If you want to grow your ecommerce store, then increasing your average order value can make a huge difference in your profitability and your ability to market your business.
For example when you have a higher average order value…
- You can afford to spend more on ads
- You will make a higher profit per sale
- You will generate more revenue for the same amount of work
Especially when it comes to advertising, a higher AOV(average order value) can drastically improve your return on ad spend metrics.
In a recent study conducted by Shoelace, the following table shows how different AOV numbers can affect your Facebook retargeting ROAS.
Most importantly, having a higher average order value will drastically improve your overall sales without any additional work!
This article is part 2 of a 3 part series on how to double your ecommerce sales on both Amazon and your online store.
If you missed part 1 and part 3, here are links below.
This post will focus on how to increase your average order value.
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How To Determine Your Average Order Value(AOV)
Before you can increase your average order value, you have to know what your AOV is in the first place.
At the base level, you can calculate your average order value by simply dividing your revenue by your total number of orders.
But even though this calculation is quite simple, many people make the following mistakes.
When it comes to calculating your average order value, make sure you…
- Don’t include shipping charges
- Don’t include sales tax
- Remove any abnormally large orders that can skew your results
Once you have your average order value calculated, follow these strategies below.
Strategy #1: Increase Your Free Shipping Threshold
The simplest way to increase your average order value is to raise your free shipping threshold by either 15-20% or by the cost of an additional item in your shop.
For example if your average order size is $50, then set your free shipping threshold at $60. In theory, this should entice customers to insert more items in their cart to qualify for free shipping.
But as with any “theory”, the reality is often different and the effectiveness of this strategy depends on a lot of factors.
Over the years, we’ve tried many different experiments with our free shipping threshold to increase average order size and here’s what we’ve discovered.
First off, our ecommerce store sells a variety of items and caters to different types of customers.
- We have our wedding and memorial customers who primarily buy handkerchiefs
- We have moms and grandparents who primarily buy our personalized aprons
- We have our older customers (>45) who buy our lace pillowcases and doilies.
- We have our event planners who buy our linen napkins
All of these customers behave very differently.
For example, our wedding customers don’t care about free shipping. In fact, a decent percentage of our wedding folks pay extra money for express because they wait until the last minute.
The same goes with our memorial customers. After all, when you’re planning a funeral, you’re not going to care about cost.
By the same token, our event planner customers buy so much product in bulk that free shipping is pretty much always a given.
But outside of our wedding folks, our other customers tend to be affected by free shipping to varying degrees.
For example last year when we ran an influencer marketing campaign to a budget minded audience, our shopping cart abandonment rate was abnormally high.
As a result, I cold called all of our abandoned customers and found out that our shipping cost was the culprit. So just as an experiment, I lowered our free shipping threshold from $75 to $40 to see if it would have an effect.
Sure enough, our cart abandonment rate decreased for these apron customers and we closed more sales. But at the end of the month when my wife ran the numbers, we lost more money than we gained in orders.
Anyway, my main point is that increasing or lowering your free shipping threshold may or may not have an effect depending on your customer.
And you have to take a variety of factors into account.
If your customers are price sensitive, then upping your threshold may increase your average order value but may reduce conversions.
Start by setting your free shipping threshold 15-20% above your current average order value and adjust accordingly based on your profit numbers.
Strategy #2: Offer An Upsell Before Checkout
A customer is much more likely to buy additional goods after taking action on your site.
For example, a great time to send a customer an offer is after they join your newsletter.
A great time to entice a customer to increase their order is just after they add an item to their shopping cart.
Here’s an upsell we offer on our site after a customer opts in to our free hankie offer.
Similarly, you can offer additional upsells of related items immediately after an add to cart.
The above example works really well because the customer has already demonstrated an intent to buy which makes them susceptible to an upsell discount on the same or similar item. It’s a no brainer!
Strategy #3: Add Upsells To Your Amazon Listings
As an Amazon seller, you can also add upsells to your product listings to boost your average order size.
Under the advertising tab in Seller Central, create a percentage off promotion as shown below. Setup your discount such that a customer gets a significant quantity discount when additional items are added to the cart.
Then in the search results, Amazon will display your promotion in the product listings which will increase your click through rate.
This is what the promotion looks like on the product listing itself.
If you use this strategy to provide discounts to your OTHER items on Amazon, then you can train Amazon to bundle them together.
For example if you sell garlic presses AND garlic peelers, you can provide a discount on garlic peelers whenever a garlic press is purchased.
Then over time, Amazon may show these 2 items together under “Frequently Bought Together”
Using this one strategy, you’ll likely see up to a double digit increase in average order size overnight.
Strategy #4: Offer An Upsell After Purchase
A while back, I was at the local Panda Express buying lunch and I handed the cashier my credit card to pay for my food.
But instead of charging my card, the cashier asked me, “would you like one mo item for one dolla more?”
Just one dolla mo? How could I say no? I was already committed to buying lunch AND I was starving so I agreed.
Little did I know that I fell for the easiest trick in the book, the post sale upsell!
After a customer has completed their purchase is the BEST time to make a little extra cash.
- They already trust your shop.
- You already have their payment information
- They’ve already paid you real dollars
Plus, they are on a dopamine high from making a purchase and extremely vulnerable to the power of suggestion.
In fact, you can easily increase your average order size post sale by up to 11% by offering special promotions after checkout.
Here’s how it works…
- You designate specific products in your shop to trigger the upsell
- Customer hits the checkout confirmation button
- Customer is offered an additional upsell
- Additional products are added to their cart WITHOUT them having to enter their payment info again.
It’s pretty slick and there are many apps that implement this functionality for you automatically.
Strategy #5: Bundle Your Products Instead Of Selling Them Individually
All of the strategies described so far involve enticing the customer to add additional items to their shopping cart to boost average order value.
But instead of enticing them to add more product, why not just make them buy more product in the first place?
Have you noticed that a lot of restaurants these days charge more per entree but give you larger portions?
You can follow the exact same strategy with your online store by bundling your products together in multi-packs.
We use this strategy pervasively in our online store.
For example, we sell handkerchiefs. But the cost of a single handkerchief can be as low as $3 per hankie.
Is it worth it for us to ship out single hankies at $3 a pop to customers? Not really.
Instead, we force customers to buy at least 3 by packaging most of our less expensive hankies in 3 packs. There is no single pack at all.
In addition, we offer special sets of 6 and 12 at a significant discount to boost up the average order value.
Even if most of your customers only want to buy a single unit, make sure that you at least offer the option of a bundle to tempt them to buy more at a discount.
There are plenty of apps that do this, or you can simply list the bundles as separate items in your shop.
Wrapping It Up
When it comes to growing your shop, increasing your average order value has a lot of positive effects.
The most important factor is that your advertising will be far more effective. When you make more money per sale, it’s much easier to achieve a good return on ad spend.
In addition when you make more money, you’ll have the additional budget to improve your customer service and deal with the typical ups and downs with any business.
Related Posts In Pricing Strategy & Increasing AOV
- How To Leverage Consumer Behavior To Get Customers To Buy More
- Unique Value Proposition Examples For Your Business To Command Premium Pricing
- 5 Immediate Ways To Increase Your AOV Or Average Order Value And Make More Money
- Pricing Strategy – Are You Charging Too Little For Your Products And Services?
- How To Use Consumer Psychology And Pricing Mind Games To Increase Sales
Steve Chou is a highly recognized influencer in the ecommerce space and has taught thousands of students how to effectively sell physical products online over at ProfitableOnlineStore.com.
His blog, MyWifeQuitHerJob.com, has been featured in Forbes, Inc, The New York Times, Entrepreneur and MSNBC.
He's also a contributing author for BigCommerce, Klaviyo, ManyChat, Printful, Privy, CXL, Ecommerce Fuel, GlockApps, Privy, Social Media Examiner, Web Designer Depot, Sumo and other leading business publications.
In addition, he runs a popular ecommerce podcast, My Wife Quit Her Job, which is a top 25 marketing show on all of Apple Podcasts.
To stay up to date with all of the latest ecommerce trends, Steve runs a 7 figure ecommerce store, BumblebeeLinens.com, with his wife and puts on an annual ecommerce conference called The Sellers Summit.
Steve carries both a bachelors and a masters degree in electrical engineering from Stanford University. Despite majoring in electrical engineering, he spent a good portion of his graduate education studying entrepreneurship and the mechanics of running small businesses.