High website traffic and good conversion rates are not the only factors that you have to consider when determining whether your online business is performing well. You have to think about other things like Average Order Value (AOV).
Average Order Value (AOV) is a useful metric for business owners to track the growth of their business.
It is basically one of the first things that owners focus on because it can lead to an increased revenue or optimize return on ad spend. In order to understand it further, we have prepared some explanations for you.
What is Average Order Value or AOV?
Simply put, it is the total revenue of your store divided by the number of orders. For example, let us say you have a total revenue of $5,000 and you split it between 50 orders, you will get an average order value of $100. Which means a customer spends on average, $100 for each purchase from your store.
What businesses usually do is to think about how they can make customers spend more than this threshold. Therefore, they use free shipping promos and other deals. Though this may help your store’s revenue flow, this does not assure the best profit margin.
Here’s how to increase Average Order Value?
Place products on bundles or packages – One effective way to entice customers to buy more items is to place them on bundles, which will cost less, compared to when the items are sold individually. Using these product packages, increases the perceived value of a customer’s purchase while creating an all-in-one product combination that has everything they need. This way it will be easier for customers to get everything they need in one purchase, while also eliminating the need to conduct further research. This is on top of the fact that you have sold more than one product.
Set a minimum order for ‘free shipping’ and other gifts – When encouraging customers to spend more, nothing compares to the efficiency of free shipping. When setting your threshold, we suggest that 30% higher than your AOV since setting it too high may force customers to abandon their carts. In order to increase your overall revenues, the goal should be to make free shipping feel attainable to majority of customers. An alternative for free shipping is creating discount deals for orders over a certain threshold. For example, you might offer a $10 coupon or 10% discount for orders above $50.
Develop a loyalty program for your customers – For consumable products or goods that are constantly needed by your customers, having a rewards or loyalty program is a good idea. It is an effective retention strategy to strengthen your relationships with your customers, encouraging them to patronize you. Expect your average order value to increase significantly with a loyalty program because your customers earn points that they can use to get incentives.
Upsell or cross-sell complementary goods – Bundling, upselling and cross selling are all similar strategies that pushes customers to purchase upgraded versions or complementary of the products that they initially intend to buy. Just keep in mind to keep your upsell approach helpful and genuine. Instead of simply suggesting random popular items from your store, it is better to handpick products that goes well with the item in the customer’s cart, such as accessories or add-ons. It is also advisable to stay on the ‘low-value’ goods when trying to upsell to increase the chance of getting an additional purchase.
Provide fully staffed live chat support to quickly answer questions – The traditional niche for chat support agents is to deal with client concerns. But now, it has expanded to upselling and answering questions of interested buyers. Having available live chat agents will make it easier and more convenient for customers to get answers for their queries. It also increases the chance for potential sales.