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Average Order Value (AOV): 7 Easy Ways to Increase Your Profitability

While you may believe that your traffic and conversion rates are great, the truth of the matter is that the average order value of customers' orders plays a huge role in the long-term growth and success of your business.

Average Order Value: 7 Easy Ways to Increase Your Profitability

Has your business been in a bit of a slump lately? 

Some businesses believe that they must gain more customers in order to realize a boost in revenue. While this indeed can be beneficial, you also want to focus on the customers you have.

One way to improve your business’s profitability is to focus on increasing the average order value (AOV). 

This is a particular tactic that is often overlooked, but it packs quite a powerful punch, especially as part of your overall digital transformation strategy.

Sure, that sounds great, but what is average order value and how can I achieve a higher AOV? You’ll learn all of this and more below.

    What is the Average Order Value (AOV)?

    The average order value is simply the average amount of money that is spent by your customers when they place an order with you over a specific time period.

    This key performance indicator (KPI) can be tracked for any period of time, although the most common among companies is to monitor the monthly average order value.

    If you’re able to succeed in having a high AOV, your revenue growth is likely to be healthier in the long term.

    Why the AOV Is Important?

    Believe it or not, the AOV is actually one of the most important metrics you can track as a business. 

    One main reason it is so important to track AOV is because it offers insights that can help with creating a solid pricing and marketing strategy.

    Average order value can help you learn more about the behaviors of your customers

    By becoming more familiar with how much customers spend on their orders with your company, on average, you will be in a much better position to tailor your pricing and marketing efforts to the needs of your current and potential customers.

    Basically, the higher your AOV, the more revenue you can expect to earn from your customers. 

    You have the ability to increase your revenue without increasing your sales and marketing costs and efforts.

    At the same time, because a higher AOV can give your cash flow a boost, you have additional funding to put toward your customer acquisition strategy. 

    Plus, that improved cash flow is just a sign of a healthy, thriving business.

    How to Calculate Average Order Value

    Now that you know what average order value is and why it is so important to the success of your business, it is time to learn how to calculate AOV. 

    In order to calculate your average order value, you simply need to take your total revenue amount and divide it by the total number of orders for that time period.

    AOV = Total Revenue / Total Number of Orders Placed

    So, let’s say you made a total of $3,000 and had 100 orders during the month of February. This would mean that you have an average order value of $30.

    AOV = $3,000 / 100 = $30

    This means that a customer tends to spend $30 on each purchase from your company, on average.

    7 Ways to Increase AOV

    So, are you ready to increase your average order value? 

    Here is a look at a few different tactics that can be implemented easily to do just that.

    #1: Offer Free Shipping at a Minimum Purchase Amount

    One simple way to get customers to increase the number of products in their carts is to make free shipping available once their total purchase reaches a certain amount. 

    An example would be to offer free shipping to your customers when they reach a cart total of $50 or more.

    In doing this, it is likely that you will convert some of your online shoppers into paying customers who otherwise would not have completed their purchase. 

    Research says that 61% of online shoppers will ditch their cart if they have to pay for shipping and that 69% of them will add products to their cart in order to qualify for free shipping.

    With that being said, it makes sense that this is a common tactic used among online retailers to help increase their AOV. 

    If you choose to go this route, make certain that the offer is displayed in various areas on your website, including the homepage and at checkout. 

    If customers don’t know the offer exists, they can take advantage of it.

    Also, try to aim for somewhere between 15% and 20% higher than your current average order value for your free shipping threshold. 

    This helps to motivate your customers to spend more to capture that free shipping option. However, if you go too high, it may turn them away.

    Ultimately, the free shipping threshold is there to encourage shoppers to spend just a tiny bit more than they normally would in order to have their order shipped free of charge to them.

    #2: Cross-Sell Similar Products

    Have you ever noticed the section for “Recommended Products” when you are viewing a particular product or at checkout? 

    Well, this is one of the many ways businesses are able to cross-sell their products.

    The tactic uses the product that the customer is viewing or purchasing and creates a list of similar products that the customer may be interested in. 

    The goal is to entice the customer to add a complementary product to their cart, increasing their total order value. 

    In many cases, cross-sells remind shoppers that they have forgotten something or show them something they didn’t realize they needed.

    Now, if you have products that would pair really well together, make sure to include that information in your product descriptions. 

    Let your customers know that they will reap more benefits by pairing the current product with another product.

    #3: Upsell Your Products

    Similar to the aforementioned tactic, this particular strategy consists of suggesting some of your more expensive products. 

    You are essentially selling them as a higher value, which will also help to increase your AOV if they add it to their cart.

    For instance, if you have an older product in your inventory, make sure the recommendations display newer and similar products. 

    While it is great to get rid of older inventory, the goal is to get a higher total cart price so your average order value increases.

    #4: Offer Bundle Deals and Bulk Discounts

    Who doesn’t like a great bundle? 

    Customers love them, and that’s why you need to make sure you have bundles available on your website.

    To create a bundle, simply group together a few products that are commonly used together, go well with one another, or often sell at the same time.

    This encourages your customers to look at a complete set when they are viewing only one product of that set.

    By purchasing the bundle deal, which should indeed be a deal, you are selling more inventory and increasing your average order value.

    Aside from bundle deals, you can also offer bulk discounts to customers who opt to purchase multiples of the same item. 

    Many consumers like to buy in bulk because it saves them money, and because of this, they may add more products to their cart and increase their AOV.

    #5: Offer Personalized Experiences

    Personalization is key in today’s digital age where technology seems to be at the forefront of everything. 

    Use any customer data that you have, including targeted shopping experiences, that may give your average order value a boost.

    For example, a customer’s order history can provide you with insights that can be used to recommend certain products and create marketing messages that speak to the customer.

    Basically, the more specific and targeted you can be in your digital marketing, the higher the chances are that your customers will spend more per session.

    #6: Create a Customer Loyalty Program

    When you are looking for a way to increase your average order value, as well as your brand loyalty, creating a loyalty program for your customers can be extremely effective. 

    In fact, it has been found that customer loyalty programs can increase AOV by approximately 14% on average.

    Customer loyalty programs will help increase your average order value while also improving customer retention rates. 

    Customers are more likely to spend more and visit your site more often if they are being rewarded for it in some way other than getting great products.

    #7: Provide Limited Time Offers

    Urgency can help spark a need in a customer to add more products to their cart because they are afraid they will miss out on a great deal — and no one wants to miss a good deal!

    One way to increase your AOV this way is to offer discount codes that are only available for a short amount of time, such as 24 to 72 hours. 

    You may want to consider adding a threshold to the discount since your goal is to increase your average order value. You wouldn’t want them getting a discount only on a $5 product, for example.

    In addition, don’t overuse this particular tactic, as it may hurt your revenue in the long run. 

    You want your customers to take advantage of the deal because they’re unsure when another may come along.

    Wrap Up

    Ultimately, increasing your average order value comes down to higher profits and continued brand success. 

    By incorporating some of the tactics mentioned above, such as free shipping, cross-sells, bundles, bulk discounts, and a loyalty program, you will improve the overall customer experience

    When you do this, customers will be more willing to come back to your business and are more likely to spend more.

    It is important to keep in mind that the content you place on your website is what helps sell your products. Check this article out for help with content selling.

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