When it comes to evaluating the health of your business, there are a number of metrics to factor in.
Some of them are more obvious:
Some of them, like average order value, tend to get overlooked for more “vanity” metrics that don’t always paint the full picture.
Pass over AOV no more. It’s a really, really meaningful metric that can help you understand how much your customers are spending. Plus, there are a number of ways to improve it.
So, what is AOV and why is it an important metric?
By definition, average order value is a measurement of the average dollar amount spent when a customer places an order on your website.
Let’s say, hypothetically, you have $10,000 in revenue. 500 customers have made purchases. Your average order value is $20. How did we get there?
AOV = total revenue / total number of orders
Now, there are a number of metrics that require measuring to understand who your customers are, what they’re buying, and how you can get them to come back. Average order value fits in nicely with cost per acquisition, customer lifetime value, and customer retention rates. Understanding AOV helps a company make decisions about shopping behaviors, focus marketing efforts, and pricing strategy, including discounts.
Like all of the other metrics we marketers look to optimize, there are a number of tactics that can be leveraged to increase AOV (and did you know AOV can be increased at every stage of the funnel, too?).
10 ways to increase average order value (AOV)
Create a flexible yet strategic shipping and returns policy.
Shoppers today have high expectations for their shopping experiences, in-person but especially online. Free shipping and free returns are two of those expectations nowadays.
According to Inc., “comScore released a study, which found that 83 percent of US online shoppers are willing to wait an additional two days for delivery if shipping is free. Similarly, 58 percent of US online shoppers have added items to their shopping carts to qualify for free shipping. These studies show that offering free shipping can lead to greater sales revenue, since people are willing to buy more to get free shipping.”
Shipping options and partners are aplenty, and eating those costs in favor of potentially making and keeping a customer and increasing AOV are far more worth it to your business in the long run than passing the shipping costs off on your customer. Plus, you can factor shipping cost into the cost of your product by raising prices a dollar or two a piece.
Cross-sell, up-sell, and bundle products together.
You want fries with that shake? The answer is yes — not just because sweet and salty is the ultimate flavor combo. It’s because, psychologically, bundling products together and offering a deal on said bundle encourages more spending.
There are a number of up-selling and cross-selling tactics businesses can use. This includes everything from creating a bundle of products and selling them as one unit or using widgets that recommend like products as shoppers place others in their carts.
Activewear brand, Outdoor Voices, does this well. They know that shoppers are looking for active bottoms or sweat-wicking tops, so they’ve created a single product that bundles both the top and bottom together and throws in a free gift, like a hat, socks, or a tote bag. They price the bundle at a discount but, in actuality, the business nets a higher average order value because the customer could have not had intentions of buying both pieces.
Cross-selling and up-selling don’t have to be leveraged one at a time, either. When used together, they save a business nearly 70% in customer acquisition costs.
Use social proof and testimonials to seed legitimacy.
People trust other people. At least, they trust other people more than they trust most corporations. And while influencer marketing has overgone a number of iterations over the years, it’s still an effective channel. Forget beauty influencers slinging Sugar Bear Hair gummies; 91% of consumers trust online reviews as much as their own friends and family.
But social proof isn’t just gained through offering free product to YouTubers or paying Instagram influencers to create content for your brand. Using your own customer testimonials can be equally as effective in showing shoppers you’re too legit to quit — and that your brand is worth them spending money on.
Social media isn’t the only place to share rave reviews, either. Embed them in your email drip campaigns, use them in paid advertising, or create a case study and quote your own customers.
Offer free gift with minimum purchase…
Who doesn’t love a freebie?! The golden rule for offering a free gift with purchase, though, is to offer something people actually want. It also gives you an opportunity to up-sell for future purchases and create repeat customers.
Take Glossier, for example, who has a genius free gift program. When you check out, Glossier automatically gives you an option to choose a sample or two of other skincare or makeup products. When you love that sample, you’re likely to go back and purchase a full size of that product.
Now, Glossier offers that gift to all customers, regardless of order value. But creating a minimum spend and incentivizing customers with something enticing — like, say, a makeup travel kit to carry around skincare products or a free charging cord with electronic goods — has been proven in study after study to not only increase average order value but seed brand loyalty.
…or a discount, only when it makes sense.
Before shopping habits changed and the market became saturated with brands all vying for consumer attention, offering a discount was a (nearly) surefire way to win a customer.
Nowadays, a discount needs to be used strategically. Handing deals out like candy doesn’t create long-term brand champions; it creates a temporarily happy customer that may not come back without another promo.
If a customer is sitting on a particularly large abandoned cart and a discount might help them pull the trigger, sure — it’s worth a shot. A discount isn’t always conducive to increasing average order value if the customer was likely going to make a purchase anyway, but it can be just the thing that helps tip the scales in your favor. Tread lightly.
Create a customer loyalty program to increase retention.
Creating customer loyalty doesn’t just start when a customer has made a purchase; in fact, you can use tactics (especially ones we’ve mentioned, like using social proof and offering minimum purchase freebies) at every stage of the funnel. It’s why Warby Parker lets you try on five pairs of eyeglasses before you make your purchase. They’re creating the foundation of a customer loyalty program well in advance of you even being a customer.
Customer retention is hugely important to your average order value number because it not only keeps customers coming back, but those who are fans of your company are likely to spend more, more often.
Have an airtight email strategy.
Say what you want about email marketing, but this behemoth is here to stay for the long haul. It’s been around forever and, because of that, it often goes misunderstood. However, when used properly, it creates some of the biggest ROI of any marketing channel. Missing out on that opportunity is like setting money on fire.
Not only does email as a channel generate tons of sales and revenue for your business, it’s something that can be easily automated and triggered based on your shoppers’ habits. These types of emails include:
Welcome email: Set the tone for new audience members and help them understand what they can expect from your messaging.
Win-back email: Don’t let those one-time customers be the buyers that got away. A win-back email seeding a discount, a freebie, or increased value adds could be the thing that gets customers back in the door (and likely to spend more, hence higher AOV. Doesn’t it all make sense now?)
Abandoned cart email: Like the aforementioned, but these shoppers have their carts full, which hurts your bottom line. Let them know that you know they’re hanging on to product and you want them to do something about it.
VIP customer emails: There are customers, then there are very, very important customers. They’re your big spenders. Your brand champs. Your super fans. Reward them accordingly, occasionally, and they’ll move the needle on average order value with every purchase.
Post-purchase email: At the very least, say thank you. For extra credit, gather testimonials, encourage social sharing, or offer a promotion for a future purchase.
Whatever your email marketing strategy looks like, Drip has automated templates and workflows to ensure your customers are getting the right message at the right time.
Provide immediate customer support and feedback.
Increasing average order value doesn’t just start and end at marketing tactics. Optimizing your website to provide customer support while they’re shopping versus once they’ve already checked out or left your site gives you an opportunity to troubleshoot in the moment and increase on-the-spot sales.
Optimize landing pages per device and ensure quick loading time.
Speaking of optimizing your website, have you ever been shopping online – say, on a mobile device – only to find the webpage is not optimized for mobile and the formatting is all wonky? Or has a product page ever taken too long to load, you’ve thrown a fit and (figuratively) stormed off?
Yeah. It’s not a fun experience for a consumer.
By ensuring quick load time by using a new web provider or dialing back code to make everything pop up faster, you’re more likely to keep customers from walking away. It’s also wildly important to optimize your pages for all devices; mobile in particular, as it’s likely that in 2022, smartphone retail e-commerce sales in the United States are projected to surpass 432 billion U.S. dollars.
Test everything from landing pages to customer journey flows.
When in doubt, test it out! Run an A/B test of two different landing pages. Maybe one offers an incentive, and one doesn’t. Maybe one offers a free gift with purchase, and one doesn’t. Maybe one showcases customer testimonials, and one doesn’t.
By doing this, you’ll understand your customers’ shopping habits better and you can implement your finding sitewide to increase average order value, grow customer retention, and impact your bottom line more effectively.
How you’ll know your average value order is increasing
So you’ve implemented a number of strategies to improve your AOV. How will you know it’s working? Let’s start with the obvious:
Your AOV increases.
Obviously, if you see an improvement in cold, hard data for your average order value, chances are something’s working.
If you’ve implemented a number of these strategies, it may be hard to know exactly which tactic(s) in particular are responsible for the growth, but you’ll likely be able to pinpoint other increasing metrics and pinpoint what’s working where. This is especially true when you have a tool that segments campaigns and attributes revenue respectively.
Your CLV improves and customer retention rate grows.
People spend money when they find a product that matches their search intent. That happy customer comes back and spends more money. Overtime, they make more purchases, often at increasingly larger order values. You’ve gained a lifelong customer, and while it won’t be an immediate shift, you’ll likely see more folks stickin’ around longer.
You see residual growth in email subscriber lists and social following.
If you’re implementing cross-channel marketing tactics AND improving the customer experience on your website, people are going to notice. They’re going to want to see what you’ve got going on more often, and the best way to do that is to keep their finger on your pulse.
By using effective tools to increase average order value, you make an impact on your entire marketing plan and see residual effects across other metrics, too.
AOV is an important metric to measure, but it’s one of many. Luckily, Drip can do that — and create full segmented reporting documents in the process. We help higher up in your funnel too, automating SMS and email sends and creating lead generation opportunities to help find your customers and keep them around for a while.