09Jan
By: Nicole Martins Ferreira January 09, 2017

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.

Free-Shipping-Threshold



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-discounts


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-Bundle-Deals


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.

Offer-a-Gift-Card


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.

Give-First-Time-Offers


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.

Create-a-loyalty-program


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.

Offer-time-sensitive-deals


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.

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.

Create-a-contest-or-game


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!


  • Chris Curwen

    Great post Nicole! I’d never come across the Cross-Sell app before but it looks to me to be just what I need for my product pages. I use the Brooklyn theme and with this app my product pages will really start to take shape 🙂

  • Nicole

    Thanks Chris! Cross-sells definitely work well. For my store, our upsells tend to bring in the most additional money. However, having a combination of everything works really well to boost up your AOV. The Brooklyn theme is great – very clean, simple. Have fun building up your average order value!

  • Shaker

    Hi Nicole,

    Great article as usual 🙂 Couple of questions for you:

    1)What payment provider do you use on your shopify store? I’m based in canada so I have a decent variety of payment service providers available to me such as paypal and stripe. I’ve heard of alot of horror stories where people are using paypal or stripe or someone else and they got shut down, because the payment providers aren’t okay with dropping shipping (i think it goes against their terms or something).

    What payment providers do you use and how have you found them to be? What do you do to stay on their good side?Are payment providers okay with dropshipping in general?

    2)What currency do you use on your store? My understanding is that only one currency can be used on your store at a time? I was thinking of using usd. Do you use an app to show the price in local currency, but they pay in your store currency(ie usd)? How do you handle it?

    3)You know how alot of aliexpress says on some of the products that the color of the product can vary a little bit because of the variations in the computer screen, would you have a similar dicsclamer in your store if you had products where the color could vary a little because of the computer screen?

  • Hi Nicole, thanks so much for mentioning our Cross-Sell Shopify app, I’m pleased you like it. Any chance you can get in touch via Twitter or provide me with an email address that I contact you on? Thanks again!

  • Nicole

    Hey Steve, no problem. I’ve PM’d you on Twitter.

  • Nicole

    Hey Shaker,

    Thanks for the feedback!
    1. We use PayPal, Apple Pay, bitcoin and Stripe. Haven’t had any issues. PayPal is pretty popular for sales so I’d definitely recommend it. Contact PayPal directly when you read articles – there’s a lot of misinformation out there.
    2. USD. We have a currency converter that tells the customer the price in their currency. However, they still get charged in USD and are aware of that.
    3. You can definitely add that disclaimer in. It’s not an AliExpress issue though. A lot of websites mention this. You can add it to your terms of service. Doesn’t need to be mentioned on every product page.

  • Shaker

    Hey Nicole,

    I was not expecting bitcoin! What was the rationale behind that?

    1)How do you think about pricing in usd even through you have a global base of customers? Ex. If I say a shirt is $30 USD, that’s fine and reasonable. But if a canadian customer sees it it’s a almost $40 cad, which seems more expensive (even though it accounts cad $40 is equal to 30 usd). How do you balance in pricing in usd, with the fact that the price of the items in local currency in other countries might make the item seem unreasonable?

    2)Someone mentioned that they got a test package from AE. They said it had the cost on it (which was ofc many times lower than what the customers paid on the site, and said it was from china post), but did not have the invoices/promotions, etc.

    Have you found that the packages that your suppliers sent out have the cost on it?

    This particular user was freaking out because they thought that the customers would feel ripped off? How would you handle this?

  • Nicole

    We’re flexible with how people pay – most don’t pay via bitcoin though!
    1. On my site, customers don’t see USD pricing only for their currency
    2. We’ve processed a lot of orders on our store but it only happened to us once. If the same product keeps having the issue change suppliers. For the most part, they don’t send invoices though.

  • Francis Palladino

    Hey Nicole, how do i handle customers that have waited 2 weeks almost 3 and start complaining ? lol

    And do you recommend to only just selling within the US?

  • Nicole

    Hey Francis,
    First, I’d check the product tracking to see when the product was shipped. Then check to see how long it takes for that product to ship so you can give a customer a ball park on when it should arrive to ease their nerves. Make sure every product is delivered via ePacket – makes a difference. Be friendly with your customer and apologize. ‘Sorry for the delay. You should be receiving your product in ___ days. I’ll check back in a few days to make sure you’ve received it.’
    For my store, we mix up our countries a bit for ads. We target the US but also other countries as well. Ads for other countries are often cheaper I find and still converts well. Don’t limit yourself. With ePacket there’s a growing number of countries that can have quick and cheap shipping. Test to see which countries work best for your store.

  • Shaker

    Hi Nicole,

    What countries work well for you outside of the US?