Building a thriving eCommerce business is a hard goal, but here’s one thing you can count on – happy clients are your key to success.
Boosting revenue and standing out from the competition requires a strategic focus and here is where Average Order Value (AOV) comes into play. It serves as an important metric that indicates how effectively these strategies contribute to maximizing profits and fostering customer satisfaction.
AOV is a way to find out how much money, on average, customers spend each time they buy something from a store. A higher AOV results in a healthier business, happier customers, and better profits. In 2022 the average order value for a typical online retailer was $116.72.
Usually companies prefer to track the AOV on a monthly basis to keep a closer eye on customers’ spending habits. For instance, if an online store received a total of $50,000 from 1000 orders in a month, to work out the AOV you would divide the total revenue by the number of orders: $50,000 divided by 1000, which is $50.
So, if you are looking to increase customer spending, look no further! In this article, we will be discussing the importance of this key metric and sharing valuable tips on how to improve your AOV!
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Why Does Keeping Up With the Average Order Value Matter?
Overall, monitoring AOV helps businesses make data-driven decisions, and optimize their sales strategies. It is a valuable metric for the following reasons:
- Business Performance. A rising AOV generally indicates increased consumer spending, which can be an excellent sign of business growth and success.
- Marketing Effectiveness. AOV helps businesses assess the impact of marketing campaigns and strategies.
- Pricing Strategy. It can help you determine your pricing strategy. For instance, businesses might use it to set up minimum order thresholds for free shipping or when to offer certain discounts.
- Inventory Management. By analyzing AOV, companies can make better inventory management decisions.
- Profitability Insights. Understanding which items contribute the most allows you to focus on promoting and optimizing high-value offerings.
- Resource Allocation. By knowing the AOV, businesses can allocate resources effectively. For instance, they can decide how much to spend on advertising or marketing campaigns to ensure a positive return on investment (ROI).
- Customer Segmentation. AOV aids in segmenting customers based on their spending habits. Businesses can identify high-value customers and better tailor their personalized offers or loyalty programs.
- Identifying Trends. Monitoring AOV over time helps spot trends and changes in customer behavior. These insights allow businesses to adapt to shifts in the marketplace. it also helps them stay ahead of the game.
10 Working Strategies to Increase AOV
Boosting your Average Order Value is key to increasing revenue and maximizing profits.
Here are ten proven strategies with detailed explanations of how each tactic works.
Upselling to Premium Products
Upselling is the art of encouraging customers to upgrade to higher-priced products with enhanced features or improved specifications. Thus increasing the AOV as well when buyers opt for a higher-priced item.
Cross-Selling Related Product
Cross-selling involves suggesting complementary or related products to customers based on their purchase choices. For example when a customer adds an item to their cart, your online shop can display a section of related products that complement their purchase.
Bundling Products for Value
Bundling products is a compelling way to offer value to customers. By combining multiple items into a discounted package, you create an attractive deal that encourages customers to buy more than they initially intended.
Minimum Order Thresholds for Perks
Implementing minimum order thresholds to unlock benefits like free shipping or a special discount that encourages customers to spend more to reach that threshold.
For instance your online shop can set a minimum order value, say $50, to qualify for free shipping. Customers who have items totaling $45 in their cart may decide to add more products to reach the minimum and obtain free shipping.
Volume Discounts for Bulk Purchases
Customers appreciate saving money, so offering volume discounts is a powerful incentive to buy in larger quantities.
Your online store can offer tiered discounts based on the quantity purchased. For example, if a customer buys five items, they get a 10% discount, and if they buy ten or more items, they get a 15% discount, etc.
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Limited-Time Offers and Urgency
FOMO (Fear of Missing Out) plays a significant role in encouraging customers to add more items to their cart before time runs out. Customers feel the pressure to buy before the deal expires, leading to a higher AOV.
Personalized Product Recommendations
Leveraging customer data and behavioral patterns allows your online shop to offer personalized products tailored to each customer’s preferences. By using a recommendation engine, your online shop will increase your AOV as customers are enticed by the personalized offerings.
Gamified Loyalty Programs
Gamifying the shopping experience adds an element of fun and excitement. Loyalty programs that reward points, badges, or exclusive perks for purchases motivate customers to spend more.
Offering Add-Ons and Customizations
Providing customers with options to add extra features or customize their purchases encourages them to spend more to tailor the product to their specific needs.
For example, when buying a laptop, customers can choose to upgrade the RAM or add software packages. This empowers them to personalize their purchase and contributes to a higher AOV.
Remarketing and Abandoned Cart Strategies
To deal with customers who have abandoned their carts, you can implement remarketing tactics and targeted communication. This is essentially a tactic where you not only remind them that they still have unpurchased items in their shopping carts but incentivize them with discounts or other offers if they complete the transaction.
The Importance of Retaining Customers to Increase AOV
In the world of eCommerce, retaining customers is just as important (if not more important) as acquiring new ones. Despite the sales strategies you use to increase AOV, keep in mind the importance of retaining current clients while gaining new ones.
According to statistics, increasing customer retention by 5% can lead to a company’s profits growing by 25% to around 95% over a period of time.
To create happy customers who stay with you and constantly contribute to your AOV, you need to add some long-term strategies.
Work on Building an Emotional Relationship With Your Customers
Emotional relationships take time. Be genuine in your interactions, show appreciation for your customers, and always deliver on your promises. All this will help to foster a lasting bond with your audience.
So don’t forget the following:
- Use the Power of Storytelling. Share your brand’s story and values. Use storytelling to create an emotional connection with your audience, highlighting how your brand aligns with their aspirations and beliefs.
- Tailor Your Communications. Tailoring to the individual needs and preferences of your customers shows them that they are appreciated and connected.
- Engage on Social Media. Be active on social media platforms and interact with your audience regularly. Respond to comments, messages, and mentions, and use social media to showcase the human side of your brand.
- Encourage Reviews and Testimonials. Encourage customers to share their experiences and feedback through reviews and testimonials. Search for positive user-generated content and share it on your website and social media to build trust and emotional connections with potential customers.Work on building community.
Constantly Improve Your Customer Service
Improving customer service is vital to retaining clients and building long-term relationships. Here are some key strategies to help you achieve this:
- Active Listening. Listen to your customers. Show them that you are genuinely interested in them and their problems.
- Regular Training and Upskilling. Upskilling your staff ensures they have the knowledge and skills to handle various customer scenarios effectively.
- Customer Feedback Loop. Establish a customer feedback loop by using surveys, reviews, and feedback forms to gather input, and then implement necessary improvements based on the feedback received.
- Consistent Brand Voice. A consistent brand voice across all customer touchpoints, whether in-person, on the phone, or online fosters trust and recognition.
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Achieving higher Average Order Value requires continuous effort and a multifaceted approach. By prioritizing upselling, cross-selling, personalized offers, and other effective sale strategies, you not only enhance sales and revenue but also cultivate happy clients, which leads to a more prosperous and thriving business.
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