Stuart Armstrong

Content Strategist
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Boosting Average Order Value (AOV) in eCommerce

Stuart Armstrong

Content Strategist
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Boost your profits with every sale by increasing your average order value (AOV). This metric reveals how much customers spend per purchase, and raising AOV translates directly to a more profitable store.

AOV is one of the first numbers online business owners try to improve to increase profitability and optimize return on ad spend.

It sounds easy enough: If you can get people to spend more money per order, you'll make more profit. But the problem is online shoppers often stick to their "shopping lists,"  only buying what they need.

In this article, we'll learn what AOV is and discover strategies for increasing it that lead to more profit.

How to calculate AOV

An average order value (AOV) is the average amount customers spend per transaction. To calculate it, divide total revenue by total orders. Bear in mind that this figure doesn't take into account marketing costs.

For example, an online boutique records a total revenue of $3,500, which is distributed across 175 orders. In this case, the average order value would be $20. This means that, on average, each customer spends $20 per transaction when making a purchase.

3500/175=20

Benefits of Increasing Average Order Value

  1. Boost Revenue and Profit: When the average order value rises, your overall revenue and profit increase. A positive change in average order value enables you to reinvest in growth and boost your own pocket.
  2. Cost-Effective Marketing Returns: Imagine spending $20 on marketing, but the average order value is only $50. After deducting product costs and taxes, your earnings are limited. However, your marketing spending becomes more profitable as the average order value improves. Having a well-defined average order value strategy is crucial.
  3. Enhance Inventory Sales: While this doesn't directly apply to drop shippers, optimizing your average order value plan can sell more of your products if you manage stock for a brick-and-mortar or online store. By making strategic adjustments, you'll maximize inventory turnover and boost sales.

How to increase AOV

Product Quizzes

Many eCommerce brands using Askflow AI have increased their average order value (AOV) significantly, ranging from 10% to even 50% increases.

If one of the goals for your product finder quiz is to increase AOV, aim to:

  • Recommend complementary products: Offer additional items that enhance the core product's value.
  • Highlight bundles and sets: Group products together at a discounted price.
  • Upsell and cross-sell: Suggest higher-end versions or related products.
  • Offer incentives for adding more items: Discounts, free shipping, or bonus items.

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Offer a Free Shipping Threshold

Source of inspiration: lush.com

One of the easiest ways to increase AOV is to offer a free shipping threshold. According to Alex Rodukov's research, a 30% increase in the average order value works effectively as a free shipping threshold.

Here's how you can set it up:

  1. Calculate your current average order value (AOV).
  2. Add 30% to the AOV. For instance, if your AOV is $20, the adjusted value would be $26.
  3. Set this new value as the free shipping threshold. Customers who spend $26 or more will qualify for free shipping.

It's also a good idea to add a notification to your checkout, and when a purchase doesn't reach the free shipping threshold, your customers are encouraged to add to their shopping cart with upsells. Having this notification will increase the AOV and reduce cart abandonment. You can easily do this using apps from the Shopify App Store.  

Create Packages and Bundle Deals

Source: crepprotect.com

To encourage customers to buy more items, consider adjusting your pricing strategy by creating product bundles that cost less than if the items were purchased individually.

By bundling products, you enhance the perceived value of a customer's purchase. A great approach to product bundling is offering complementary items that provide an all-in-one solution for the desired experience.

For instance, take Crep Protect—they offer a variety of bundle packs at different price points. This simplifies the shopping process for customers, allowing them to get everything they need in one go without additional research. Plus, you've successfully sold multiple products instead of just one.

Cross-Sell Related Products During Checkout

Recommend complementary products or accessories during checkout to encourage customers to add more items to their cart.

  • Product Pages:some text
    • On individual product pages, display related items under the heading "Complete the Look" or "You May Also Like."
    • Show visually appealing images of the suggested products.
  • Post-Purchase Recommendations:some text
    • After a customer completes a purchase, recommend complementary products.
    • Use personalized suggestions based on their previous choices.
  • Checkout Page:some text
    • Display related items during the checkout process.
    • Offer a last-minute opportunity for cross-selling.

Thoughtful cross-selling enhances the shopping experience and encourages customers to explore more of your store's offerings!

Give Product Discounts

It might seem surprising, but strategic discounts can actually bump up your average order value. Instead of "X% off everything" approach! Try tiered discounts that entice customers to buy more.

For example, our online boutique may try tempting customers with offers like: Spend $30, unlock 10% off your necklace!

Or they could try:

  • Themed discounts: Offer "15% off a beach dress, get 20% off when you add matching sandals!" This encourages outfit building and boosts average order value.
  • Highlight new arrivals: Feature "20% off our new scarf collection, spend $75 and get a free tote bag!" This drives attention to new products while incentivizing larger purchases.
  • Partner products: Offer "Spend $40 on a top, get 10% off any bottoms!" This encourages mix-and-match purchases, showcasing product variety.

Have a Loyalty Program

Source: danjohn.com

These programs are retention strategies designed to foster strong customer relationships and increase lifetime value. As loyal customers, they can earn points or discounts every time they place an order.

The advantage of implementing a loyalty program lies in its ability to cultivate brand evangelists—customers who consistently return to your website for shopping. Repeat customers tend to make more frequent purchases than those unfamiliar with your brand. These brand evangelists are crucial in increasing the average order value.

Fostering loyalty pays off not only in revenue but also in creating a devoted customer community!

Dan John Men's Wear employs a highly effective loyalty program where shoppers accumulate points and receive discounts depending on how much they spend throughout the year.

  • Silver 5%
  • Gold 10%
  • Platinum 15%.

The tiered structure encourages shoppers to reach higher spending thresholds, and by rewarding consistent spending, the program fosters lasting customer relationships.

Give a Gift Card

Gift cards can be a powerful tool to increase your AOV, even when you offer them for free! If a customer spends $35 on your product. Offer them a free $5 gift card for their next purchase. This incentivizes them to return and spend more, boosting your AOV.

Set Limits; you don't want to give away free products! Ensure your product prices are high enough that the gift card doesn't cover the entire purchase. Also, clarify that the gift card is for future purchases and excludes shipping (if applicable).

Gift cards encourage future purchases, potentially reducing your need for expensive ad campaigns to bring back customers. This is especially helpful during seasonal slumps, when sales dip.

Don't overdo it; while tempting, offering free gift cards year-round can devalue the offer and make it less effective. Use it strategically, like during promotions or slow periods.

Even without free cards, gift cards work! Most people spend more than the card's value or add items to reach a higher threshold.

Final thoughts

Understanding Your Store’s Performance Through Average Order Value

Calculating your AOV provides valuable insights into your store’s performance. By determining this metric, you can then explore strategies to enhance it. However, it’s essential to avoid implementing all tactics simultaneously, as this can complicate the analysis of what’s effectively raising your AOV.

Why Focus on Average Order Value?

The beauty of concentrating on AOV lies in targeting visitors who are already inclined to make a purchase. These potential customers arrive at your site with intent—some may even have items in their shopping carts. Your task is simple: guide them towards discovering and purchasing additional relevant products.

When you prioritize engaging and activating existing shoppers, you encounter fewer obstacles. Rather than endlessly chasing new customer acquisitions, focus on creating a mutually beneficial value exchange. Remember, it's about creating a greater value exchange—the customers who spend more ultimately get more.

Another vital metric for any eCommerce business is CRO. Check out our article, Why Your Shopify Store Has Lots of Traffic but No Conversions?

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