Increase Average Order Value — Ecommerce Tips

Key Takeaways

a few things we'll cover today is what is average order value why is it important how to calculate your average order value that's a pretty simple equation and then ways to increase your average order value most importantly so next up here so what is average order value so average order value is pretty self-explanatory it's the average amount of money your customers spend with you when they order from your store it's a very important business metric that essentially can tell you whether or not your marketing efforts are yielding proper results um gives you a better idea of whether or not your customers retention strategies are also working if they trust you they'll spend more we'll get into that too in terms of of how to increase that and then how well your marketing strategy is working so the higher your average order value is the more Revenue you can earn from that same number of customers and this ultimately means that you can increase Revenue without increasing your marketing and sales costs right you don't have to spend more um to get more you can actually get more by spending the same amount so it's a very important lever that I like to pull as a marketer to grow a business and to grow my my clients e-commerce stores so some of the main benefits of increasing average order value I kind of touched on this earlier is you know increasing your sales revenue overall bringing in more Revenue over a shorter period of time recovering the cost to acquire a customer more quickly so that goes into if you have a smaller priced product it allows you to essentially recoup that cost instead of waiting for that customer to come back and buy again and again and again to make that customer acquisition worth it and then overall increases the lifetime value of your customers if they buy more product from you or buy more from you at a time the chances of them coming back to shop again is much higher because they're being exposed more and more to your products perfect um how to calculate your average order value so average order value is your total sales revenue divided by your number of orders so two very big metrics that are are pretty easily accessible on any shot or any e-commerce platform whether that's Shopify big Commerce or the shop app those are the two main numbers that you need in order to calculate average order value is that total revenue and then the number of orders as well just another example for Math's sake I'll make it easy if you have a online clothing store and say they sold twenty five thousand dollars in total revenue they had 500 orders average order value would be 50 bucks um all right so next up popular ways to increase your clients average order value so all have slides I have individual slides for each one of these so we'll dive a little bit more in depth but the biggest ones creating order minimums for free shipping implementing and upselling implementing upselling and cross-selling providing bundle deals and bulk discount options starting customer loyalty programs limited time promotions social proof and reviews being flexible with your payments and then a flexible return policy these are all things that I really make sure my clients are implementing across the board anytime I get an e-commerce business and this really helps in turn you know increase that average order value whether that's pretty immediately or over the course of our partnership so first up is creating order minimums for free shipping I'm just going to preface I did not create this but I wish I did um getting customers to add more products to their cart by offering free shipping is probably one of the easiest ways to increase your average order value um by doing this the goal isn't to essentially weed out weak customers right you're not wanting to say hey if you can't spend a certain amount I don't want you to purchase from my store but what it does do is entice customers to spend a small percentage more to get something that they feel is of more value to them than that increase in spend typically 25 to 35 percent increase of your current average order value for your free shipping threshold is a safe place so you know for example if your average order value is a hundred bucks and you want to increase it to 125 you can make your at your free shipping threshold 125 dollars instead of that free shipping of 100 bucks so next one is upselling and cross-selling so I'm sure you've all seen this when you are consuming or shopping yourself online there's lots of different plugins that can do this on different e-commerce websites but the biggest thing is you know completing the look or you may also like um or you know think this will go with this so this is just an example of a complete the look you know this is someone who would be shopping for a sweater down below it also has the pants the bag and the shoes that are featured so this is a great way of you know growing the basket right and getting people to add more product to their cart and hopefully buying more and making a bigger sale foreign next up is providing bundle deals and bulk option discounts so grouping products that go really well together or commonly sell together and this is information that you can get from your clients as well up front and bundling these together can help increase your average order value so customers that maybe were looking to buy part of a set they see that that set is include or that item is included in a larger set for a discounted price they're enticed to spend more and get more as well but also that original item that they were looking for you can also do this with like the same quantity of items so if you don't want to necessarily bundle products together maybe you only have one product on your site you can still offer this type of discount by offering you know purchase five and get a discount right or purchase three this helps increase that average order value especially with small products like I had mentioned socks soaps um you know instead of buying just one and having a ten dollar order you can buy three and now your average order value increases to about 30 bucks foreign Ty programs is next this is something you may not like conventionally think would help increase your average order value but in the grand scheme of things it truly does by about 14 on average if you have a strong loyalty program you're you'll see an increase in your average order value so this is you know loyalty programs are meant to increase customer retention I think we we all can agree on that but by creating a loyal customer base you can also increase that average order value because it gets people to add more to their orders to help increase to essentially enable higher rewards for example if you know Nordstrom does a really great job of this and that's what I included in my screenshot here is if you spend up to a certain threshold you meet this level if you spend up to a certain threshold again you meet this level so it entices you to spend more or over a period of time so you can essentially meet that criteria for that next rewards tier um it also allows you to you know push specific product or inventory instead of offering them at a big discount so you could say hey if you buy from this collection um you would get this many rewards right or if you shop if you spend this amount of money you get this additional reward so it just allows them you to give them free dollars to come back and spend even more but also incentivizing for them to spend more initially limited time promotions this kind of goes into the free shipping threshold but there are some different promotions that I've historically offered with my clients that have worked really well for us the biggest thing is this creates a sense of urgency to spend more right everybody loves a good deal no one wants to miss out on something so urgency kind of Sparks that need for somebody to add products to one's cart and hopefully get the most bang for their Buck during that time frame so certain things like percent off um an amount or order minimum buy one get ones spend X get Y which would be you know spend a hundred dollars get a 25 gift card right um that also is a really great and powerful promotion because it is essentially you're giving money away but it's going back into your pocket because they'll spend product they'll spend again or shop again on your site and then bundle the discounts again like we discussed so returns and exchanges is the last one um this again you might not necessarily think would have a big impact an average order value but it also does go into people trusting you to spend more um about seventy percent of Shoppers will say that their return the return experience of a website will impact if they even purchase with you and essentially how much um because they if they can see hey okay if I place an order for 100 bucks pre-returns easy shipping or easy exchanges again the the chances of them spending that amount of money it's they don't have to commit to okay if I don't like this product I'm out a certain amount of money right so that I'll test the waters and maybe order just one item instead of five this allows them to essentially spend more with you initially because they are able to recoup that cost few things with return policies just really make sure it's transparent and flexible on your site and that it or transparent and flexible in terms of you know whether you allow free returns whether it's we provide a shipping label there's multiple drop-off points I don't know if you've heard of happy returns something that is fairly new a lot of retailers utilize it now you could drop off your product at Super unrelated stores like for example I ordered something on like oh clothing website and I was able to drop it off at World Market which is not related at all but that was a happy returns drop-off Point very convenient for the Shopper so if you offer those types of things really making sure that that's across the site and displayed pretty clearly especially if you offer um you know free shipping and free returns that make sure is included in your adverb Edge on your site and anywhere you know it's the bottom of your email the confirmation emails even for orders is really important to have for the return policy as well foreign