What is Average Order Value (AOV) and Why is it Important?
One of the most important stats to track for your online store is your average order value (AOV).
AOV represents the average amount of money that a customer spends when they make a purchase. This is easy to calculate: You just need to divide your revenue by the total number of orders placed on your store.
For example, if you had $50,000 in revenue and 250 orders placed in February, your AOV for the month would be $200.
Generally, you’ll want your AOV to be as high as possible. A large order means a large amount of revenue and profit for your business, of course. Also, due to transaction fees, you make more money from a single large order than several smaller orders that add up to the same price.
In addition to transaction fees, you must consider how much investment it takes to make even a single sale. You might be spending a small fortune on paid advertising and SEO marketing to build awareness and drive traffic to your store. And then, you’ll need to have invested in an attractive, easy-to-navigate website in order to convert traffic into sales.
Increasing your AOV will help you get a bigger return on that investment. After all, a customer who shops at your store today just might switch over to one of your competitors tomorrow. Large orders allow you to maximize the value of your customers while they’re still your customers.
How to Increase Your AOV
There are many different techniques that stores use to increase their AOV — the following stand out as the most effective:
Raising the prices of your products will raise your AOV as well. You must be careful not to raise prices too high, though, or else you’ll drive customers away to competitors that offer a better deal.
Rather than starting from your homepage, many of the people who visit your site will land directly on one of your product pages. Unless you do something about it, there’s a good chance that these visitors won’t be exposed to any of the other products that you have to offer.
That’s why you should add a recommended products section to each product page. This will help you drive traffic to the rest of your pages, which in turn will lead to more sales and an increased AOV.
You should also add a recommended products section to your checkout page, as this gives you one last chance to convince customers to add more items to their cart before they place their order.
Another benefit to recommended products sections is that you can use them to feature your lowest-performing products and attract visitors to pages that aren’t getting a lot of traffic organically. Alternatively, you can use them to highlight your best-selling products or any other products that you want to draw attention to.
Upselling and Cross-Selling
Upselling and cross-selling are similar to product recommendations. With all three of these techniques, the theory is that it isn’t enough to attract a visitor to one of your product pages — once they’re on the page, you need to make sure they see other items that you have to offer as well.
Upselling involves showing the visitor a better (and more expensive) version of the product they’re looking at. For example, if the visitor is on the product page for a laptop, you could upsell them on a laptop with a bigger screen or more powerful hardware.
Cross-selling involves showing the visitor products that they might want to buy in addition to the product they’re looking at. Returning to the example of a product page for a laptop, you could cross-sell the visitor on laptop bags, screen protectors and cooling fans.
Amazon is the undisputed champion of cross-selling. The “Frequently bought together” section on Amazon product pages has played a key role in the company’s success — in fact, this recommendations engine generates 35% of Amazon’s revenue.
Amazon also has the most successful example of another effective technique for increasing your AOV: the loyalty program.
The Amazon Prime subscription service offers a variety of benefits to members, including free two-day shipping and access to a large library of original TV shows and movies. The program has become enormously popular — 82% of U.S. households now have an Amazon Prime membership.
While subscriptions cost $12.99 per month, Amazon likely makes much more money from the effect that this program has on customer behavior. Without a Prime membership, someone might buy a few items they want on Amazon, but then look elsewhere for other items they want. But with a Prime membership, they’ve already invested in shopping on Amazon, so they have an incentive to get everything they want in an order on Amazon instead of shopping around. In other words, Amazon Prime increases Amazon’s AOV.
You may not have the resources to start your own movie studio as a way to attract customers, but there are plenty of other perks that you can offer. Discounts, gifts and early access to new products are a few ways that any store can build a successful loyalty program and keep customers away from the competition.
It’s easy to see why free shipping for orders that meet a certain minimum value threshold is one of the most common promotions featured on online stores
Seventy-four percent of online shoppers say that free shipping is the most important option they consider at checkout, and 94% of shoppers have reported that they have previously taken an action in order to qualify for free shipping (for example, adding extra items to their cart to meet an order minimum).
By setting an order minimum for free shipping, businesses can enjoy the sales-increasing benefit of this offer while minimizing how much it costs them — plus, it has the added effect of increasing their AOV.
You can also tie other benefits to an order minimum, such as a discount or returns eligibility, to persuade shoppers to increase the value of their carts before checkout.
Use A/B Testing to Perfect Your AOV Strategy
What works for one business won’t necessarily work for another. The only way to know if one of the techniques listed above will actually increase your AOV is to try it out and see what happens.
But after you make a change to your site, how do you know if an increase or decrease in your AOV was because of the change you made as opposed to some other factor?
This is what makes A/B testing so important. An A/B testing tool allows you to show a portion of your visitors the original version of your site, show the rest of your visitors the version with changes and then compare the performance of the two versions over the same period of time.
That way, you’ll know for sure if the changes you made are having their intended effect.
Adam Ritchie is a freelance writer based in Silver Spring, Maryland. He currently writes for Shogun, and his previous clients include Groupon, Clutch and New Theory.
Build pages that convert.
Create professional-quality pages for your ecommerce store with a powerful drag and drop page builder designed with ecommerce teams and agencies in mind.