Work smarter, not harder. Instead of searching out an endless stream of new customers, make the most of each transaction. When you know how to increase average order value (AOV), you can boost revenue without the hassle of marketing to new prospects.
Learn about the importance of AOV and take advantage of these proven strategies to increase it — and your business’s bottom line.
Introduction to average order value (AOV)
Key ecommerce metrics like average order value indicate a business’s potential longevity and growth.
What is average order value?
Average order value is the metric that measures the average amount of money customers spend per transaction on your website.
By focusing on increasing AOV, businesses can boost their revenue without necessarily acquiring new customers.
AOV also provides deeper insights into your customers’ purchasing habits. For example, a winter-time AOV spike may indicate a trend of customers shopping for holiday or seasonal items.
What does a high average order value mean?
A high AOV indicates that customers spend a significant amount on each purchase. It could reflect positively on your product lineup and pricing strategies.
Understanding and calculating AOV
Spending patterns enable data-driven decisions to optimize your sales approach.
How to calculate average order value
The average order value formula is your total revenue divided by the number of orders during a specific period: AOV = total revenue / number of orders
For instance, if your online store made $10,000 from 200 orders in a month, your AOV would be $50.
Tools and software that can help track AOV
Tracking AOV manually can be time-consuming. Thankfully, many tools and software solutions automate this process and provide deeper insights:
1. Google Analytics
Google Analytics offers comprehensive tracking of various metrics. By setting up ecommerce tracking, you can get detailed reports on sales performance and customer behavior.
2. Shopify Analytics
If you need to know how to increase average order value on Shopify, start with their built-in analytics dashboard. It provides real-time insights into AOV and other important metrics.
3. Constant Contact
Constant Contact combines best-in-class email marketing with robust ecommerce tools. By integrating your store, you can track AOV and other key metrics, using that data to segment your audience for targeted campaigns.
The importance of increasing AOV
Increasing AOV boosts profits and increases the profitability of your current customer base. After all, repeat customers are preferable to new ones.
Why is average order value important for ecommerce businesses?
AOV provides an ecommerce business with:
- Revenue growth
- Marketing efficiency
- Customer insights
How increasing AOV can boost overall revenue
By increasing AOV, you can boost revenue. Each transaction becomes more valuable, and more substantial orders improve cash flow, which you can use to manage inventory and operational costs.
How do you increase the average price?
Justify price increases by demonstrating the value of your product or including it in more expensive packages.
How do you increase average transaction value?
To boost AOV, encourage customers to opt for higher-priced items or add-ons while they shop.
AOV, customer lifetime value (CLV), and profitability
Increasing AOV can have long-term benefits. It leads to:
- Higher customer lifetime value (CLV): Customers who spend more per transaction are more valuable over the long term.
- Enhanced profit margins: Bigger transactions mean better economies of scale and lower relative transaction costs.
- Better customer engagement: Providing more value per transaction fosters deeper engagement and loyalty.
Strategic ways to increase AOV
Learning how to increase the average order value is a key strategy for boosting revenue. Existing customers spending more per transaction can enhance your bottom line.
Encourage additional or larger purchases
By packaging and recommending products strategically, you can increase your AOV.
Upsell, cross-sell, downsell
- Upselling is when you suggest a premium version of the product the customer is considering. For example, if they’re looking at a basic laptop, recommend a more expensive model with better features.
- Cross-selling is the suggestion of complementary items to enhance a customer’s original purchase. Take advantage of opportunities during checkout and in follow-up emails to cross-sell products.
- Downselling involves offering lower-priced alternatives and add-ons when customers hesitate about higher-end options.
Provide bundles and bulk options
Bundles give customers more value for their money. Bundle complementary products into a single package and discount the total.
Bulk purchase options encourage customers to buy more items in one transaction. Target items that require frequent resupplying, such as office supplies or hygiene products.
Create order minimums for free shipping
Set your free shipping threshold slightly above your AOV. For instance, if your average purchase is $40, offer free shipping on orders over $50.
Take shipping costs into account. The average threshold for free shipping has increased in recent years to reflect rising costs.
Offer incentives to take action
Time-sensitive marketing strategies, such as flash sales and limited-time offers, can persuade customers to increase their spending.
Offer limited-time promotions
Limited-time promotions create a sense of urgency. Provide seasonal promotions to encourage customers to stock up or offer flash sales with substantial discounts on high-value items.
Give a gift with purchase
Offer a gift, such as a free sample or a gift card, with purchases over a certain amount to entice customers to spend more.
Gamify discounts
Gamification incentivizes customers to spend more and adds an element of fun to the process. For example, you could try a reward wheel that customers spin to win discounts or freebies.
Get creative with one-time add-ons
Let customers purchase add-on items or services with their main product. An electronics business might offer extended warranties, or a retail brand could provide gift wrapping for a surcharge.
Tailor the shopping environment
Strategically design the shopping experience to highlight your best products and nudge customers to spend more.
Use web design to highlight higher-priced plans
Your website design helps guide customer decisions. Prominently featuring higher-priced plans or products can encourage customers to opt for more premium options.
Use visual elements like banners, badges, and comparison tables to highlight benefits.
Use merchandising online and in the store
Visual merchandising best practices can guide customers toward making larger purchases. Use attractive images and engaging descriptions to highlight your products’ benefits.
If you have a brick-and-mortar shop, position higher-margin items at eye level, rotate displays regularly, and add impulse buys near the register.
Try new default settings for your product detail page (PDP)
The default settings on your product detail page create expectations for each transaction. Use them to subtly suggest customers buy more without being pushy.
Default to higher quantities or premium options as they shop and add things to their cart.
Streamline navigation and checkout processes
An easy-to-use website allows shoppers to find and add additional items to their cart. Straightforward checkout processes reduce cart abandonment rates, increasing the chances of the customer completing a larger transaction.
Ride the viral wave
Place trending products or services in visible locations or recommend them as cross-sells to capture current excitement.
Reduce barriers to expensive purchases
Big purchases are riskier because customers worry about disappointment and the financial impact of large purchases.
Let customers try higher service tiers
A free trial period can encourage customers to sign up or upgrade. Let them experience the premium version of your service for a limited time, giving them a taste before they commit.
Offer payment plans
Customers may need to pay for larger items in installments. Financing options help them afford the products or services they want.
Buy now, pay later (BNPL) options are becoming more popular with online retailers, accounting for 11% of digital purchases in April 2024.
Offer guarantees
Guarantees and warranties create peace of mind. Assure customers they can get their money back or replace their product if something goes wrong. A generous return policy instills confidence.
Market to your current customers
Your current customers are familiar with your brand and likely to make additional purchases.
Leverage personalization
Personalized recommendations and experiences influence purchasing behavior. Eighty percent of business leaders claim that personalization led to increased consumer spending, and 62% say it positively impacts customer retention.
One significant benefit of email marketing is the ability to personalize content. Suggest products and create offers based on customers’ purchases and browsing history.
Market to a “heavy user” audience
Targeting heavy users — frequent or high-spending buyers — drives up AOV. These customers are invested in your brand and likely to respond to tailored recommendations based on their history.
Spoil your VIP clients. Keep them engaged with customer retention emails and exclusive deals.
Start a customer loyalty program
A customer loyalty program motivates repeat purchases and higher spending per transaction. Rewarding customers for loyalty is also a strong customer retention strategy.
Points systems are popular. Try creating one where customers earn points for every dollar spent and can redeem them for discounts or free products.
Build trust and authority with your target market
Trust makes customers more likely to make large purchases and enter long-term relationships with your brand.
Provide detailed product information
Offer comprehensive descriptions, specifications, and high-quality images to help customers make informed decisions.
Highlight expertise
Share expert advice, guides, or blog posts to position your brand as an industry authority.
Gain customers’ trust with social proof
Showcasing social proof — like reviews — builds credibility and reassures prospects.
Here are 12 ways to encourage customers to write reviews: Ask shortly after their purchase or appointment.
- Send follow-up emails and provide a link to the review platform.
- Offer incentives, such as coupons or loyalty points, in exchange.
- Simplify the process with clear instructions and direct links.
- Highlight positive reviews online.
- Use review platforms like Google and Yelp to reach a wider audience.
- Respond to all reviews, thank customers for their feedback, and address concerns.
- Post a sign with a QR code in your store.
- Use social media to ask followers for reviews.
- Include review requests in packages.
- Host contests where participants need to leave a review to enter.
- Personalize requests with the customer’s name and purchase details.
Data-driven growth strategies
Understanding average order value meaning allows you to leverage analytics tools and data.
Get useful, actionable data on your ecommerce store’s performance. Track key performance indicators (KPIs) such as average order value and conversion rate.
How to create a bar graph in Google Sheets in 3 easy steps
Visualizing your data can help you understand and communicate insights. Here’s a simple guide to creating a bar graph in Google Sheets.
Step 1: Enter your data
Open Google Sheets and enter the data you want to visualize. Arrange your data in columns with clear headers.
Step 2: Highlight your data
Select the range of data you want to include in your bar graph.
Step 3: Insert the bar graph
Navigate to the toolbar at the top of the page, click on “Insert,” and then select “Chart.” In the Chart Editor panel, choose “Bar chart” from the Chart type dropdown menu.
Customize your bar graph by adjusting colors and other settings. Then, share or embed the graph in your reports.
AOV benchmarking and competitor analysis
Competitor analysis and benchmarks help you evaluate your business’s strategies. For example, you can refine your campaigns by using email marketing benchmarks, such as the average return on investment (ROI).
Benchmark average order value by industry. For example, the global AOV for skincare purchases from 2022 to 2024 ranged from $69.81 to $78.91. That’s substantially lower than the AOV for luxury apparel, which ranged from $325.60 to $395.
PPC industry benchmarks
Encouraging customers to spend more while shopping maximizes the return on your pay-per-click (PPC) investments. To increase your AOV, consider using PPC ads to promote upsells, cross-sells, and bundle offers.
Showcase related products. Display complementary products from your brand when customers browse online, and use the data generated by PPC campaigns to personalize offers.
Key PPC metrics
To assess the performance of your PPC campaigns, monitor the following metrics and take note of these examples:
- Click-through rate (CTR): In early 2024, the global average CTR was 1.6%. Try to outperform it with compelling ads.
- Conversion rate: Average conversion rates range from 2.53% for furniture to 12.96% for automotive ads. High conversion rates indicate effective landing pages and offers.
- Cost per click (CPC): Manage your budget with an eye to CPC. Competitive keywords always cost more, but the average CPC ranges from $1.72 for arts and entertainment to $8.94 for legal services.
Exploring AOV in different ecommerce niches
Different ecommerce niches benefit from custom strategies to increase AOV.
Marketing AOV
Marketing AOV often depends on the value of services and packages offered.
Consider offering tiered packages of marketing services, from basic to premium. Persuade customers to choose higher-tier packages by highlighting additional benefits.
During checkout, you could also suggest add-on services, such as social media or paid ads management.
Sales AOV
Ways how to increase the average order value in ecommerce sales include product bundling and personalized recommendations. Create bundles of related products at a discounted price and use data analytics to recommend products based on customer history.
Service AOV
Service-based businesses, such as consulting or home services, can increase AOV through longer-term contracts and comprehensive packages with priority support or extended warranties.
How do you increase the average order value on Shopify?
Increasing AOV on Shopify involves a combination of smart strategies and thoughtful implementation.
Some of the best strategies listed above for Shopify brands are:
- Upselling and cross-selling
- Free shipping thresholds
- Limited time offers
- Loyalty programs
- Personalized email campaigns
Integrate your marketing tools with Shopify to leverage advanced analytics and automations.
Improve your average order value
If you need to learn how to increase your average order value, you can’t go wrong adopting these proven strategies.
There are countless variations, but you can boil them down to the following tactics:
- Encourage additional or larger purchases
- Incentivize action
- Tailor the online shopping journey
- Reduce barriers to expensive purchases
- Market to your current customers
Start by calculating your current AOV and making sure you have the tools to track your data moving forward. Then, you can pick a strategy to increase order value.
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