How to Increase Average Order Value? 11+ Effective Ways to Maximize Your AOV

Q: How to calculate average order value?

H To calculate Average Order Value (AOV), divide your total revenue by the number of orders over a specific period. For example, if your revenue was $10,000 and you had 200 orders in a month, your AOV would be $50. This calculation helps you understand how much your customers spend on average, allowing you to strategize on how to increase this value.

Wouldn’t you be happy seeing customers ordering more expensive products from your eCommerce store? This indicates that your Average Order Value (AOV) is pretty good, and you are earning more revenue from your shop.

AOV is like your shopping cart’s report card, showing how much each customer spends on average. Divide the total cash amount by the number of shopping sprees (orders).

So, you know it’s essential, but are you aware of how can you improve your AOV? Increasing AOV will not only be about the spend of your customers but to build a more trustworthy and sustainable relationship with them.

Well, there are some effective methods to maximize your AOV, and they are pretty cost-effective, too.

What is the Average Order Value (AOV)?
3 Types of AOV
12 Best Ways to Increase Your Average Order Value
8 Tips to Stop a Steadily Decreasing AOV
FAQ

What is the Average Order Value (AOV)?

Average Order Value (AOV) is a key metric used in eCommerce and retail to understand your customers’ purchasing habits. It represents the average amount of money spent each time a customer places an order on your website or store.

To calculate AOV, you simply divide the total revenue by the number of orders over a specific period. This figure gives you a clear picture of how much your customers typically spend in a single transaction.

You can identify trends and opportunities to increase the value of each purchase, leading to higher overall revenue by analyzing AOV. It’s a straightforward yet powerful tool to enhance your business strategy and improve customer engagement.

3 Types of AOV

There aren’t explicitly categorized “types” of Average Order Value (AOV), as AOV itself is a singular metric in eCommerce and retail. However, AOV can be analyzed and segmented differently based on various factors or dimensions.

a. Channel-specific AOV

This involves analyzing the AOV for different sales channels or platforms. For instance, compare the AOV from your online store versus a physical retail location or other online marketplaces like Amazon, eBay, or your own eCommerce site.

b. Customer segment AOV

Here, AOV is calculated for different customer segments. Segments can be based on demographics (age, gender, location), customer type (new vs. returning), or customer behavior (frequency of purchases, product preferences). This segmentation helps understand which groups are spending more and can inform targeted marketing strategies.

c. Time-based AOV

It refers to measuring AOV over different periods, such as daily, weekly, monthly, or even seasonally. This can reveal trends and patterns in customer spending habits, helping businesses to identify peak purchasing times or seasons and adjust their sales strategies accordingly.

12 Best Ways to Increase Your Average Order Value

You can expect a 90% increase in your AOV with these methods. Your customers will also benefit along with your business from these changes.

i. Offer bundled products or services that complement each other

Bundling products or services that complement each other adds value for the customer and increases your Average Order Value. Consider a customer buying a smartphone; offering a bundle that includes a phone case, screen protector, and earphones at a discounted bundle price can be very appealing. This method doesn’t just increase sales; it enhances the customer experience by providing a complete solution in one purchase.

ii. Implement a loyalty program with rewards that encourage higher spending

A loyalty program that rewards higher spending can effectively increase AOV. Design a program where customers accumulate points for every purchase, and these points can be redeemed for discounts, free products, or exclusive offers. For instance, for every $100 spent, the customer could earn a $10 voucher. This system encourages customers to spend more to reach reward thresholds, enhancing their engagement and loyalty to your brand.

iii. Provide limited-time offers and discounts on larger purchases

Creating urgency with limited-time offers and discounts for larger purchases can significantly boost your AOV. For example, offer a 20% discount on purchases over $150 for a limited period. This strategy pushes customers to add more items to their cart to benefit from the offer, thereby increasing the overall order value.

iv. Upsell premium versions or additional features of your products

Upselling is a strategy where you encourage customers to buy a higher-end product or additional features. For example, if a customer is interested in a basic laptop model, suggest a higher-end model with better performance and features. Explain the benefits and value of the upgrade, which can encourage the customer to spend more.

v. Cross-sell items related to those in the customer’s current selection

Cross-selling involves suggesting additional products that complement the customer’s current selection. If a customer is buying a bed, recommend related items like premium bed sheets, comfortable pillows, or a matching bedside lamp. This increases the AOV and provides a more complete shopping experience for the customer.

vi. Use targeted marketing to showcase products based on customer preferences

Employ targeted marketing to showcase products that align with individual customer preferences and past buying behavior. Like, if a customer frequently purchases fitness gear, you could send them personalized emails highlighting the latest running shoes or fitness accessories. This tailored approach makes the customer feel understood and can lead to higher spending.

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vii. Set minimum thresholds for free shipping or special discounts

Minimum thresholds for free shipping or special discounts incentivize customers to increase their order size. For instance, offer free shipping on orders over $75 or a 10% discount on orders exceeding $100. Customers often add more items to their cart to reach these thresholds, increasing the AOV.

viii. Create exclusive package deals or seasonal collections

Exclusive package deals or seasonal collections can be beautiful to customers. An example is introducing a winter skincare package with a moisturizer, lip balm, and body lotion at a special price. These curated collections simplify the buying process and offer a perceived higher value, encouraging larger purchases.

ix. Implement a tiered pricing strategy to incentivize bulk purchases

A tiered pricing strategy encourages customers to buy in bulk, where the price per unit decreases as the quantity purchased increases. For example, offer a single t-shirt for $20, but reduce the price to $15 per shirt when three or more are purchased. This approach can significantly increase the quantity sold and the overall order value.

x. Personalize your communication to suggest items that add value to their purchase

Personalized communication can significantly impact AOV. You can suggest products that interest them by sending tailored recommendations based on the customer’s previous purchases or browsing history.

For instance, if a customer recently bought a camera, follow up with an email suggesting a compatible tripod or camera bag. It’s proven that this follow up works on how to increase average order value.

xi. Leverage customer feedback to recommend popular or highly-rated items

Use customer feedback to your advantage by recommending popular or highly-rated items. Display reviews and ratings prominently on your website and highlight bestsellers. The positive experiences of others often influence customers, and they may be more inclined to add these popular items to their purchases.

xii. Utilize strategic pricing to make larger orders more attractive

Finally, strategic pricing can make larger orders more attractive and increase AOV. Offer a “buy more, save more” pricing structure, where customers get a greater discount as they buy more items. Like, A 10% discount for two items, 15% for three items, and 20% for four or more. This pricing strategy encourages customers to buy in larger quantities to avail better deals.

8 Tips to Stop a Steadily Decreasing Average Order Value

If you are experiencing a steadily decreasing AOV, then take actions immediately. Left it uncheck and you will find a collapsing store economy pretty soon. A steadily decreasing AOV indicates that people don’t have much interest in your products anymore, or they found new or similar products at a much more affordable price.

Whatever the case, take immediate actions!

1. Adjust product pricing for better value and competitiveness

Take a closer look at your product pricing. It’s important to strike a balance between competitive pricing and ensuring your products are perceived as valuable. Research your competitors’ prices and consider adjusting yours to offer better value without undercutting your profit margins. Sometimes, slightly higher prices can convey higher quality, potentially attracting a customer base that is willing to spend more.

2. Simplify and improve your website’s navigation and purchasing process

A seamless, intuitive website experience is crucial for encouraging purchases. Review your site’s layout and user interface. Is it easy for customers to find what they’re looking for? Is the checkout process simple and quick? Removing barriers and streamlining the buying process can reduce frustration, potentially leading to higher order values as customers find it easier to add more items to their carts.

3. Introduce appealing product bundles for larger sales

Bundling complementary products can be a powerful strategy to increase AOV. These bundles should offer a clear advantage over buying items separately, such as a price discount or exclusive items. For example, if you sell beauty products, a bundle could include a face wash, moisturizer, and toner at a slightly reduced price compared to buying each item individually.

4. Refine upselling and cross-selling strategies

Effective upselling and cross-selling are about making relevant recommendations that add value to the customer’s purchase. When a customer selects a product, suggest higher-end alternatives or additional items that enhance their initial choice. For instance, recommend a high-quality camera lens when a customer is looking to buy a camera. Ensure these suggestions are relevant and genuinely beneficial to the customer.

5. Tailor promotions using customer data segmentation

Using customer data to tailor promotions can significantly impact AOV. Segment your customer base based on their buying habits, preferences, and past interactions with your store. Create personalized offers and promotions that speak directly to different segments. This could mean targeting repeat customers with loyalty discounts or new customers with introductory offers.

6. Enhance your loyalty program for greater spending incentives

An attractive loyalty program can encourage repeat business and higher spending. Consider offering tiered rewards, where customers earn more substantial benefits as they reach higher spending levels. For example, a basic tier might offer 5% off future purchases, while a premium tier could offer exclusive access to new products or larger discounts.

7. Gather customer feedback through surveys

Understanding your customers’ needs and preferences is crucial. Implement regular surveys to gather feedback on various aspects of your business, from product selection to website usability. Use this feedback to make improvements and adjustments that can enhance the customer experience and encourage higher spending.

8. Focus marketing on high-value items and special offers

Adjust your marketing strategy to emphasize high-value items and attractive offers. Highlight the exclusivity and quality of premium products in your advertising campaigns. Create special promotions that make these higher-priced items more enticing, such as limited-time discounts or exclusive bundles. This approach can attract customers who are willing to spend more for perceived value.

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FAQ

How to calculate average order value?

To calculate Average Order Value (AOV), divide your total revenue by the number of orders over a specific period.

For example, if your revenue was $10,000 and you had 200 orders in a month, your AOV would be $50. This calculation helps you understand how much your customers spend on average, allowing you to strategize on how to increase this value.

How to check the current average order value of your products?

You can check your current AOV by analyzing your sales data, either through your eCommerce platform’s analytics dashboard or your point-of-sale system.

Look for the total revenue and the number of orders for a given period, and then apply the AOV formula. Regularly monitoring this metric allows you to track changes over time and assess the impact of your strategies.

What's the KPI basket size?

The KPI Basket Size refers to the average number of items purchased in a single transaction. It’s a key performance indicator (KPI) that, when combined with AOV, gives insights into customer purchasing behavior. A larger basket size often indicates successful cross-selling and upselling tactics.

What is Average Transaction Value (ATV)?

Average Transaction Value (ATV) is a key metric in retail and eCommerce measuring the average amount customers spend per transaction. For example, if your store made $20,000 in sales from 400 transactions over a month, the ATV would be $50 per transaction.

What is the ATV formula in retail?

ATV, or Average Transaction Value, in retail is calculated similarly to AOV. The formula is,

> Total Sales Revenue / Number of Transactions = Average Transaction Value

This metric provides insights into the average amount spent per transaction, helping you to understand spending patterns and identify strategies to increase transaction values.

Final Verdict

Average Order Value can be a crucial part of your eCommerce business ecosystem, so overlooking this part is ; hence,a little take it as an important part. By analyzing your AOV, you can add quality offers and products to your table, and always be 1 step ahead of your competitors.

By focusing on strategic pricing, tailored promotions, and thoughtful upselling, you’re investing in the longevity and profitability of your business. Remember, the key to success lies in understanding your customers’ needs and continuously adapting your tactics to meet them.

With dedication and the right approach, you’ll see a significant and sustainable increase in your Average Order Value, paving the way for a thriving business.

Best of luck with your eCommerce business!