Ways to Increase Your Shopify Store’s Average Order Value

Increase Shopify Average Order Value

In the fast-paced world of eCommerce, every single online retailer seeks to boost sales and profitability. Average Order Value (AOV), is a crucial measure that is frequently ignored yet has a big impact on your bottom line.

AOV represents the average total of each order placed with a merchant over a defined period. A higher AOV means more revenue per transaction, and consequently, a better return on investment for your various customer acquisition strategies.

In this blog post, we’ll dive into the importance of AOV and explore practical strategies you can implement on your Shopify store to increase it.

Whether it’s through upselling, cross-selling, offering volume discounts, or creating enticing product bundles, we’ve got you covered. Let’s get started!

What is the Average Order Value or AOV?

Average Order Value (AOV) is a crucial eCommerce indicator that shows how much money customers typically spend on each order or transaction in your online business.

Understanding and tracking AOV can help businesses identify trends, optimize pricing and product offerings, and implement marketing strategies to encourage customers to spend more per transaction.

Increasing AOV can have a direct impact on a store’s profitability and overall success.

Why is AOV Important?

Average Order Value (AOV) is a crucial eCommerce metric for several reasons:

  • Profitability: A higher AOV means that your customers are spending more on each purchase, which can directly increase your revenues and profitability. Increasing the amount that current customers spend is frequently a more cost-effective strategy than finding new ones.
  • Marketing Strategy: Understanding your AOV can help inform your marketing strategies. For instance, if your AOV is lower than you’d like, you might implement strategies to encourage higher spending, such as volume discounts, bundles, or free shipping thresholds.
  • Customer Behavior Insight: AOV can give insight into buying behaviors. Tracking changes in AOV over time can help you understand how customer buying patterns are changing. For example, a sudden decrease might indicate that customers are buying less, or choosing cheaper items, which could signal a problem that needs addressing.
  • Business Health Indicator: AOV is a key indicator of your business’s health. A steady increase in AOV could mean your upselling and cross-selling efforts are working, or that customers see more value in your products. A decreasing AOV might be a warning sign that you need to adjust your strategies.
  • Pricing Strategy: Knowing your AOV can also assist in developing effective pricing strategies. If you know customers typically spend a certain amount, you can price and package your products in a way that maximizes revenue.

How to Calculate Average Order Value?

An important indicator for comprehending your consumers’ purchasing patterns is average order value (AOV). It reveals the typical amount of money spent by clients on each order.

To calculate AOV, here’s the formula:

AOV = Total Revenue / Total Number of Orders

For instance, if 200 orders were placed and your store produced $10,000 in revenue last month, your AOV would be $50 ($10,000 / 200 = $50).

Ways to Increase Average Order Value

Increasing the Average Order Value (AOV) can significantly impact your business’s revenue without necessarily acquiring new customers.

Here are some effective strategies to increase AOV:

1. Upselling

Upselling is a sales technique in which you persuade customers to buy a more expensive model of the product they like or to add more features or services that raise the purchase’s worth. The main goal of upselling is to increase the average order value, thus enhancing the profitability of each transaction.

Here’s how it works:

  • Offer Higher-End Products: If a consumer is considering a specific product, you might advise a more expensive model that comes with extra features or is of higher quality.
  • Add-On Features or Services: You can also upsell by suggesting add-ons that enhance the original product. For instance, if a customer is buying a smartphone, you might offer an extended warranty or a premium subscription to a relevant service.
  • Personalized Recommendations: Use customer data to offer personalized upsell suggestions. For example, if you know a customer frequently purchases premium products, you might highlight your higher-end items in their shopping recommendations.
  • Show Value: To successfully upsell, it’s important to clearly communicate the value of the higher-priced item. Highlight the benefits and features of the more expensive product and how it meets the customer’s needs better than the less expensive option.

Upselling

2. Cross-Selling

Cross-selling is a sales strategy that involves suggesting additional, complementary products to a customer based on their current product interest or selection.

The primary aim of cross-selling is to increase the total purchase amount, thereby raising the average order value (AOV).

Here’s a closer look at how it works:

  • Complementary Products: If a customer has a product in their cart, consider what additional products could enhance their use of the original item. For example, if a customer is buying a printer, you might cross-sell them on ink cartridges or high-quality printing paper.
  • Bundles: Offering bundles of products that are typically bought together can be a good cross-selling strategy. Bundles often come at a slightly lower price than buying each item individually, adding perceived value for the customer.
  • Personalized Recommendations: Use customer data to offer personalized cross-sell suggestions. Knowing a customer’s past purchases enables you to suggest goods that other customers with comparable histories have purchased.
  • Clear Value Proposition: Just like with upselling, it’s important to highlight the benefits the additional products will bring to the customer. This might be increased convenience, enhanced product functionality, or cost savings.

Cross-selling

3. Volume Discounts

Volume discounts are a pricing strategy where the cost per unit decreases as the quantity purchased increases. This strategy’s main objective is to encourage customers to make larger single purchases, hence raising the Average Order Value (AOV).

Here’s how volume discounts work:

  • Quantity-Based Discounts: When a consumer purchases a specific number of the same item, you give them a discount. For example, “Buy 2 shirts, get the 3rd at 50% off,” or “Buy 5 coffee packs, get 20% off your purchase.”
  • Spend-Based Discounts: You offer a discount when a customer’s total purchase reaches a certain amount. For instance, “Spend $100 and get $10 off your order.”
  • Tiered Pricing: This is a variation of quantity-based discounting where the per-unit price decreases as the customer purchases higher quantities. For instance, purchasing five bottles of lotion at once lowers the cost to $8 a bottle from a single bottle that might be $10.

However, it’s important to ensure your volume discount strategy still aligns with your overall profitability goals. Offering discounts can increase AOV and overall sales, but the discounts shouldn’t significantly erode your profit margins.

Volume Discounts

4. Bundle Products

Product bundling is a marketing tactic where you combine similar products and sell them as a single unit, frequently at a slightly discounted price compared to if the customer purchased each item separately.

This method can encourage customers to spend more money in a single transaction, increasing the Average Order Value (AOV).

Here’s how product bundling works:

  • Complementary Products: Select products that naturally go together and offer them as a package. For instance, you might group shampoo, conditioner, and hair masks together if you sell hair care items.
  • Discounted Pricing: Bundles are typically priced to offer a small discount compared to buying each product separately. The perceived savings can make bundles appealing to customers and encourage them to buy more.
  • Ease and Convenience: Bundles can also simplify the decision-making process for customers. Instead of having to select each item individually, they can buy a pre-selected bundle that meets their needs.
  • Exposure to New Products: Bundling can also be a way to introduce customers to new products. By including a new product in a bundle with popular items, customers may be more willing to try it.

Bundle Discounts

5. Free Shipping Threshold

Setting a free shipping threshold is a strategy where you offer customers free shipping if their order total exceeds a certain amount. By enticing customers to add more items to their shopping carts, e-commerce businesses may raise the Average Order Value (AOV) and increase sales.

Here’s how it works:

  • Setting the Threshold: Determine an order value above your current AOV that will trigger free shipping. For example, if your current AOV is $40, you might offer free shipping on orders over $60 to encourage larger purchases.
  • Promotion: Promote the free shipping threshold clearly on your Shopify store. Make sure customers are aware of the promotion, particularly when they are checking out, and can see how much more they must spend to receive free shipping.
  • Cart Reminders: Remind clients how much more they need to spend in order to receive free delivery as they add goods to their cart. This can motivate them to look for additional items to add to their cart.

Free Shipping Threshold

6. Loyalty Programs

Loyalty programs are a marketing strategy where you reward customers for their repeat purchases, thereby encouraging them to continue buying from your business. These programs can incentivize customers to spend more during each purchase, increasing the Average Order Value (AOV).

Here’s how loyalty programs can work:

  • Reward Points: One of the most common types of loyalty programs is a points system. Each dollar a customer spends results in one point, which can subsequently be exchanged for discounts, free merchandise, or other benefits.
  • Tiered Rewards: Some loyalty programs offer tiered rewards. The more a customer spends over time, the higher their tier and the better their rewards. This can encourage customers to make larger or more frequent purchases to reach the next tier.
  • Exclusive Offers: Loyalty program members can be given access to exclusive sales, products, or discounts. These exclusive offers can encourage members to spend more to take full advantage of their membership benefits.
  • Personalized Promotions: You can give loyalty program members personalized promotions based on their purchase histories, enticing them to buy more of the goods they adore or to try new goods depending on their preferences.

Loyalty Programs

7. Gift Cards

Gift cards are a sort of prepaid stored-value money card that can be used as an alternative to cash for purchases within a certain store or associated businesses. These cards are often issued by a retailer or bank.

Offering gift cards can be a strategic way to increase your Average Order Value (AOV) in several ways:

  • Higher Spending: Customers often end up spending more than the value of their gift card. A customer with a $50 gift card, for instance, might find a product they like for $60 and decide to pay the extra $10 themselves, therefore spending more than they initially intended.
  • Attracting New Customers: Gift cards can bring new customers into your store or onto your website. Even if they’ve never made a purchase from you before, people are more inclined to peruse your offers when they receive a gift card.
  • Reducing Return Rates: When customers pay with gift cards, they are less likely to return their purchases, which helps maintain your sales figures and AOV.
  • Promotional Opportunities: You can offer promotional gift cards that are valid when a customer spends a certain amount. For example, “Spend $100 and get a $20 gift card.” This encourages larger purchases, boosting your AOV.

Gift Cards

Wrapping Up

Increasing your Average Order Value (AOV) on Shopify isn’t just about making more money. It involves coming up with innovative and customer-focused ways to give your customers more value and entice them to spend more money on your goods.

Each strategy we’ve discussed – from upselling and cross-selling to volume discounts, product bundling, free shipping thresholds, loyalty programs, and gift cards – can be a valuable tool in your eCommerce toolkit.

It’s essential to experiment, measure the results, and adjust your tactics accordingly. By doing so, you can find the best strategies that work for your Shopify store and your unique customer base.

Start today! Take a fresh look at your Shopify store and consider how you can implement these strategies to increase your AOV.

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