Boost Average Order Value

Top 5 Strategies Ecommerce Stores Use to Boost Average Order Value

Simple math proves that growing website traffic can increase revenue for ecommerce businesses. Online retailers spend plenty of time, money and resources getting it right. But a powerful strategy that’s often overlooked and just as effective at turning profits is getting customers to add more products to each transaction once they hit your site.

Ecommerce stores that encourage buyers to check out with larger carts not only increase online revenue but also reduce per transaction costs. The best measure of success for these efforts is Average Order Value or AOV. To calculate AOV, simply divide total revenue by number of orders.

AOV

For online retailers, increasing AOV is one of the most effective and comparatively inexpensive ways to increase revenue and cash flow.
So, how do you increase AOV? We’ve done the research for you and compiled these Top 5 strategies to convince your customers to buy more products and increase average order value:

1. Free Shipping Threshold

Free shipping offers with a price threshold are proven to increase overall conversion rates on ecommerce sites. A recent study by comScore also found that 58 percent of online shoppers have added items to their shopping carts in order to qualify for free shipping.

Find a prominent place on your homepage to display your free shipping offer, such as the navigation area or page header, like this example from Banana Republic.

Banana

2. Product Bundles

Bundle discounts are a traditional and effective way to increase the number of items at checkout. Bundles are combinations of products that, when bought separately, would cost more.

You can increase the effectiveness of bundles by analyzing customer data and buying trends in order to offer products that are commonly bought together.

Microsoft

3. Upsell and Cross-Sell

Upselling and cross-selling is the science of offering customers higher end or complementary products to what they are considering at the time.

Upsell – Suggest a larger or more expensive version of a product a customer is viewing.

Cross-sell – Recommending additional items related to the one your customer is viewing.

According to Forrester research analyst Sucharita Mulpuru, product recommendations like upsells and cross-sells are responsible for 10%-30% of ecommerce revenue. The key to successful recommendations is to offer products that add value to the customer and optimize the customer experience. Well executed techniques will boost revenue by selling more to the same customer.

Shopping

4. Volume Discounts

Offering quantity discounts is another way to increase order value. Volume discounts can be offered as a percentage off a minimum purchase or total number of items like this example from Target.

Another option is offering a flat dollar amount of savings by reaching a price threshold, such as $10 off your order of $100 or more. Of course, ecommerce sellers need to find the right discount value that attracts buyers without cutting into profit margins.

Bundle

5. Loyalty Programs

A proven method for getting customers to spend more is a loyalty or rewards program. Ecommerce loyalty programs with points, incentives or discounts for registered members are shown to increase orders and encourage repeat purchases.

The best way to use a loyalty program to increase average order size is to offer ‘points’ when customers spend over a certain amount. This is similar to the threshold examples cited earlier, but will cost ecommerce sellers less because the perceived value of the points is more than what it is actually costing the seller.

Why AOV Matters to Ecommerce Stores

Another reason online retailers should focus on average order value? Customer acquisition costs. Attracting new customers to your ecommerce store takes marketing resources and a budget for SEO, AdWords and various channels. Increasing AOV, on the other hand, brings in more revenue at a lower cost.
Analyzing the data from average order value can also give you insight into your customer’s buying habits and help you identify your high value customers. By combining that analysis with conversion rate data, online retailers can predict how much revenue to expect from a certain number of site visits.

Implemented correctly, these techniques can increase the profitability of your ecommerce business and boost your customer’s lifetime value.

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