The average order value is simply the average amount of money that a customer spends in your store. Average order value is just one of several metrics in the eCommerce formula, which results in Revenue = Traffic * Conversion Rate * Average Order Value
Previously, we talked about the basic problem of an eCommerce store and why achieving sales at similar conversion rates as in-store has been difficult to reach.
Before giving you the strategies, you should first understand why increasing average order value can benefit your eCommerce store revenue.
Why should I increase my Average Order Value?
First things first, your eCommerce store will generate more revenue and profit from a single session, more money from the same traffic volume.
This increase in Average Order Value will also increase your eCommerce revenue without an increase in marketing spending or sales cost.
These are the 5 simple strategies to increase your eCommerce average order value.
Free shipping with minimum spending
This is the easiest way to increase average order value.
Set a minimum spend and get your customers to spend more to qualify for free shipping.
You can use this formula.
(Product price * no of items targeted + 0.5 * average product price).
For example, if your average product price is at $30 and you set the minimum spend at $60 you won’t be getting as much increase in average order value when compared to minimum spend at $75 from -> ($30 *3 items + 0.5 * $30).
This will give your customers the FOMO if they didn’t make the next purchase.
This rule of thumb will also work if you want to stack up the minimum purchase with more promo. For example, $75 for free shipping, $90 for free shipping + product sample, $105 for 1-day free shipping + product sample.
Upselling / Product recommendation
If your eCommerce store has a large range of products in different categories, like fashion or electronics, upselling is the way to go. An example of upselling in an eCommerce store would be JB Hi-Fi.
When trying to look for a MacBook Pro laptop, the store displays products that might interest the customer, which is an apple magic mouse in this case.
Just be careful to not give recommendations that are unrelated to the product that they actually are going to purchase.
When upselling, make sure the product recommendation relevant, a substitute, or a complimentary product.
A product substitute would be a MacBook pro with lower system specifications, and another complementary product would be a USB-C USB dongle.
Don’t be like that annoying salesperson who recommends the whole catalog just because you entered the store.
Gift cards on minimum spending
Giving away gift card is another great way to increase average order value.
However, you need to be careful to not give a big enough gift card to result in a free purchase of your product.
While giving away gift cards is heart-warming, research says you don’t really have to worry about giving away too many gift cards. Research suggests that gift cards were not being used as frequently as what eCommerce stores think. Only around 20% of gift cards were redeemed and the rest reached their expiry date or neglected.
However, if you want to make this gift card strategy work, you could work with an online gift card platform PREEZEE which has a 99.95 redeem rate. They will be able to send your customers emails not only from the initial purchase but also nags you to use the gift cards you own.
You can combine both new customers and gift card strategy too! like this skin care eCommerce store Adorebeauty.
Bundle / starter packs
Especially for eCommerce stores that sell a niche, this is a great way to capture new customers and skip the purchase decisions.
An example of an eCommerce store with a niche is VAPO.
Imagine people trying to quit smoking and when they decide to switch to vaping, they were bombarded with information about the confusing vaporizer styles, types, and liquids.
The availability of HAIZ starter pods would eliminate all the confusion and become the go-to product for new customers.
Free gifts on minimum spending
Who doesn’t love free gifts? Everyone does!
This is a good tactic for eCommerce stores who thinks that giving discounts might devalue their brand.
From a consumer psychology perspective, consumers tend to be interested in getting 50% more for free at the same price rather than getting a 33% discount for the same product.
As an example, you can give + 1 free of the same products, +1 substitute product or a product sample.
Behavioural research showed that in some cases, giving product samples can increase sales by 2000% and was proven that product samples can sway people into purchasing products that they don’t intend to purchase.
If your eCommerce store revolves around the consumer goods industry, you can definitely play around with this strategy.
All the tactics within minimum spending can utilize those “Spend $9 more to get free shipping. A checkout strategy to remind customers about the minimum purchase.
Another one would also be displaying the “amount of money you saved $23” to give a sense of reward in terms of cutting spending.
It is true to say that what matters most to eCommerce managers is revenue.
Increasing average order value is just one variable to increase eCommerce growth.
2 other eCommerce metrics can be improved, such as Traffic and Conversion Rate
To boost revenue, you will need to harmonize your 3 eCommerce metrics: Traffic, Conversion rate, and Average order value.
Other related articles you might be interested: