5 Ways to Leverage AOV to Increase Your Retail Store Bottom Line
When it comes to hitting revenue goals, marketers will often try to convince customers to spend more, to increase their Average Order Value. In fact, statistics consistently prove that selling to a nurtured customer is much cheaper than pitching to and acquiring a new one.
What is Average Order Value?
Average order value is the average amount of money a customer spends per order. To calculate AOV, divide your total revenue by the total number of orders received.
AOV = Total revenue / Total number of confirmed orders
Why Care About Increasing Your Average Order Value?
A higher AOV means that you’re earning more per paying customer, over the same time period. You’re not only recovering the money spent on customer acquisition but also becoming a more profitable business.
AOV can also help you gather insights, such as how your customers interact with your website, products that interest them, what they end up buying, and how much they actually spend per order. With this kind of information, you can improve your customer acquisition strategy as well as identify opportunities to continue increasing your customers’ average spend per order.
Listed below are a few AOV optimization ideas to get you started. Regardless of which you implement, never stop thinking from a customers’ standpoint. Put another way, get them to spend an amount they are comfortable parting with. Anything more than that can force them to abandon their carts, the exact opposite of what you are trying to achieve with AOV optimization.
What exactly is cross-selling? It involves recommending products that complement the items your customer is considering buying. Amazon does it all the time, so if you need inspiration take a peek at their product listings.
2 Bundle Products
Bundles are a combination of products that make for a great deal by creating a value-for-money perception in customers’ minds. But for it to work, you should be careful about which products you package together.
E-commerce brands usually either sell more of the same product at a discounted price, or create a pack of complementary products. Small brick and mortar merchants often find that they benefit from doing a similar thing, but may also be able to create more personalized ‘bundles’ for customers they can ‘physically see.’
3 Run Limited Time Offers
When you offer time-sensitive discounts, you create a sense of urgency among your customers. As a result, they immediately start evaluating whether buying right now is a good decision.
In most cases though, especially where brands are careful not to run sales all year long, customers buy right away, because FOMO – fear of missing out – is a very powerful thing and customers fear the regret of not having acted soon enough will be too much to bear later on.
4 Give Freebies on a Minimum Order Value
At the very outset, the idea of giving gifts might seem absurd but it works because of the element of surprise attached to it. And because of that, when you ask customers to spend more to get that gift, they often happily comply.
5 Create a Free Shipping Threshold
Using free shipping thresholds, where you deliver for free above a certain amount, creates a perception in the minds of shoppers that shipping is indeed free. And so they load their cart with more stuff.
To determine your ‘magic number’, find out your current average order value. Let’s assume it’s $50. Now run tests to see if a $65 free shipping threshold increases your average order value or not. If yes, then keep testing to know how high you can raise this threshold without it affecting your conversion rate and profits.
Then, you can insert the free shipping message on the promotion banners or checkout page. This way, and as can be seen in the example below, customers will be repeatedly reminded of the free delivery perk waiting for them.