple items can help increase average order value.
Creating a game or a contest to increase average order value
The food industry often creates games or contests to increase average order value. For example, McDonald’s has the Monopoly Game where customers are incentivized to order more frequently and upgrade their meals to get more game pieces. With the game pieces they have a chance of winning big prizes. Read more about McDonald’s Monopoly Game marketing from Business Insider.
In ecommerce, you can also run contests where customers have a chance to win prizes when they buy often. You can let customers know that if they’ve made a purchase they’ll be entered into the contest where they can win one of several prize packs. Then, you can search the Shopify App store for the contest app that works best for your campaign.
Viral Sweep is a great app that allows you to offer contests and sweepstakes.
What have you implemented to help increase average order value? What’s your average order value goal for your store? Let us know in the comments!