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Increasing your average order value (AOV) is a huge lever in driving additional contribution margin post-click. 

Before we get into these quick wins to increase your average order value you might be asking yourself questions like?

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What is AOV?

I’m glad you asked dear entrepreneur. AOV is one of the most important metrics an e-commerce merchant should be tracking. It represents the average amount of money a customer spends every time they shop with you.

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How to work out AOV?

AOV is calculated by dividing the total revenue generated from all orders by the total number of orders within a specific period. 

Let’s make it incredibly simple to understand with an analogy. Imagine you own a bakery. The average order value would be similar to the average amount each customer spends on their bakery visit. Let's say you have a total of 100 customers in a day, and the total revenue earned from all their purchases is £1,500. To find the AOV, you divide the total revenue (£1,500) by the number of customers (100). In this case, the average order value would be £15.

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Why is AOV important?

It provides valuable insights into customer behaviour and helps you understand the effectiveness of your pricing, promotions, and strategies in place to increase customer spending and the overall profitability of your business. 

By tracking and optimising your AOV, you can make informed decisions to maximise revenue and profitability in your e-commerce business, just like understanding the average amount spent by customers in your bakery can help you make decisions to improve your bakery's financial performance.

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Why is my AOV low?

Well, it could be for a number of reasons and without context it’s difficult to single out one specific driver of low AOV. Here are 6 reasons why you might have a low AOV.

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Pricing strategy: 

If the products or services offered have low price points or are frequently discounted, it can contribute to a lower AOV. Customers may be more inclined to make smaller purchases rather than larger ones if the pricing structure does not incentivise or encourage them to spend more. 

Remember, if you are constantly running discounts, you might actually be devaluing your brand. The knock-on effect of this being that people aren’t willing to pay a premium for your product as they just expect low prices as the norm.

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Limited product range: 

If your product catalogue is fleeting or lacks diversity, customers probably won’t find other items that actually appeal to them or go hand in hand with their initial purchase. This can result in lower cross-selling or upselling opportunities, which would typically drive up the AOV (we’ll go into this one a little later).

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Lack of product bundling or upselling strategies: 

Failing to implement effective product bundling or upselling techniques can also contribute to a disappointing AOV. Without enticing offers or incentives to add more items to their cart or upgrade their purchase, customers may not feel motivated to spend that extra money with you.

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Insufficient product information: 

If product descriptions, images, or reviews are lacking, customers might be hesitant to make larger purchases. A lack of product information can lead to lower confidence in the product's value, resulting in lower AOV as customers may only feel comfortable making smaller initial purchases.

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Poor user experience: 

If the e-commerce website or mobile app has a complicated or long checkout process, it causes friction which might rub customers up the wrong way (if you’ll pardon the pun) an deter them from making larger orders - or maybe even purchasing in the first place. 

Friction during the checkout process, such as slow loading times, messy navigation, or excessive form fields, can contribute to lower AOV due to customers abandoning their purchases or opting for smaller orders to minimise hassle.

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Targeting the wrong customer segment: 

Marketing efforts that don’t actually reach the right audience or attract customers who align with your brand's higher-priced offerings will result in a lower AOV. Attracting customers who have a higher likelihood of spending or who are looking premium products can help drive up AOV.

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How to increase AOV

Now we’ve got that out the way, here are a few ways you can maximise the efficiency of your marketing budget by driving up your average order value:

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Post-purchase upsells

Positioned correctly, a post-purchase upsell can convert at 10% upwards - that's huge for profitability as you’re not paying for the additional revenue customers are contributing post-acquisition! 

We've found using a complimentary product at a low AOV with a small discount will work well. You should be thinking about offering a complimentary product that has a high gross margin so you're really maximising profitability per order.

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Gamified in-cart upsells

Let's face it, traditional in-cart upsells don't convert that well at all. At this point in the purchasing journey, we don't want to be hit with friction unless there's something in it for us. 

Implement in-cart upsells but give the customer incentives to go ahead and purchase once they've reached certain order value thresholds. For example, if their cart is currently worth £50 and you offer free shipping at £70, offer a product worth £20, now think about offering a free gift at X value and another at Y value - people love free stuff so make spending more an exciting activity!

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Bundles with offer tiers

If you've got multiple SKUs bundles are a no-brainer for driving up AOV, but combined with a pricing tier that is positioned as an irresistible offer for the customer, you're destined to drive up AOV and maximise contribution margin per order. Be strategic with the bundle and understand your unit economics for each offering - have contribution margin at the front of mind when offering bundles so you're not chasing ROAS, you're chasing POAS (profit on ad spend).

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Limited-time offers and scarcity tactics

Create a sense of urgency and scarcity by offering limited-time promotions and exclusive deals. Time-limited discounts, flash sales, or limited stock availability can motivate customers to make larger purchases to take advantage of the offer before it expires. By tapping into FOMO, you can boost AOV and encourage immediate action.

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Tiered loyalty programs

Implement a tiered loyalty program that rewards customers for their repeat business and higher spending. Offer exclusive perks, such as free shipping, early access to sales, or additional discounts to customers who reach specific spending thresholds. 

This strategy not only incentivises customers to spend more to unlock the benefits but also fosters a sense of loyalty and encourages them to continue purchasing from your brand.

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Personalised product recommendations

Leverage the power of data and personalisation to provide tailored product recommendations to your customers. Use existing customer data and purchase history to suggest complementary or higher-priced items that align with their preferences. 

By presenting relevant recommendations, you can entice customers to add more items to their cart, increasing the overall AOV.

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Volume discounts and bulk purchases

Encourage customers to buy in larger quantities by offering volume discounts and incentives for bulk purchases. Highlight the cost savings they can enjoy using price positioning by purchasing more units of a product or bundling multiple items together. By positioning bulk purchases as a smart financial decision, you can entice customers to increase their order size, thereby boosting AOV and maximising your profit margins.

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Targeted email campaigns with exclusive offers

Segment your email list based on customer behaviour, purchase history, or demographics, and create targeted email campaigns with exclusive offers. Send personalized promotions that cater to specific customer interests or preferences, providing them with incentives to upgrade their purchase or add complementary products to their cart. By delivering tailored offers directly to their inbox, you can capture their attention and motivate them to increase their order value.

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Limited-edition or premium product releases

Introduce limited-edition or premium products that have a higher price point or offer unique features. Create a sense of exclusivity and desirability around these products through strategic marketing and storytelling. Highlight their limited availability, premium craftsmanship, or special edition status. By appealing to customers' desire for something unique or prestigious, you can drive up AOV as customers are willing to pay more for these special offerings.

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Remember, it's important to analyse the impact of these strategies on your overall profitability. Keep an eye on your contribution margin per order and align your pricing and promotional efforts accordingly. By implementing these tactics with a focus on maximising profitability rather than just increasing revenue, you can effectively raise your AOV and enhance your overall e-commerce financial performance.

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If you run an e-commerce brand and need help with your Shopify strategy, book a call today with Joe or Freddie today to learn more about how we can help you.

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