Jul 18, 2023

How does improving Average Order Value (AOV) help eCommerce brands?

When you first launch your eCommerce store, the metric you might be paying attention to most is website traffic- how many eyeballs are you getting each month? Are you standing out amongst other online brands in your category? But more traffic does not necessarily equate to more sales. Without a steady injection of cash, your brand will not be able to scale. 

So what metrics should you consider on top of traffic for your eCommerce business health check? Common metrics include conversion rate, average order value, customer lifetime value, repurchase rate- the list goes on. 

This article focuses on Average Order Value (AOV) and how boosting AOV can be beneficial for your eCommerce business.


Definition

AOV: Average order value. AOV refers to the average amount of money your customers spend per purchase from your store.

Why is Average Order Value important?

AOV is an important metric in understanding customer behavior. When looked at in conjunction with your best selling products, it could help you determine which products to promote to increase sales. 

Additional benefits of increasing your AOV include;

  • A quick way to increase cash flow for your business.

  • Driving traffic to your store and acquiring customers adds to your Customer Acquisition Cost (CAC) but driving AOV can be achieved by adding a simple sticky cart app or plugin to your store that let’s you incentivise customers within the checkout experience.

  • Improving your AOV then positively impacts your Customer Lifetime Value. This then leads to more repeat customers and a better LTV: CAC ratio- which results in better profit margins.

Now that we’ve established the benefits of improving AOV, how do we go about improving this metric?

Here are a few common strategies implemented by fast growing online brands;

  • Bundles, “Frequently bought together” packs
    Selling bundles or complementary items is a fast and effective way to boost AOV. Bundles offered in the cart nudge the buyer to increase the value of their order with one click, without leaving the cart.

  • Conditional Free Delivery
    Offering Free Delivery for all orders regardless of order value, location or time period is challenging because you need to be able to maintain your profit margin while absorbing the cost of shipping.

    An easier option that is also more profitable is to offer conditional Free Shipping. The most obvious offer is based on order value. For example, if your average order value is $50 and shipping costs $5- offer Free Shipping for orders above $65. This way you increase your AOV and your profit margin.

  • Post purchase upsells
    You’ve bundled your products together, you’re offering free shipping with a minimum order value, you’ve maximized your cart in every way to boost AOV. What next- do we just wait for customers to repeat orders or to acquire new customers? No! Post purchase upsells are a great way to leverage trust and credibility which peak just after a customer makes payment.

    Post purchase allows you to present an upsell offer to your customer between the checkout payment page and the thank you page on your store. This encourages customers to make an additional purchase while trust is at its peak.

  • Free Gifts or BXGY
    Who doesn’t love a freebie?! If Free Shipping is not moving that AOV needle enough why not offer Free Gift or Buy X Get Y offers in your cart. Add a progress bar to the top of your sticky cart so that shopper’s can see how close they are to receiving a free gift. What’s more with a good stick cart app, you won’t need to decide which AOV booster to promote in app as you should be able to do tiered rewards in the cart.

By implementing a combination of or all of these AOV boosting strategies, you could be looking at an increase of up to 38% in AOV! If your store is built on an eCommerce platform like Shopify, you should be able to easy add a sticky cart solution to your store. If your website is built from scratch you might need some development support to get your cart boosters set up.

Increase your AOV by 38%

Neeta is the Content & Community lead at AMP. She has over 8 years experience in eCommerce marketing having previously worked for TradeGecko.

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