Online retailers have a lot to take care of. Near the top of the list is attracting traffic to the store so you can present your products. When people land on the website, you need to prevent them from bouncing back out and encourage them to add products to the cart and make a purchase.
If you provide great service, they may become loyal buyers and recommend the company to their friends. All these activities involve investing in marketing and understanding the psychology behind the decision to make a purchase.
But who doesn’t want their customers to spend more money? That’s where we need to bring up the average order value (AOV). It’s an eCommerce metric showing how much people spend per order on average. Increasing this parameter also requires deep comprehension of your target audience. In this article, I’ll explain how to calculate AOV, why it’s essential, and how to boost it.
Average order value: what it is and how to calculate it
As an online retailer, you use Google Analytics and other tools to track website metrics and key performance indicators (KPIs). This knowledge lets you monitor user behavior and answer the following questions:
- What pages do people close without making further clicks?
- How many visitors become customers?
- Why is the percentage of abandoned shopping carts so high?
- How much time do people spend on the page?
With detailed information, you can optimize marketing and pricing strategies to bring more sales. AOV is among the critical KPIs too. It’s the average amount of money spent per order for a given period. You can calculate it monthly. Its formula is:
AOV = total revenue/total orders
So, if you earn $2,000 monthly and get 20 orders, the AOV will be $100.
Note: You should use sales per order, and not sales per client. If you determine the AOV for the month but one customer buys once a week, you should take every order separately.
What is a good AOV in eCommerce?
First of all, you need to remember that the eCommerce sphere spans from expensive electronic goods and luxury items to cheap products like cosmetics or food and beverages. High-end goods will have better AOVs than businesses selling inexpensive goods. So the industry, company type and size, and product categories will influence the AOV.
According to Dynamic Yield, the greatest AOV over the last 12 months, as of June 2023, came from the home & furniture sector and was $238. Pet care & veterinary services experienced the lowest AOV at $71. The report also states that the AOV globally was $119 in June.
Image credit: Dynamic Yield
Apart from the industry disparities, AOVs also vary across devices. The same report reveals that desktop has generated AOVs of $120, and mobile and tablet have been responsible for $103 and $79, respectively. This figure will change with seasonality. For example, AOV will be higher during particular seasons, like Christmas, Black Friday, Cyber Monday, etc.
What’s so important about AOV and why should you measure it?
AOV is an indicator of your website’s overall health and performance. It shows how people interact with your store.
Determining the AOV provides you with the following benefits:
- Creating a 360-degree view of your marketing initiatives and plans with the help of information on each consumer’s value.
- Recognizing trends and patterns in your clients’ spending habits.
- Optimizing strategies to suit the shoppers’ needs.
- Tweaking your pricing strategies to get clients to spend more money per transaction.
- Comparing the store’s performance with the industry standards or your historical data.
- Spotting the areas for improvement, such as reorganizing the website’s navigation, layout, or loading speed.
5 ways to increase your AOV
1. Play a game
Most people like to compete, play games, and get free things. Gamification involves taking advantage of this fact and employing tricks that make shoppers anticipate pleasant rewards. Here’s what you can do to boost engagement:
- Use a timer to instill urgency around one-time bargains.
Screenshot taken on the official Boozt website
- Implement progress bars to show how much consumers need to spend to gain additional value, like free shipping.
Screenshot taken on the official Converse website
- Offer a tiered system where customers earn points for reaching certain spending thresholds with each tier unlocking exclusive benefits, like a loyalty program, for example.
Screenshot taken on the official Chubbies website
Let’s look at D&R, a leading entertainment retailer offering a wide range of products. The company aimed to position itself ahead of the competition during Black Friday 2022. The goal was to attract more customers with an interactive campaign.
Undoubtedly, Black Friday and Cyber Monday are among the high-peak points of Q4 sales. With so many people waiting in anticipation of the large discounts and budget-saving promos, store owners prepare for the influx of customers.
D&R wanted to provide visitors with a different website experience. For this purpose, it partnered with Segmentify to introduce gamified elements. This move helped the retailer achieve a 73% uplift in average order value and a 103% increase in conversions.
2. Customize recommendations
Personalization is one of the most essential elements of an online store. More and more businesses invest in it because customers consider it valuable. According to statistics, 89% of companies are spending money on personalization.
Personalization denotes offering relevant products to clients in line with their needs and style. It ranges from dedicated “You may also like” sections to exclusive discounts and product customizers.
But personalization relies heavily on data. Use the chance to gather information when users register on your website or make their first purchase. As a result, you can provide educated recommendations for future planning and promotions. The more a person interacts with your brand, the more data you can collect, such as:
- buying frequency.
- the campaigns that led to their first purchase.
One of the easiest ways to collect data is to ask shoppers to disclose some of their details, such as gender, location, and interests. To overcome their hesitation, explain why you need it, and make sure you aren’t giving them irrelevant information or items. Below you can see a screenshot from the ModCloth online store. The retailer leverages browsing history and product recommendations generated by artificial intelligence (AI) to show more goods to the customer.
Screenshot taken on the official ModCloth website
3. Combine products to create packages or bundles
Another clever tactic to increase AOV is bundling. By combining products strategically, you can provide customers with added value, convenience, and enticing cost savings. Here are some practical tips to follow for creating bundle deals:
- Create coherent bundles: Pair items that naturally go together, like shampoo and conditioner or a complete outfit. This strategy simplifies the shopping experience and enables customers to find everything they need in one place.
- Offer attractive discounts when bought together: Price reductions on packages may encourage customers to purchase more. For example, if a shopper wants to buy shoes, assemble a box with socks, shoe fresheners, or cleaning kits that will cost less than buying the items separately. The savings will make it hard for consumers to resist.
- Ensure a cohesive experience: As discussed above, personalization is one of the most beneficial tactics to appeal to your audience. Once you identify frequently viewed or bought items for a client, you can offer them complementary items. Suppose they purchase skincare products for acne-prone skin. You can include them in future bundle deals or suggest more expensive goods for the same problem.
Below is a screenshot from the ErgoPouch website. The seller presents a bundle pack and stresses that it costs less than each item bought separately: “Save with our Newborn Hospital Bundle Pack.”
Screenshot taken on the official ErgoPouch website
4. Harness social proof and UGC
Social proof is the term denoting other people's influence on our behavior. Modern consumers not only compare prices and different stores. They can access other people’s opinions on the product and determine whether they’re ready to have a similar experience. Social proof can take various forms. A few of them are:
- user-generated content (UGC) on social media.
- video reviews on YouTube.
- feedback on dedicated websites.
- comments on the store’s website.
According to statistics, 93% of customers read online reviews before purchasing. The same resource states that deleting negative reviews can spoil consumer trust in 95% of cases. But responding to such comments can lead to 80% of consumers trusting the brand more. That’s why making a review section on your website may also be beneficial.
This is a product page for the Tamiami II shirt on the official Columbia website. We can see a star rating and reviews link under the product name to allow customers to see the section with client feedback. There, the retailer provides the average rating based on 964 reviews. Besides the comments, there are customer images and client information. Another example of social proof on the page is the “See You Out There” section with real-life photos.
Screenshot taken on the official Columbia website
5. Offer live chat for quick support
Focusing on quick and efficient customer service is another strategy for raising AOV. Consider a scenario where a customer wants to check out but has some doubts. Ideally, your store should be user-friendly and logical enough to complete the order without the assistance of your support team. But if something is wrong, making shoppers wait is a surefire way to lose them forever.
What’s the solution? Provide a means for clients to contact you immediately, such as live chat and AI chatbots. Note that people contacting your company are high-intent buyers. They deliberately came to the website to find the desired product. That’s why it may be easier to convert them into customers and it may be so devastating to let them go with nothing. If done correctly, you can not only help with a single purchase but also garner repeat sales.
Vans implemented Stevie, a virtual assistant that works 24/7. You can ask questions about products, order status, and other information.
Screenshot taken on the official Vans website
To sum up
Boosting the AOV boils down to encouraging people to spend more in a single purchase. You should find the balance between maximizing revenue and maintaining customer satisfaction. We’ve analyzed five tried-and-tested strategies to improve your AOV. Remember, while these ideas can effectively raise AOV, aligning them with your target audience, product offerings, and overall business strategy is essential. Additionally, monitoring customer feedback and analyzing data can help you refine these strategies to maximize their impact on AOV. With this in mind, good luck and happy sales!
Art Malkovich is CEO and Co-founder of an eCommerce development company
Published August 7, 2023