Average order value is the average worth of products which each customer purchases at your online store. Average Order Value(AOV) is a key ecommerce metric as it signifies how much a customer is willing to trust you with her money. Increasing average order value generates more money for your business for the same amount of traffic.
Increasing cost of acquisition of a user and importance of a healthy average order value
- With complex algorithms running search engines and ever increase CPC bids acquiring customers has become an expensive affair.
- The competition in online retail space is only increasing and small online retailers are losing the pricing war and customers to the bigger players.
This should make smart ecommerce entrepreneurs focus on getting the best ROI in terms of revenue and margins from the set of audience and customers they already have. Instead of spending huge amounts on advertising they must work on improving metrics like average order value and customer life time value.
Pair up the cousins – Customers bought these together
One of the key reasons for Amazon’s success is its high degree of personalization. With huge database of customers frequently buying with them they have their own algorithms to pick up products which are frequently bought together.
The above snippet is shown just below the fold on the product page. By displaying highly relevant products together Amazon encourages its users to buy more. Customers can even un-tick products which he doesn’t need and checkout with a single click of a button or add them to wishlist.
Cross sell relevant products
Cross sell is a strategy wherein you suggest your customers to buy other products relevant to the current item in cart. The products suggested could be listed on the product or the shopping cart page. Cross selling is a great way to push in more products in to your customer’s basket. However, the key here is how relevant and non intrusive the cross sell is to the user.
Cross sells on shopping cart page
Among the top 100 online retailers Staples does it best. Staples has an app called basketbuilder, which is an interface that helps users add more products to their cart before they checkout. The user can add more products to his basket using a simple click. The user can add multiple products without leaving the cart. This helps in increasing AOV without hurting conversions. This improves AOV without overwhelming the user. This kind of cross sells are perfect if you are selling apparels, stationery, heavy instruments or office supplies.
Bathandbodyworks does best when compared to its counterparts. The page suggests more relevant products and a user can add the product to his bag and edit quantity without even visiting the page.
Cross sell on product page
Cross selling on product page helps people realize that there is more to buy apart from the product he is viewing. Often people do continue shopping in spite of adding a product to his cart. Cross selling on product page is widely used strategy by top online retailers.
The idea of increasing your average order value is not to bombard users with options so that he buys more. The key is to suggest products in a way that they doesn’t interfere with the current buying process of the customer as doing so the customer could be a victim of paradox of choices.
Macys.com use a clean recently viewed items within the product page below the main product details.
Product bundles are most common tactic used by online retailers to flush their old inventory. This approach can be used to increase AOV too. Bundles are popular during holiday seasons and often gives high value to the customer. One great way to bundle products is by selling a bunch of highly relevant products together. For instance a bundle of harry potter books, a bundle of iPhone accessories or a t-shirt pack can motivate the customer to shell out more as she sees more value in buying the bundle than in buying individual products.
While cross selling is about selling alternative products upselling is about selling higher end or more products during or after the purchase. People make their buying decisions based on value not just price. Customers often buy a more expensive product if they feel the product has better value and fits their needs. Pricing tables are great way to showcase what best suits a customer and making him choose a plan which fits his need in spite of it being expensive.
Asos has a feature wherein a user can buy the look portrayed by the model right from the same page. She can add all items the model is wearing on to the cart and checkout. This feature is very useful in increasing AOV if you have an online clothing store. So your customer who visits a page to buy denim shorts might end up buying shoes and socks which go along with it.
Bathandbodyworks displays other products from warm vanilla so that the products suggestions are not interfering with the customer’s decision process. By doing so Bathandbodyworks is selling other skin care products the user might be interested in.
3 ways to motivate your customers buy a high priced item –
- Have higher price for products customers would buy anyway – A customer values a product based on its color, size and his current needs. For instance, white iPhone 5 doesn’t have anything special in it except for its color. There was a high demand for white iPhone 5 and Apple sold it for an extra $100.
- Make the expensive product more discoverable – There are many ways to make a product of your choice more discoverable. Few of which could be listing the higher priced item higher in search listings or linking the product from the homepage banner. The idea is not to game the user, instead it is to make the expensive product discoverable to the user so that he weighs his options instead of going straight for the lower priced products.
- You Save ________ – Tell your customers how much they would save if they bought an higher priced item. Show them how they are winning by spending more.
Set Free shipping or discounts for a minimum amount order
Give customers a discount or a free shipping only if the order is over a threshold(target Average Order Value). Doing so will encourage visitors to buy more products and avail the offer.
You can apply this strategy site wide too. You can inform the user on minimum threshold on free shipping upfront using a banner on every page of your site.
Diapers.com uses an animator right next to its logo to communicate free shipping threshold of $49. The same is pasted across the whole website so no matter which page the user lands on she is informed on this goodie. This motivates the customer to hit the $49 mark before she checks out.
Loyalty Programs – Cash Backs & Reward Points
As a promotional strategy Newegg started a preferred customers account $30 cash back to people who complete a $100 purchase with Newegg. The money is credited to the customers account which can be used only if he makes a purchase at Newegg. So essentially Newegg convinces a customer to shell out $100 to avail the offer but ties the offer with shopping credits.
Baublebar Vault uses the below landing page to increase loyalty among its customers. The loyalty program is focused around pushing customers to spend more. More the customers spend, more the vault points they score and deeper will be the future discounts.
Schedule your promotional campaigns at the end or beginning of the month
A large portion of the population live pay check to pay check. Scheduling your promotional campaigns to the beginning of the month will make your customers shell out more since they have more money in the bank and not be worried about credit.
Personalize based on browsing history
Online shopping is a non linear experience. Users add or remove products from cart, search or abandon search or leave the site with an intent of buying stuff over the weekend. When your online store technology tracks this user behavior you can understand what exactly the user is looking to buy on your site and display relevant products on the home page upon their next visit to your online store. This gives the user a personalized feel and direct access to continue the shopping and research journey with you.
Amazon uses my shopping and browsing history to convince me add more products in to the cart as below.
As per a study done by liveclicker ecommerce sites which use videos to showcase their products have higher average order values and conversions as compared to online stores which rely on text and image based content. Video gives user an intuitive and closer experience with your products which translate in to buying confidence.
About 57% of online retailers who used video on their online store reported positive impact in AOV while 43% of them reported no negative impact.
Resources to make good ecommerce product videos
- 6 product video examples from top ecommerce sites
- 17 best ecommerce video examples
- How to use video to increase sales in your ecommerce store
Segment buyers and personalize email campaigns
Not all customers are equal. Most of us spend based on our income levels and our level of passion for a product. Few customers might trust your offering much more than the rest. These high paying customers can be put under an elite list.
A typical segmentation based on AOV will look like the one below. A smart ecommerce entrepreneur will sell his premium products to the customers in segments to the right which is blue and yellow as chances of them shelling out more money is higher.
As per RJ metrics report top 10% of the customers have an AOV 3 times more than the bottom 90% and the top 1% of the customers have an AOV 5 times more than that of the lower 99%.
Once you find the top customers you can
- Create a special email campaign which lists premium products from your online store.
- You can increase affinity of this audience to your brand further by sending them a gift or a free pass to try your latest products before launch.
- Personalize homepage of these customers with premium products as recommendations.
All the above ideas above have helped online retailers both large and small increase their average order value. Executing an idea is different from getting it right. Every idea needs multiple iterations before it starts delivering results. You should –
- A/B test design, email subject lines, reward points, free shipping threshold, copy, widget placement for all campaigns.
- Isolate each idea to an audience and see how it impacts average order value.
- Measure impact on AOV but see how it affects total revenue. Ideally you want to increase AOV without hurting conversion rates and margins.