How to Increase Your Average Order Value
Marketers often focus attention on attracting new customers. But another way to boost your revenue is to encourage existing customers to spend more.
In this blog post, we explore nine ways to increase your average order value. Read on for practical tactics you can implement as part of your eCommerce strategy.
How to calculate average order value
Average order value is an important eCommerce metric. It refers to the average amount that is spent in each transaction on your eCommerce website.
To work out your average order value, simply divide your revenue by the number of orders you’ve received.
For example, if your site made £70,000 last month from 1400 orders, your average order value would be £70,000/1400 = £50.
Why average order value matters
Keeping track of average order value helps your business in a number of ways, including:
- understanding your customers’ spending habits
- informing your pricing strategy
- measuring the success of your marketing efforts
To use average order value to measure marketing success, take a benchmark and see how this figure improves as a result of your efforts.
It may cost you money to earn new customers but increasing average order value is normally inexpensive. It can often be achieved by tweaking tactics and won’t require a whole new campaign.
What’s more, increasing average order value directly impacts your bottom line.
Nine ways to increase your average order value
So, how can you increase average order value for your brand? Here’s nine simple tactics that are easy to implement.
Using product recommendations is a great cross-selling tactic.
By encouraging people to buy additional products to complement their purchase, you may increase the amount they spent in one transaction.
Over time product recommendations can help you increase your average order value significantly.
Here’s an example of product recommendations being used to cross-sell beauty products on Amazon:
2) Product bundles
Offering a bundle of related products is a smart way to boost average order value. This enables your customers to buy complementary products in fewer clicks.
Upselling is similar to cross-selling, but rather than recommending complementary products you show customer higher value versions of what they’re browsing.
This tactic can work well to increase your average order value if your customers are quality-focused. It works less well if your audience is super price sensitive.
Here’s an example of upselling from Amazon. Customers are shown more expensive items that people viewing the same product as them also viewed:
4) Loyalty scheme
If you have a loyalty scheme, then offer customers bonus points for orders over a certain value.
This bumps up your average order value. At the same time, you may increase customer retention through building loyalty.
5) Volume discounts
Offering a discount when customers buy a large volume helps to increase average order value.
Here’s an example of this simple but effective eCommerce tactic in action:
6) Coupon threshold
Allowing customers to use a discount coupon above a certain spend threshold increases average order value.
That said, only offer this if it makes financial sense. Make sure the coupons available to use don’t mean the overall spend ends up being lower.
7) Free shipping
Another way to bump up average order value is to offer customers free shipping.
Only offer this orders over a certain value. People are often happy to spend more than planned if it means shipping is free.
8) Free returns
Sometimes worrying about the cost of returning items can put customers off pricey purchases.
Including messaging around your free returns policy helps reduce friction. Making this specific to items over a certain value increases average order value.
9) Free gift
A simple way to increase average order value is to offer a free gift for orders above a certain amount.
If you have excess stock that you could give as a gift, this is option is a no-brainer.
Using A/B testing
Work out the best messaging to implement our nine tactics with A/B testing.
For example, test whether “complete the look” or “often purchased together” works best to entice customers to buy recommended products.
The same message can resonate differently with each eCommerce website’s audience. A/B testing is your way to determine the most profitable messaging.
Other important eCommerce metrics
While average order value is important, don’t forget to keep an eye on other crucial eCommerce metrics.
For example, you’ll want to check that your conversion rates are staying healthy. Sometimes focusing on one aspect of your strategy can have unexpected effects on other areas.
Smart eCommerce marketers keep one eye on the big picture while implementing new tactics.
We’ve explored nine effective ways to increase your average order value. Use A/B testing to find the most profitable way to frame your messages when you implement them.
If you’re looking for technology to implement product recommendations and other personalisation features, we can help. Click the button below if you want to see our personalisation technology in action.