While it’s important for e-commerce businesses to turn visitors into paying customers, how much a customer purchases per order is similarly important. And that’s why average order value (AOV) is a critical metric to improve in e-commerce.
So, what exactly is Average Order Value (AOV)?
AOV is an important metric that helps e-commerce businesses understand the average dollar amount spent each time a customer places an order on a website or mobile app. It’s determined by dividing the total revenue by the number of orders.
Why is it an important metric to monitor for e-commerce businesses?
AOV is an important metric for e-commerce businesses as it represents an integral component of an online store’s top-line revenue and provides actionable insights into customer behavior.
By measuring AOV, e-commerce businesses can then use a variety of best practices to increase the number and/or value of items per order, driving meaningful improvements to overall e-commerce performance.
Now that we’ve established what AOV is and why optimizing (i.e. increasing) it should be a priority, here are several proven ways to boost your website’s average order value:
1. Deliver “Fast and Free” for orders that meet a minimum spend amount
Free shipping is a tried and true way to entice customers into purchasing. Why not spice it up and offer ‘fast and free’ delivery to boost both conversion rates and AOV?
Many businesses are hesitant to offer free shipping because they think of delivery/fulfillment as a cost, and it doesn’t always seem intuitive to “eat the cost” of shipping. But, that’s exactly why it can make a whole lot of sense to offer “fast and free” delivery, as studies have shown that shoppers don’t want to pay extra for shipping and that fast/reliable shipping is shoppers’ #1 overall consideration when shopping online. By offering “fast and free” delivery, your shoppers can be incentivized to buy at a higher rate and add more to their carts than they normally would, increasing both conversion rates and AOV.
Ujji, a substitute for coffee, offers free 2-hour and same-day delivery with Ohi in Los Angeles, New York City, San Francisco, and Chicago.
Other brands such as Bathing Culture also offer free 2-hour shipping with Ohi on orders of $50 or more and have seen AOV increase as a result of this tactic.
How to determine the threshold for “fast and free” delivery
You can calculate your cart order minimum using a modal order value or the most common order values. For example, if the majority of your orders are under $35, you could offer free two-hour delivery on orders over $50.
2. Pre & post-purchase upsells & cross-sells
Upselling and cross-selling are tried-and-tested behavioral marketing techniques for increasing average order value (AOV).
Upselling is a technique e-commerce businesses use to persuade their customers into buying an upgrade of the product the customer has added to their cart. Typically, an e-commerce business can do it two ways: (1) offer an upsell pre-purchase, that is, recommend the upsell before customers add the product to their cart. Or, (2) make an offer post-purchase. Many businesses do this via post-purchase emails, which typically have low conversion rates. However, there’s a better way to approach this. Making an offer after checkout — by sandwiching it between checkout and your thank you page — increases the likelihood of your customers accepting it. By utilizing this approach, you mitigate the risk of cart abandonment while still enjoying much of the upside upsells offer.
To optimize even further, you can create a one-click purchase experience for your online store. CartHook enables an easy way for online stores to create post-purchase offers in checkout.
This way, customers are more likely to accept the offer as doing so requires only one click and does not require them to re-enter their payment and shipping info.
In contrast, cross-selling encourages customers to shop for related or complementary products. Similar to a pre and post-purchase upsell, you can offer your customers a pre and post-purchase cross-sell. For instance, if your customer adds a Vitamin C serum to their cart, you can always offer an eye cream to go with it.
Amazon is one of the industry’s biggest users of upsell/cross-sell tactics. Amazon features an entire carousel of related products or products that go well together once you’ve added items to the cart.
3. Provide bundle deals and bulk options
Group relevant products (or items commonly purchased together) as “bundles.” If you want customers to purchase more items, try creating product bundles that cost less than if the same items were purchased individually. Small discounts can entice customers into buying the set. Here’s an example from Dollar shave club.
4. Start a customer loyalty program
A loyalty program is a winning strategy to help build your brand and your share of your wallet. Loyalty programs not only boost customer retention (or loyalty), but they also encourage people to add more items to their carts (increasing AOV) because every additional item added gets them closer to the next reward or tier.
Sephora’s Beauty Insider is one of the best examples of tiered, point-based loyalty programs. Members can win one point for every dollar spent in the store and work their way up the ranks from “insider” to “VIB” to “rouge.”
5. Create limited-time promotions
Limited-time offers work wonders on online shoppers because they create a compelling case for prospects to make a purchase by instilling a sense of urgency.
Understanding this, e-commerce marketers often leverage consumers’ fear of missing out (FOMO), or scarcity marketing, to capture the attention of consumers, get them to load up on products they perceive as rare, driving up AOV. Black Friday and Cyber Monday sales work so phenomenally because they stir up FOMO to dramatic effect (e.g. early-morning lines that span several city blocks).
6. Build trust with social proof
89% of consumers worldwide check out reviews before buying a product. (Trustpilot, 2020)
Many customers have grown wary of marketing and instead only give credence to honest, real-life experiences from actual customers.
Social proof – reviews and feedback – has a significant impact on your potential customer’s buying decisions. If your products have received awesome reviews, make sure to showcase them on your store’s website. Doing a great job with customer reviews and social proof can give buyers the confidence they need to skip the obligatory test order (with one unit) — and instead load up their cart, increasing your AOV.
7. Establish a customer-first, flexible return policy
With the intense competition many brands are seeing in the e-commerce space, it’s more important than ever to be as accommodating to your customers as possible. Having a flexible refund policy can help mitigate any serious misgivings potential customers may have about purchasing from you while increasing AOV (by reducing the common fear shoppers have of getting stuck with unwanted merchandise).
Once you’ve set up your customer-friendly return policy, the next step is to ensure that you make it known to your customers. Your purchase confirmation emails, social media accounts, and website banners are some of the best touchpoints to highlight your (AOV-boosting) return policy.
AOV is important, but it’s not the only growth lever
While it’s true that increasing AOV is one of the best ways to boost revenue and profit, it is just one of many important KPI for your online store. It’s crucial that you track and optimize this metric alongside other equally important metrics such as conversion rate, repeat purchase rate, and customer lifetime value (CLV), if you want to maximize the ROI of your growth/marketing efforts.
At Ohi, we’ve flipped the script for e-commerce fulfillment, transforming it from what is traditionally seen as a cost center into a growth engine. Brands join the Ohi platform to deliver powerfully fast, brand-focused, and memorable post-purchase experiences that enable them to grow. Want to learn more about how Ohi enables instant commerce? Get in touch today.