If you ask a dozen different e-commerce companies what their goals are, you’ll get a dozen different responses. But, they’ll all probably have the same ultimate end goal in mind—boosting revenue.
One of the easiest ways to do that is by increasing your average order value (AOV).
“Increasing AOV is something all brands strive to do,” said Nik Sharma, founder of Sharma Brands. “It helps to negate the cost of advertising, goods, overhead, paid media dollars, and helps brands be more profitable per order.”
AOV is one of the most common e-commerce metrics, and for good reason: The more customers spend with you, the greater your profits will be.
Companies deploy a variety of common tactics to help boost AOV, including:
- Customer loyalty programs
- Minimum order value requirements to get free shipping
- Limited-time offers
These are tried-and-true methods for boosting AOV, but they’re not the only ways to increase customer spending.
This post will cover some existing tactics, new ideas for improving AOV that you may not have considered, and examples of tactics in action.
Study Customer Purchasing Habits and Adjust Accordingly
Average order value is sometimes viewed as the benchmark for studying purchasing habits. You can use it to assess marketing campaign performance over time.
But did you know that customer purchasing habits can also be used to improve AOV?
Being in tune with your customers’ preferences makes it easier to adjust things like pricing structures and product volume, allowing you to better accommodate their needs while increasing spending. Let’s look at some examples of how brands have used consumer behavior to boost AOV.
Example 1: Adjust Free Shipping Threshold
After examining customer purchasing habits, activewear jewelry company, QALO, adjusted their free shipping threshold to match their most common purchase price. As a result, shoppers were more inclined to add another item to their online shopping cart in order to qualify for free shipping.
“At QALO, our average order value was around $30, said Taylor Holiday, managing partner at Common Thread Collective and QALO. “But that wasn’t actually indicative of any possible purchase type. We sold rings at $19.99, $25.99, and then our third most common order type was two rings at $40. Our Model order was $19.99. So, when we moved our free shipping threshold from $40 (attempting to get people to buy two rings) to $25, we improved AOV dramatically because we incentivized our most common purchase type to increase the basket.”
Example 2: Align Product Volume with Consumer Demand
Updating your product volume so it matches consumer demand can also increase your AOV. That’s because many customers are willing to buy a larger size than purchase several small products.
According to Michael Waxman, the CEO and co-founder of Sundays dog food, this tactic helped double his company’s average order value.
“Sundays comes in different sizes than traditional kibble or refrigerated dog food, so we were torn about how to size and price our products,” said Waxman. “How much would dog parents want to order at a time? We started with just one size but noticed that many customers were buying 2-4 units per order. So, we created two new sizes (2x and 4x our original size), and it doubled our AOV almost overnight.”
Example 3: Collect Customer Data with Surveys
Personalization is one of the most effective marketing tools in your arsenal. According to a 2018 Accenture survey, 91% of customers prefer to shop with brands that give personalized (and relevant) product recommendations. So it’s no surprise that skincare company, BeautyBio, improved average order value by analyzing customer preferences and offering personalized recommendations.
BeautyBio did this by:
- Surveying customers
- Creating various segments based on customers’ needs
- Offering relevant products to the different segments
Tina Donati is a content marketing specialist at OctaneAI, the company that helped BeautyBio with their personalized marketing campaign. Here’s what she had to say:
“Quizzes that collect customer profiling data have proven extremely effective. One of our merchants (BeautyBio) built a product recommendation quiz and was able to use quiz answers to segment customers into profiles. Doing this allowed them to discover what group of customers spent more money and, in the end, they increased AOV by 28%.”
Integrate a Positive Impact Option into the Checkout Experience
Conscious consumerism is at an all-time high thanks to Millennial and Gen Z shoppers who want brands to do more than provide goods and services—they also want them to take a stand on important social and political issues. Just how big is conscious consumerism? Take a look at the statistics below:
- Customers spend more than $300 billion per year on responsibly-made products and brands that donate a portion of their profits to a good cause
- Nearly 75% of Millennials look at environmental impact when making a purchasing decision
- Conscious consumerism increases by 10% year over year
Some brands have targeted conscious customers and prospective customers, informing buyers that a portion of their profits will be donated to various NGOs. This can boost spending and increase brand loyalty among customers interested in making a positive difference.
Example: Embrace Cause Marketing
“Highline Wellness, a cannabis wellness brand, partnered with ShoppingGives to embrace cause marketing and to make the process of donating easier for their brand,” said Jay An, the senior director of strategy and operations at ShoppingGives.
“They ran tests to see how ads with product-focused messaging performed compared to those with impact-focused messaging. What they found was that the impact-focused ads outperformed other ads, and saw an AOV increase of 6% on orders with donations.”
Christopher Roth, the founder and CEO of Highline Wellness, had this to say about the campaign:
“From a customer perspective, knowing during the shopping experience that your purchase can go towards a charity that means something to you is so powerful, and it helps to gain more comfort and trust in the brand.”
“We’ve seen really great success,” mentioned Roth when asked about the effectiveness of their impact marketing campaign. “[impact messaging] actually outperformed our other creative pieces.”
Bundle, Package, and Upsell
Another effective way to increase your average order value is to apply the curated “kit” or “capsule” approach. Do this by grouping cohesive and/or complementary items together and upselling the bundles to customers. Along with increasing customer spending, bundled products can improve your inventory turnover ratio and lower your shipping costs.
Example 1: Offer Bundle and Gift Options
“One of our most effective ways to increase AOV is to bundle products together (typically 3-5 items) to create a higher price point product,” said Cathryn Lavery, co-founder, and CEO of BestSelf Co.
“Throughout the year, we test different bundles and gift options to see what performs best, and it gives us almost endless possibilities to connect with our audience. This adds value for the customer—while not feeling overly salesy—and provides a win-win experience. Plus, it can be implemented pretty quickly.”
Another example of this type of bundle is the bathroom set by Native. This product is for customers wanting to buy an entire set of bathroom products (like soap, shampoo, and deodorant) rather than standalone items. More products sold in a bundle = higher AOV.
Example 2: Custom Bundles
Mark Chou, former vice president of growth marketing at Away, adopted a different approach on bundles by giving customers the option to create their own sets.
“At Away, we saw very positive effects on first order AOV as we expanded the product line and introduced new on-site features like bundling and add-ons like personalization,” said Chou. “It’s important to note, however, that launching new products and digital product features will only have this sort of positive effect if you are actually developing the sorts of SKUs and online experiences that your customers want.”
Most conversations on increasing AOV stress the same tactics: changing free shipping thresholds and implementing rewards programs. While they can be effective at getting customers to spend more, they’re not the only methods for improving your average order value.
Want more insights on e-commerce excellence? Check out our Online Selling Handbook for tips on how to optimize your online operations.
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