{"id":4438,"date":"2020-09-03T08:27:10","date_gmt":"2020-09-03T05:27:10","guid":{"rendered":"https:\/\/adoric.com\/best-shopify-apps\/?p=4438"},"modified":"2022-04-01T15:29:20","modified_gmt":"2022-04-01T12:29:20","slug":"tips-to-improve-average-order-value","status":"publish","type":"post","link":"https:\/\/adoric.com\/best-shopify-apps\/tips-to-improve-average-order-value\/","title":{"rendered":"10 Tips to Improve Average Order Value"},"content":{"rendered":"

There are several ways to increase your profit. Some of them include finding more buyers, reducing operational cost, selling more by increasing your average order value (AOV), etc.<\/span><\/p>\n

In this article, we\u2019ll concentrate on the last point and explain how you can increase average order value.<\/span><\/p>\n

Let\u2019s start:<\/span><\/p>\n

What is Average Order Value?<\/b><\/h2>\n

The average order value is defined as the average amount of money your average customer spends on a single order.<\/span><\/p>\n

It is calculated by dividing revenue by the number of orders over a specific period of time.<\/span><\/p>\n

Here\u2019s how to calculate average order value:<\/span><\/p>\n

Let\u2019s say you earn $2,000 in February by selling to 40 customers who made a total of 50 orders, i.e. some of your customers gave multiple orders.<\/span><\/p>\n

You\u2019ll reach the AOV by dividing 2000 by 50 = $400.<\/span><\/p>\n

The average order value formula does not consider the number of buyers one has, it only considers the number of orders.<\/span><\/p>\n

Now that we\u2019ve understood average order value calculation, let\u2019s talk about how to increase average order value online.<\/span>\u00a0<\/span><\/p>\n

How to Improve Average Order Value eCommerce<\/b><\/h2>\n

Very few businesses pay attention to increasing average customer value. They are typically busy acquiring new customers and making more sales from them instead of focusing on customer retention and selling more to existing customers.<\/span><\/p>\n

It\u2019s more beneficial and profitable to target your current customers as it<\/span> costs 5x as much<\/span><\/a> to attract a new customer, than to retain an existing buyer.<\/span><\/p>\n

We know that growing traffic usually results in more money in the form of more customers or orders. This is why businesses happily invest in SEO and other marketing techniques. However, merely getting visitors can never be enough. You must try to make sure they \u2018buy\u2019 as much as they can.<\/span>\u00a0<\/span><\/p>\n

At the end of the day, traffic does not matter. It\u2019s the volume of purchases that does.\u00a0 SEO alone may not be enough to increase your AOV. Here are some reliable and cost effective ways to increase your website\u2019s AOV:\u00a0<\/span><\/p>\n

#1 Consider Offering Free Shipping and Use Thresholds<\/b><\/h3>\n

In one of our <\/span>previous blogs<\/span><\/a>, we talked about the importance of free shipping and how it can be used to make more sales and retain more clients.<\/span><\/p>\n

Customers pay a lot of attention to free shipping and most are willing to spend more if it means free shipping. However, one has to be very careful when creating this strategy as it can backfire if not used properly.<\/span><\/p>\n

\"free
free shipping Amazon<\/figcaption><\/figure>\n

\u00a0<\/span><\/p>\n

It\u2019s understandable why businesses do not offer free shipping. Transport costs money and the profit you make may not always be enough to off-set the costs. This is why we suggest that you put a threshold so that you can cover shipping costs without stressing your business.<\/span>\u00a0<\/span><\/p>\n

You must choose a threshold that doesn\u2019t interfere with your profit margin. Think about a user who lands on your site to purchase a t-shirt that costs $40. He notices that he\u2019ll have to spend $15 on shipping, which means he\u2019ll have to spend a total of $55 to get his hands on the t-shirt.<\/span>\u00a0<\/span><\/p>\n

On the same page, he sees that he can qualify for \u2018free shipping\u2019 if he spends a total of $50 or more. The person decides to purchase two t-shirts for $80.<\/span><\/p>\n

\"free
free shipping example<\/figcaption><\/figure>\n

From the buyer\u2019s perspective, each shirt now costs $40, whereas it would\u2019ve cost $55 each if he had opted for a single t-shirt. This can be a great motivator for buyers to spend more money. But, it can be bad for businesses if not handled well.<\/span><\/p>\n

You need to calculate your profit margin<\/a> and shipping costs because now you will have to bear shipping and the money will be deducted from your profit.<\/span><\/p>\n

If you make more profit than the cost of shipping only then this strategy will be helpful. If you feel that the threshold should be higher than you set it $100 or more, but make sure to understand how much your customers can or are willing to pay.<\/span><\/p>\n

A threshold that is too high will repel customers. Also, advertise your free delivery offer as much as possible so that buyers are fully aware of it.<\/span><\/p>\n

#2 Offer Special Discounts on Bulk Orders<\/b><\/h3>\n

Discounts on bulk orders isn\u2019t a very popular eCommerce concept but many businesses now are using it to make more sales and increase the average order value.<\/span><\/p>\n

Nothing works like a discount, customers are attracted towards \u2018low prices\u2019 and many end up spending more than they originally planned to.<\/span><\/p>\n

\"bulk
bulk discount<\/figcaption><\/figure>\n

Use words like \u2018cheap\u2019, \u2018offer\u2019, \u2018discount\u2019, \u2018free\u2019 and \u2018economic\u2019 to attract customers. It doesn\u2019t matter how much of a discount you offer \u2013 2 percent or 20 percent \u2013 words like these always attract buyers and can help increase your AOV.<\/span><\/p>\n

These offers make buyers feel they\u2019re getting a great deal. You can also use other tricks such as timers to create urgency or scarcity, i.e. 20% off for 2 days. This will make buyers feel they must make an order today if they wish to buy the product at a discounted rate.<\/span><\/p>\n

\u00a0<\/span>A large number of eCommerce stores use this trick to get rid of old stocks but if used cleverly, it can also help increase your average order value. Tell buyers they can get a discount if they spend $100 or they can get 1 item for free if they purchase 3.\u00a0<\/span><\/p>\n

\u00a0<\/span>Once again, be smart and calculate your costs and profit margins so that you don\u2019t end up facing a loss.<\/span><\/p>\n

#3 Consider Cross-selling and Upselling<\/b><\/h3>\n

These two concepts are different yet very similar. They have one aim \u2013 to increase your average value order by motivating buyers to purchase more.<\/span><\/p>\n

It\u2019s believed that upselling can drive between <\/span>10 and 30 percent of revenue<\/span><\/a>. The term can be defined as \u2018offering an improved version of the product the customer is interested in.\u201d<\/span><\/p>\n

On the other hand, cross-selling can be defined as \u2018offering a complimentary, additional product that completes the first order.\u201d<\/span><\/p>\n

Let\u2019s say you sell mobile phones. A buyer shows interest in the device that goes for $499 and comes with 256 GB of space.\u00a0<\/span><\/p>\n

Here\u2019s how you can upsell:<\/span><\/p>\n