Best effective ways to increase your average order value to make more profit

Best effective ways to increase your average order value to make more profit

What is your ultimate purpose of opening and functioning an ecommerce store? Undoubtedly, making profit. You are trying every cards of your hand to change the scenario. You are working hard to attract traffic, providing best services and products to your customers, planning and setting dozens of strategies to increase conversion and so on. Everything that you are doing- you are doing to make more profit. That’s the ultimate goal of running an ecommerce store.

Most of ecommerce retailers emphasize only either on customer engagement or acquisition when it comes about making profit. But they unconsciously ignore one of the most important factors of improving conversion thus profit, and that is average order value (AOV).

Average order value is the most overlooked and ignored tool in ecommerce but this is the most effective tool to make profit. Today’s marketers pay most emphasis on this less-known marketing arsenal and suggest to focus more on AOV than traffic acquisition.

As it is a less-known fact, there are still arguments on why and how to focus on average order value. Here, we discussed what is an average order value and how important it is in ecommerce with 7 best ways to increase AOV to make great profit from your ecommerce operation.

What is an average order value?

An average order value (AOV) is the average amount of your customer’s spending of each of their order that they make form your store. This is basically the result of your turnovers and total numbers of orders.

AOV= total of all orders/ numbers of orders

Simply divide your store’s total revenue by the number of orders taken. You will find your average order value of a certain period of your business.

For example, if your total earning from 100 orders is about $2000, then your average order value is $20. Thus you can calculate individual customers’ average order value by diving their total purchase amount by their total number of orders. This will help you to find out your most valuable customers who pay thick bundle of dollars per order.

Though AOV doesn’t determine the actual profit margin, rather it is an indicator of profit margin that how much you increase your profit gradually. Keep in mind that, average order value only focuses only on average earnings from per order, it doesn’t include your marketing (ad fee) expenses.

Why it is important?

The more AOV the more money you are making per order. It is an important metric to follow as it depicts how much you need to concentrate in convincing customers to add more items to their cart before checking out.

Ecommerce business operators are putting importance on increasing AOV because it has potential to reduce your shipping costs per order. Not only that, it is an indicator of your product marketing- how well you are handling products’ promotions through upselling, cross-selling and product recommendations.

Following are the reasons why you should try to increase your AOV-

  1. AOV can be the easiest and quicker way to increase neat profit.
  2. It successfully reduces shipping charges.
  3. As AOV is just a metric, you can increase it without paying a single penny by setting up some strategies.
  4. Improved AOV can work as a backup if your traffic sources disappear somehow.

Here are 7 most effective ways to increase your AOV to earn maximum profit-

  1. Free shipping threshold

Many ecommerce brands offer free shipping on any amount spending or numbers of orders. It is actually an important customer targeting and acquisition tactic which also helpful to increase your cash flow through increasing average order value.

But for small to medium business free shipping can be a burden, – actually it is. To solve this problem small or medium brands can set free delivery over a certain threshold.

Ecommerce experts suggest to set shipping threshold slightly higher than average order value. It is because your AOV is not static and it is not defined, so whenever you set a shipping threshold you should consider higher possibilities of recovery your total costs.

Let’s say, your AOV is $100 per order, and you want to add 30% more with it, then your shipping threshold should be $130 with the 30% increase. Now you can display “free shipping or free delivery on all orders up to $130”.

  1. Discounts

Another way to increase your average order value is to provide discounts. Customers actually love getting discounts on their purchase and like to shop more from those brands who give exclusive discounts.

But offering excessive discounts is bad for your business. What you can do to offer discounts without hampering your margin is to be sure to add a minimum spend for getting such discounts.

For example, get $10 off on your $100 spending. Or you can offer discounts in a percentage form like “5% cash off on every $150 spending”, or “get 10% off on next purchase”. you can also offer volume discounts, like get $5 off when you spend $75, get $10 off when you spend $100, and get $15 when you spend $150 or more.

Here are some ways of how and when you can add discounts to increase your average order value-

  • First time discounts

First time discounts are generally for first time shopper who did not shop from you before. This type of discount helps you to attract more customers and to convert them as you are being reasonable to them at the first time of their shopping experience. For example, “$10 cash of on first time shopping” or “get 5% discounts on your first purchase”.

  • Minimum spend discounts

You can offer discounts when shoppers spend a certain amount similar to free shipping threshold. It is called minimum spend discounts where you set a minimum amount of spending on which customers get discounts. For example, if they spend over $50 then they would get an amount or a percentage off from their total cost. Like 5% or $10 off $100 or more spending. This is actually a great trick to convince customers to spend a certain amount of money and to increase your average order value.

  • Package deal discounts

Offer discounts on bulk purchase of the same product. For example, if you are selling books online then can offer a package discounts on a series of books like “get 5% discounts on buying full set of Harry potter” or “$50 cash off on buying three books at a time”. Offering package or bulk discounts is conversion friendly and increases your average order value by 18.94%.

 

  1. Bundle or volume deals

Bundles or volume deals are another great way to increase your average order value. Bundles are generally about selling multiple products in bargain of an increased amount spend in one order.

For example, instead of selling different or similar product separately, sell three or more products at a single price such, as if you sell women clothes, then sell women dress, shoe and accessories for $2900 instead of taking separate price for each of those items. You can also offer “buy 2 and get 1 free” or “save $40 buying 2 together”.

While offering bundle or volume deals, be careful as you don’t want to make loss. Make sure that what you are providing you are making enough profit out of it. If you provide a buy 2 get 3rd free deal, make sure your products are prices in a way that you can afford to cover the costs of 3rd product with making enough profit from the volume deal.

  1. Create urgency through limited deal offer

Urgency and limited stock deal is always a wanted thing that customers appreciate whenever you are providing these types of deals to them. Urgency is a marketing tool to create a fear of losing the item in customers’ mind. So that they act first to purchase the product. Thus you can boost your engagement and increase your average order value.

Offering various limited deals to create urgency is a great way for ecommerce marketers to increase sales and conversion. Generally, this deal goes well with new or best seller products.

For example, if you bring new line of products, say women leather shoe, offer a limited time deal such as “free gift cards with purchase”, “discounts on purchase”, or show limited stock to create urgency. Mention a limited time span to create an urgency such as “$20 cash off on $150 or more spending for two days” or “buy 2 and save $50 within next 2 hours”.

Keep in mind that, pushing customers hard to the fence may not work, you need to be wiser choosing time frame and deal types.

  1. Offer a freebie

Who doesn’t love to have free things? Free is one of the most powerful word that can boost your sales and engagement ultimately. Freebies are great to increase your average order value. Freebies are offering something free of cost with buying something- buy one and get one free!

Freebies are effective. But you need to confirm that giving free things at a price that may cover the cost of the free product. For example, many ecommerce cosmetic brands offer a free leap color with buying a $100 priced eyeliner or Mascara. You may wonder how much those brands would make profit if they offer free $100 lip color with a $100 spending. That’s why you need to be more accurate when pricing your products and offering freebies.

Here are some freebie ideas-

  • Buy one and get one free
  • Buy one and get one half price
  • A conditional price threshold or free product on buying the main product
  • Buy one and get free trial
  1. Display relevant products or accessories

Displaying related, relevant or accessory products when customers purchase something from you is another effective way to increase your average order value. It is actually a kind of product recommendation where you show similar or relevant products to customers after buying the main products.

In that case, instead of simply suggesting other popular items, try to recommend hand-picking products that pair well with the purchased item. For example, if customers purchase a mobile phone from your store then show phone case, stickers, accessories like screen protectors or wipes to convince them to make further purchase.

Conclusion

So now you know how much important AOV is and how you can improve your average order value. But you don’t need to implement all of these tactics, rather follow one or two of them and optimize time to time. But success may depend on your ecommerce solutions that you are using like ad-ons, plugins or apps. If you have apps or plugins to handle your carts, boost sales or engagement then you may not need to follow these trick. But otherwise follow these tricks and get the expected results.

Happy selling!!!

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