Increasing your customer’s average order value will increase your ecommerce store’s profitability. At first, this seems very logical and intuitive—just get customers to buy more and you will make more money! However, do you actually know how to do it? More importantly, do you even know how to calculate your average order value? This post will cover both of those topics!
How to calculate average order value (AOV)?
Before learning how to boost your average order value, it is very helpful to understand how to calculate it. Knowing your current average order value is vital to setting goals and evaluating progress.
This is the simplest way to calculate your average order value, but it doesn’t provide the full picture. Remember to subtract expenses and cost of goods sold for a better representation of your current average order value that is translating into pure profits.
You can also adjust the reporting period by looking at revenue and number of orders for a weekly, monthly, quarterly, or any other time period.
Tips to increase average order value
The two best ways to increase profitability as an ecommerce business are by improving purchase frequency and average order value. Now that you’re an expert on calculating average order value, here are 5 proven ways to increase it.
1. Create a threshold for free shipping
One of the easiest ways to increase average order value is by setting a threshold that a customer must spend in order to receive free shipping. According to a study by Baymard Institute, 70.19% of online shopping carts are abandoned. That means that for every 10 shoppers that fill their carts on your website, 7 never hit that buy button.
- Baymard Institute
The study shows that the number one reason for cart abandonment was that the extra costs like shipping, taxes, or fees were too high. Setting a free shipping threshold can help convert some of those shoppers into paying customers.
We’ve all seen the social media memes that express these feelings of not wanting to pay for shipping. Earning free shipping on an order makes customers feel like they are gaining additional value with their orders as opposed to paying for the cost of shipping which is intangible to them.
Free shipping on all orders 😉 #properwild #freeshipping #freeshippingusa🇺🇸 #freeshipping🚚 #free #deals #dealoftheday #dealsandsteals #deal #dealsoftheday #meme #memes #oprah #oprahwinfrey #oprahmeme #funnymeme #funnymemes #lol #funny #memes😂 pic.twitter.com/bKlRpaP9kO— Proper Wild (@ProperWild) May 13, 2021
Since the majority of shoppers will leave your site if they can’t get free shipping, that also means that they will actively pursue it! You can motivate them to spend a little more in order to receive free shipping. The important thing here is to make the threshold obtainable. Arbitrarily setting a threshold that is too high is a common mistake and will drive your customers away.
The ideal threshold for free shipping is 15-20% higher than your AOV, to motivate your customers to spend slightly more without driving them away.
The Sugar Free Bakery provides an excellent example of an effective free shipping threshold. With a free shipping value of ₱2,500, The Sugar Free Bakery is motivating customers who would normally make a smaller purchase to add a little bit more to their cart to qualify for free shipping. With most of its products ranging from ₱500 to ₱1500, the Filipino sweets brand encourages customers to treat themselves to a few extra goodies each time they shop.
2. Start cross-selling
Cross-selling is presenting additional items that a shopper might see as valuable. Usually, this is done by looking at what they have put in their basket and recommending products that complement that item.
There are several Shopify apps that can automate this process for you like Rebuy Engine, Loox, and many others. Adding Shopify ecommerce apps to your stack is a great way to streamline the process and improve your cross-selling efforts, ultimately increasing your AOV.
Miniweight does a great job of cross-selling by immediately offering a list of suggested products after a customer adds an item to their cart. For example, after adding the Fat Burner capsules to their cart, a customer is greeted by a pop-up recommending a variety of other products that are commonly purchased together like the Best-Seller pack, Discovery pack, or Antioxidant Mint Basil tea. Customers also have the opportunity to upgrade their single purchase to a 2x or 4x supply at a discounted price.
After adding a second product to their cart, customers are then surprised with free products! While this obviously doesn’t increase AOV immediately, Miniweight is delighting its customers and increasing the likelihood that they will purchase these products in the future, leading to a higher future AOV.
Cross-sells are a great way to boost average order size because they remind your customers of products they may have forgotten or didn’t realize they needed. You provide them with additional value and they provide you with additional order value. It is a win-win!
3. Offer a product bundle
Product bundling is combining multiple products into a single item on your site. It makes it very convenient for a customer to pick up everything they are looking for with the click of a button. Additionally, it reduces the risk that customers will abandon your site during their search for multiple products.
Starter bundles or grouping best-selling products together have to be the most effective types of bundled products. When someone decides they are going to get into a new hobby or sport or dive into skincare they often don’t know everything they need. You can make it easy for them by including everything they need in one convenient bundle. Providing a starter bundle saves your customer time, research, and money while at the same time increasing your order value.
Plastic Free Amsterdam is a sustainable homeware store that offers a variety of product bundles, including this soap sample bundle. With this strategy, Plastic Free Amsterdam is able to increase its AOV by ensuring that customers are also trying out multiple products at once. It makes its bundles even more appealing by highlighting the savings with a 5% off badge and a new price highlighted in red. This bundle offers both additional savings and encourages new product trials—something its customers are always looking for.
FaceTory’s Just Dew It Gift Set is another good example of a bundle. Sampler packs are especially effective when promoted as gift sets because people like to offer their friends and family a variety of products to try. A sampler pack lets them try multiple products with one purchase. This also makes it more likely that customers will find a product they like, which will lead to more repeat purchases.
FaceTory takes product bundling even further with its on-page offer to “save with sets”. Beneath the product description, customers are shown 2 other products frequently bought with the one they are currently browsing. With a few clicks, they can choose to add one or both of the suggested products to their cart and are notified in real-time of the savings they will get by purchasing all 3 products.
4. Use coupons with a threshold
Coupons are another method to increase your average order size, but they must be approached with caution. Coupons that increase AOV are often used in a similar fashion to free shipping offers—if the customer spends over a certain threshold they will receive a discount. This will motivate customers to spend more than they would’ve without the discount to ensure they can take advantage of the savings.
Coupons can be effective as long as they match what your brand and store are trying to achieve. If you sell luxury goods, a discount won’t align with your brand strategy. The best coupon strategy to maximize AOV will push customers to spend more but also make them feel like they are getting a special deal as well.
Although coupons are a great way to temporarily increase AOV, they’re not the best long-term strategy. They aren’t sustainable because discounting too often will cause shoppers to expect it and never buy at full price. You want your shoppers to love you for what you sell, not because you discount.
5. Start a rewards program
A rewards program can get your customers to purchase more per visit and more often. It does this by using rewards as motivation for customers to return to your store. With more incentive to shop with you instead of competitors, customers will spend more per visit and shop with you again in the future.
Topps Now Rewards does a great job of this through its use of VIP tiers. Higher tiers are very desirable in its program because they provide additional benefits such as free MLB cards of the month and discount coupons. Points can be earned by making purchases, sharing their store on social media, or even just registering an account. Topps’ use of sports icons and terminology ties the loyalty program to the rest of the brand seamlessly while bringing a new level of gamification as well.
Loyalty programs can help boost AOV by encouraging additional spending with points. Points are extremely valuable to customers because they can be used to redeem products with a high perceived value. This provides great returns for you because something as simple as branded merchandise can be cheap to manufacture but carry high value for your customers. Boost your average order value with a rewards program.
Maximizing your average order value
Ultimately average order value boils down to increased profits and continued success for your brand. Incorporating tactics such as free shipping, cross-selling, bundling, coupons, and a loyalty program will deliver results and improve your customer experience. These considerations will keep customers coming back and make them want to spend more, which is great for every business.
Editor’s Note: This post was last updated in February 2018 and was updated for accuracy and comprehensiveness on August 31, 2023.