You launch your ecommerce business and you've been able to consistently market and sell your products. But eventually, you notice something. Nearly all of your orders average out to the same, low amount.
Your store looks like it's on the verge of plateauing, and your revenue begins to look static every month. What gives? You know one remedy is to get more traffic and thus, more orders on your website. But for some store owners, that can mean more work and more money, and leaves them constantly running on the acquisition treadmill.
Alternatively, you can encourage your customers to buy more products or buy more expensive products (or both!). That comes down to knowing how to measure and improve your average order value.
What is average order value?
Average order value (AOV) is the average amount of money each customer spends per transaction with your store. You can calculate your average order value using this simple formula: Total revenue / number of orders = average order value.
Let’s look at a hypothetical example: If your store had a total revenue of $1,700 split between 100 orders, your average order value would be $17. This means that, on average, a customer will spend $17 for each purchase from your store.
You may have also heard of a couple of other key metrics:
- Average basket value: Average basket value is a similar metric to AOV. Rather than measuring how much customers spend per transaction, this number tells you how many items are typically sold per transaction.
- Customer lifetime value: This tells you how much each customer is worth over the course of their entire relationship with your business. If this number is low or decreases, you’ll want to focus on customer retention.
To increase your average order value, you’ll need to convince customers to add more items, or more expensive items, to their cart. Throughout the rest of this post, I’ll share five practical strategies that can help increase the average order value of your store and get your customers to checkout with larger carts. Shopify App developers: Learn how the introduction of order editing impacts you on the Web Design and Development Blog.
How to increase average order value
- Provide product recommendations
- Upsell or cross-sell complementary products
- Set order minimums for a discount
- Set up a customer loyalty program
- Bundle products or create packages
1. Provide product recommendations
Occasionally, customers are so focused on buying one of your products that they neglect to browse around to find more. This leads to smaller carts, and as a result, smaller average order values.
To address this problem, try adding product recommendations to your product pages or checkout page. By profiling popular products, or products that other customers purchased in addition to what’s currently in the user’s cart, you can not only minimize friction before checkout, but also increase average order value.
To illustrate this point, here’s Zaful sharing which products other users viewed. This is a great technique, especially because it also incorporates social proof.
You don’t need to limit yourself to sharing what other users viewed. You can provide recommendations based on your own business priorities. You might be looking to sell some slow-moving stock, for example. Product recommendations offer a great way to get traction on those particular products.
Along the lines of Zaful’s approach, consider using phrasing on your website such as “Complete the look” (for fashion and apparel websites) or “Customers also bought” when suggesting more products for your customers.
Shopify apps for product recommendations:
Check out the Shopify App Store to find the right product recommendation app for your store. Here are a few options to check out:
- ZEN.AI Product Recommendations
- Cross Sell
- Visely Product Recommendations
- Recomatic Related Products
2. Upsell or cross-sell complementary products
Much like the previous strategy, this tip involves adding product suggestions to your product page. In this case, instead of simply suggesting other popular items from your store, hand-pick products that pair well with the item in the user’s cart, such as accessories or add-ons. For example, a mouse for a laptop, or batteries for a remote control.
This is essentially cross-selling and upselling. Cross-selling is when you promote a complementary product, whereas upselling is when you promote a product upgrade or a more expensive version of the product.
Here’s how Colorado Crafted uses a cross-sell tactic on their checkout page. With a single click, shoppers can add a Colorado Water Bottle—and increase their order value by $13.
3. Set order minimums for a discount
You can also increase your average order value by incentivizing customers to spend a minimum amount. This could be a minimum order amount for free shipping, which is easy to set up in Shopify. United By Blue, for example, offers free shipping for all orders over $100.
Other examples of minimum order incentives include offering a coupon or free gift. For example, giving a 15% discount on orders over $75 or a free t-shirt on all orders over $100. Consider using a promotion bar on your website to make it obvious that you’re offering a minimum order incentive.
Shopify apps for order minimum incentives:
If you want to start setting up order minimum incentives, you can do so within Shopify or use an app from the Shopify App Store. Here are a few to get started with:
4. Set up a customer loyalty program
If your store sells consumable products—something customers need to repurchase, like razors or shaving cream—consider setting up a rewards or loyalty program.
Creating a customer loyalty program is a retention strategy that helps you forge relationships with your customers, which will eventually encourage customers to purchase again.
Loyalty programs can also help increase the average order value of your store. Nordstrom recently updated their customer loyalty program, The Nordy Club, to reward big spenders.
When there’s an incentive for your customers to earn points under your loyalty program, you can expect to see your average order value increase significantly. Smile.io found that “the majority of brands see at least a 13.71% increase in order values from rewards program members over non program members.”
It might seem counter-intuitive to offer a program that provides discounts which can cut into your revenue, but a Stitch Labs study found that loyal customers spend 120% more than new customers annually. And “great discounts” are the No. 2 reasons consumers join customer loyalty programs, according to the 2017 COLLOQUY Loyalty Census.
5. Bundle products or create packages
If you want customers to purchase more items, try creating product bundles that cost less than if the same items were purchased individually.
By bundling products, you're increasing the perceived value of a customer’s purchase. One great approach to product bundling is by offering a package of products that create the all-in-one solution for the desired experience.
For example, BioLite bundles together a stove and accessories—the basic essentials to cook a meal while camping. This makes it easier for customers to get everything they need in one shot, while also eliminating the need to conduct further research. And you’ve sold multiple products instead of one.
You can also empower your customers to create their own bundles by allowing for custom products or packages that let customers choose which features or add-ons they want in their order.
For example, RageOn! allows customers to design their own shoes and choose additional features, customizations and add-ons that increase the order total.
This also works for custom bundles, allowing customers to choose which products or accessories they want in their package before checkout. For example, allowing customers to build their own first aid kit, makeup kit or gift box. Instead of selling the components of these kits individually, encourage your customers to create their own bundle and thus increase your average order value.
Shopify apps to create product bundles:
If you’re interested in adding product bundles or custom bundles to your store, check out the Shopify App Store. We’ve listed a few below to review:
Sell more to people who want to buy
The most cost-effective and efficient way to increase average order value is by concentrating on your existing, most loyal customers. They already know and trust your brand, all you have to do is get them to spend a little extra.
When you focus on engaging and activating those who are already spending with you, you have fewer barriers to overcome. Instead of spinning your wheels on acquisition, focus on creating a greater exchange of value—the customers who spend more, get more.