Being real, the top goal for an online store is to make a profit. Not everything in a small business needs to generate revenue, but without a steady stream of income, even the most philanthropic agents would struggle to keep going.
Luckily, as a small online business, there’s lots you can do to fulfill that goal. Experts advise store owners to employ ecommerce sales strategies that focus specifically on Average Order Value, or AOV marketing.
Let’s discuss how AOV can help your small business become way more profitable by going over what it is exactly and why it’s so important. We’ll also be discovering how you can achieve a higher AOV, with 7 powerful and actionable strategies. Let’s dive right in.
The AOV meaning
AOV or Average Order Value is the average amount of money your customers spend over a set period of time. It is a metric that’s widely used by companies in order to measure e-commerce performance. But how do you calculate your AOV?
Calculating your small business’s AOV is actually pretty simple. To do so, divide total revenue by the number of orders. For example:
If business sales totaled $24,000 in April, and orders totaled 600…
AOV was $40 for your e-commerce business in April. It’s a really simple formula, which gives you a great metric when applied. But why does it matter for AOV marketing?
The importance of AOV marketing
Once you know your e-commerce business’ AOV, you’ll be able to see how well your marketing efforts are paying off, and what results your pricing strategy is getting. Each individual customer’s long-term value, which you can assess through AOV, can really help you to understand if something is going wrong.
You’ll then be able to set relevant goals and strategies, and continually assess how well your new strategies are working. Knowledge is power, right? That’s why this is actually one of the best e-commerce KPIs you can track: AOV is good for short-term and long-term strategies.
AOV is also important for paid advertising because you can target efficient keywords and gather more traffic, which inevitably leads to more sales, without having to spend more money. Knowing your customers’ typical behavior can help you set ad campaigns that positively impact ROI.
How to know if your AOV is up to scratch
Let’s cut to the chase: there’s no one way of knowing whether or not your AOV is good. This is because AOV numbers differ so much within different industries and fields. You wouldn’t expect a luxury fashion brand to have the same AOV as a low-cost affordable clothing maker, though this doesn’t necessarily mean either of them have bad AOVs.
Therefore, the best idea is to set a baseline using your own data from previous months. The more data the better, so that you’re able to benchmark your performance. You could even determine your AOV over a whole year, and then compare monthly AOVs to the annual metric.
Your AOV will also flex to demographic factors — you’ll probably notice that AOV is higher on desktop compared to mobile. Once you figure out these metrics, you’ll have a guide to where to concentrate most marketing efforts and target advertising campaigns where they can have most impact.
Increasing your average order value (AOV): actionable strategies
The magic formula to increase your AOV depends on many factors surrounding your business. Ultimately, you’ll have to test different strategies out and see what works for you. However, there are some tried and tested tips you could start with:
1. Offer order minimums for free shipping
Offering free shipping over a certain amount is known to lead customers to add more products to their carts. It’s common to see stores set that amount at $50, but you should try setting it to an amount slightly higher than store’s usual AOV and adjust to effectiveness.
If you follow this tip, make sure to display the benefit clearly across your website, not only at checkout. Inform your customers that they can get free shipping above a certain amount on your home page, with pop-ups, or even within items.
2. Suggest discounted bundles of products
You can increase your AOV by getting each customer to purchase more itesm. That will require making large purchases more attractive to them. Consider offering bundles of products at a discounted rate. and plan inventory beforehand, if all goes to plan.
3. Run limited-time deals
FOMO or Fear Of Missing Out is something we’ve all felt and it can be a pretty powerful motivator. You can use FOMO to your advantage by offering flash discounts and limited-time deals so that customers feel like they are missing out if they don’t buy immediately.
Beware though, this ploy isn’t suited to the long-term. It will only increase your AOV as long as the deal runs. Consider this a booster to long-term AOV strategies.
4. Launch a customer loyalty program
Rewards programs or anything that might encourage customers to never look to your competition is a great way of increasing AOV as well as keeping retention rates high. These might include:
Memberships that unlock exclusive early discounts
Branded credit cards
Coupons for repeat purchases
Point system for every dollar spent
Contrary to limited-time deals that lean on FOMO, customer loyalty programs work well in the long-term, and can supplement all the other AOV strategies here.
5. Offer “Buy Now, Pay Later” options
In recent years, Buy Now, Pay Later (BNPL) financing options have become more and more popular. Many e-commerce stores, ranging in size, have launched BNPL financing by partnering with platforms including:
Providing BNPL options as an ecommerce store draws customers in with flexibility. They’re able to purchase immediately and pay later on, often without interest. When customers see multiple lower payments instead of one bulk one, they can satisfy their need for your product without breaking the bank. In return, your store will be able to increase AOV and purchases in general.
6. Cross-sell by recommending complementary products
Brick-and-mortar retailers have been using this AOV strategy for a long time. Cross-selling is when sellers persuade prospective shoppers to purchase supplementary products — enticing the to add complements to their basket, therefore upping the AOV.
You can do this as an e-commerce small business by recommending complementary products at check-out. Remind customers that they might need this or that product to help with the one that’s already in their basket. Some examples include:
“Frequently bought together…”
“Shop the look.”
“You might also like…”
“More products we think you’ll love.”
You should consider adding visual aids like product carousels to your checkout pages to make cross-selling a page-wide strategy, not just a checkout add-on.
7. Offer a flexible return policy
We’ve all felt fear of commitment at some point in our lives. Customers might be unsure about committing to a purchase, but feel reassured by a clearly communicated returns policy. It’s little safety net to help them feel comfortable hitting “checkout”.
A flexible return policy can be a great strategy to increase AOV as long as the info is readily accessible, with banners at the top of your product pages for example. Many brands make their returns policies hard to find, which is discouraging in and of itself.
A/B testing and tracking
As you can see, there are so many different aspects to AOV, and dozens of ideas and strategies you can implement to increase ecommerce sales by measuring and mastering AOV strategy. Your e-commerce business is different from any other, so A/B testing is the key: simply try out different options (A or B) on a monthly basis and compare your AOV for each as you go.
Also, ensure you keep a detailed record of your AOV increasing efforts so that you can analyze results as they come in. The more data you have tracked, the better you can understand what works for your business and what you should continue implementing.
Automation – The easy route to outstanding AOV
It’s difficult to keep track of data when you have so little time. It takes an army to even run an ecommerce business, let alone spend hours analyzing strategies, measuring their effectiveness, and segmenting your audience. That’s why here at Aument, we’ve developed a powerful automation platform for ecommerce owners.
Automate all of the most important marketing tasks you need to keep your store growing by seeing exactly how your customers behave, whether they’ve dropped off the radar and need encouragement to return to purchase, and send them personalized suggestion emails, which will greatly increase your AOV. Just click “play” on your ecommerce toolbox of growth actions.
Yep, it’s that easy! Install Aument today.