Online business owners are always looking for ways to increase the revenue generated from their store sites. Some pay more attention to the advertisement in order to increase the online traffic and some focus on converting the online visitors to customers for a better conversion rate. None of these methods are wrong in any way because every approach focus on increasing profitability and revenue
But, there is one method that is overlooked by majority of online business owners i.e. trying to increase the average order value (AOV). Why increasing AOV matters? It matters because it ultimately benefits you as a business owner as well as your customers. Increasing the average order value is one the most simple and less excruciating way to increase the revenue.
What is Average Order Value (AOV)?
Before we get into different ways to increase average order value, let’s make sure we understand its meaning and how we can calculate AOV.
Average Order Value (AOV) = Total revenue / number of received orders
For an example, let’s say the total revenue from your online business in 2014 was $50,000 and you received 750 total orders. Now, if we try to calculate the AOV based on the above formula, we will get:
AOV = 50,000 / 750
AOV = 66.67
This means on average each customer spent $66.67 on your online store site (per transaction). This number gives you a set point for benchmarking. Depending on your cost and expenses that you invested in your online business, you can calculate your profit margin based on AOV or you can try to reach a certain profit margin every year.
Offer cross-selling, related products and bundle products
An effective strategy known as “Cross-Selling” is a great marketing tactic that aims for selling more products/services complimenting the item that a customer is looking to purchase. For example:
- Display a wall mount if anyone is buying a T.V.
- Display a hands free or external battery kit if anyone is buying a mobile phone
- Display a carry bag if anyone is buying a laptop
- Display paper or ink if anyone is buying a printer
You can easily use these techniques on your online e-Commerce store by presenting your customers with additional related products that they can add to their online shopping cart during the checkout process. This kind of marketing will significantly increase the average order value on your online store site.
Here is an example of displaying related products: http://demo.nopcommerce.com/htc-one-m8-android-l-50-lollipop
For more information, please read: Increasing order value by crafting a cross-selling and up-selling opportunities on your online store
Increase the free shipping threshold
Increasing the free shipping threshold is a great tactic to motivate your customers to spend more (per order). If you have been offering free shipping on all orders over $25, think about increasing the minimum value from $25 to $35 for free shipping. This small change can easily increase the average order value of your store site.
- Create your own strategy according to your sales, customers and profit margin
- Try to set the minimum free shipping threshold a little above than your average order transaction – This will give you some buffer and opportunity to increase AOV
- If currently you offer free shipping over $25, setting a new minimum requirement to $50 is not a good idea – A number that is too high can easily backfire and make your customers reluctant to proceed with an order
Tip: According to a survey by Monetate; 61% of customers are at least “somewhat likely” to cancel their purchase if free shipping is not offered and 52% of abandoned online shopping carts are triggered by shipping and handling costs.
Start a reward point program
While the word “free” is always an effective way to attract more customers to your store site, loyalty programs like reward system or cash back is not that far behind. Rewarding your customer by a loyalty program is a great way to encourage customers to place an order on your store site. Setting up a minimum order value that is slightly above your average order value is a great strategy of rewarding your customers. This way, a first time buyer becomes a returning customer and your AOV also gets a sudden increase.
Read our article on: Why your online store needs a reward points program
nopCommerce offers a great rewards points program allows you to offer points per dollar spent on your store. The customer can then redeem the points for additional products at your store. nopCommerce allows the store administrator to have a full control over the reward points program by setting rules on certain actions by which customers can earn reward points. nopCommerce supports related products. Displaying related products is a wonderful tool to "up-sell" customers while they browse a product's page or before checkout. nopCommerce also offer the feature of cross-selling by which you can suggest your customers additional items during the checkout process in order to increase your sales and order value.
Author: Lavish Kumar