6 Tips to Increasing Average Order Value

Increasing average order values is an essential component of success for e-commerce businesses as it can significantly boost profitability. Not only does increasing the average order size mean more income for the company, but it also increases customer loyalty and satisfaction. Additionally, when customers spend more on one order, the shipping cost is spread out across more items, leading to reduced costs for the business. Accurately forecasting sales and revenue based on average order values improves inventory management and provides insight into crucial investment decisions. This post will discuss average order value (AOV), how to calculate it, and 6 tips to increase it.

Average Order Value (AOV) Definition

Average order value (AOV) is the average dollar amount spent each time a customer places an order. In other words, it is the average amount of money a consumer spends each time they visit the store.

Average Order Value Calculation
To calculate your company’s average order value, divide total revenue by the number of orders.

increasing average order value

AOV is a key performance metric that helps determine consumer purchasing habits. Knowing the AOV is important because it allows you to evaluate your sales and marketing efforts. For example, let’s say that in March, your web store’s sales were 20k, and you had a total of 1k orders. 20k divided by 1k = $20, so March’s monthly AOV was $20. Because of the high cost per acquisition for customers, it is in your best interest to generate the maximum revenue from the consumers visiting your store. This is why profitable businesses implement strategies to increase the AOV as much as possible.

increasing average order value

Tips to Increase AOV

There are several strategies to increase AOV and compel your customer to buy more products or more expensive products. Increasing the average order value occurs across the entire sales and marketing funnel. Any idea or promotion encouraging a higher dollar amount at checkout will increase AOV. Here are a few common tips to increase AOV.

  • Offer Discounts for Larger Orders: By offering customers discounts for larger orders, customers are more likely to purchase more items at once to take advantage of the savings.
  • Cross-Selling: promote additional product add-ons that are common with a specific purchase. For example, promote buying replacement bulbs for LED flashlights, batteries, etc.
  • Upsell Items: Suggest more expensive items related to the primary items customers purchase. Highlighting best-selling items that are slightly more expensive is a great strategy to increase AOV.
  • Bundle Items: Create packages of related products and offer them at a discounted rate. This encourages customers to purchase more items, providing value for their money. To implement this strategy, determine what products work together and create a bundle. Working with a quality 3PL can help you pick and pack effectively.
  • Offering Loyalty Discounts: If you have a rewards or loyalty program, offer those repeat customers better discounts for higher purchase amounts.
  • Offer Free Shipping Thresholds: Offer free shipping for customers who meet a minimum spending threshold. This is one of the most effective strategies for increasing AOV. You might think offering free shipping will cut your profit margins, which is possible if you don’t carefully calculate. Here is a formula to help bake the shipping costs into your product pricing, so you don’t lose money!
increasing average order value

How working with a 3PL can help increase AOV

Your shipping strategy will play a massive part in the success of increasing your AOV. Working with a quality 3PL can ensure your company offers the expedited shipping options that consumers desire. Additionally, you benefit from lower shipping costs due to their relationships with multiple carriers and high-volume discounts. Lastly, working with a 3PL with multiple distribution warehouses will allow your company to lower shipping costs because products travel shorter distances to customers. Talk to one of our agents today if you want to learn more about how Falcon Fulfillment can help your business grow.

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