Running a successful business doesn’t just mean convincing your customers to buy from you.
If you want to accomplish great things, you need to convince your clients to keep giving you more cash. That could mean working on building customer loyalty.
Remember, 61% of businesses say that more than half of their revenue comes from repeat customers.
On the other hand, building your bottom line could just mean that you encourage your clients to spend more every time they interact with you.
Increasing Average Order Value or AOV means that every interaction you have with a customer becomes as lucrative as possible.
So, what is AOV, and how do you improve it?
We can help with that.
What is Average Order Value?
Let’s start simple. What is AOV?
Average order value is the average amount your customer spends when buying from your store. You calculate the number by dividing the store’s total revenue by the number of orders processed. For instance, if you made $100 from 5 customers, your AOV would be $20.
Increasing your AOV means giving your customers reasons to spend more than that average amount. The more you build your AOV, the more you:
- Increase profit: A higher average order value means an increase in profit and revenue. The more you earn per order, the more your business makes. It’s basic math!
- Better ROI: If you spend $20 on your ad campaigns and your order value is only $40, you’re not making much after you deduct all the fees for making your product. Increasing your order value means you get more profit out of your investment.
- Get rid of more inventory: If you’re storing your own products, then increasing AOV means you get more items out of the door faster. This means less stress for business owners.
How to Increase Average Order Value
So, how do you boost your AOV?
There are plenty of ways.
1. Offer a free shipping threshold
Have you ever been on a website, buying shoes, and you discover that if you just pay $5, you can save $3.99 on shipping? Free shipping is how you encourage your customers to buy just a little more. Often, your customers will spend extra to get to the free shipping threshold, because it feels like they’re getting more value for their money.
2. Upsell and Cross-Sell
Upselling and cross-selling are another fab way to make some extra cash through a boosted AOV. Upselling is the art of convincing your customers that they should buy a slightly more expensive version of your product. Studies suggest that this strategy increases revenue by up to 30%
To successfully upsell a customer, show them what they’re missing out on with the cheaper product. Highlight all the benefits of your more expensive items, so upgrading seems like a no-brainer.
Cross-selling is a slightly different approach that involves convincing your customer that they should buy another item on top of what they already want to buy. For instance, when your customer clicks on a product page, you can suggest other items they may also like:
3. Make Bundles
Want to get as much clutter out of your warehouse as possible and improve AOV? Bundles are the tool for you. Bundling products essentially means creating a collection of items that go well together. You offer this combo for a slightly lower price than all the items would come to on their own.
With bundling, you’re usually only providing a small discount, but the extra value conveyed may be enough to convince your audience to buy more. You might even decide to add a freebie to your bundle, so your customers are even more tempted.
4. Start a Loyalty Program
Loyalty programs are awesome for increasing average order value. Often, they increase revenues by up to 10%, plus they turn your customers into repeat buyers. Remember, loyal customers, are worth about 10 times as much as their first purchase!
Companies like Sephora have already unlocked the awesome benefits of loyalty programs. The Beauty Insider program shares exclusive discounts with customers, helps them to earn rewards, and more. Treat your customers like a VIP, and they’ll keep coming back to buy from you. Guaranteed.
5. Provide Epic Experiences
Experience is everything to modern businesses. If you want to make a profit, then you need to show your customers that you have their needs in mind. Giving your customers the kind of customer service they expect can even increase your average order value.
Something like a “live chat” option or even an FAQ where people can find answers to their questions will help to eliminate the issues that might stop your clients from buying. Think about the roadblocks to a purchase that your customer might encounter. Once you know those friction points, deliver services that will reduce them.
6. Deliver Discounts
While it may seem counter-intuitive, providing discounts to your employees can be an excellent way of improving average order value. The key to success? Minimum spends.
Tell your customers that they’ll get $10 off when they spend $60 or more, and customers that would have previously only bought $40 of items will suddenly ramp up their spend. Sure, you’ll need to swallow the cost of the discount, but the extra earnings should make up for the loss.
7. Reward Loyal Customers
Since repeat customers are the most valuable assets your business has, it’s worth rewarding them at times. For instance, if a customer buys five items in a row from you, send them a discount code so that they can buy their next item for less.
If you have customers signed up to an email newsletter, there are even more options. For instance, you can send a special discount via email when your customer has been with you for a year. You might also offer discounts as a type of birthday gift:
8. Use First-Time Offers
As valuable as your repeat customers are, you’re going to need to earn new revenue too. If you’re a relatively new business, or you’re trying to build your brand reputation, consider offering customers a first-time discount in exchange for their email address.
Providing a discount for newbies will help to reduce some of the panic they feel about buying from a new company. Additionally, it’s a chance for you to find more people to add to your email list. Once your customers are signed up to your email, you can nurture them for additional sales.
9. Use Urgency
Have you ever decided to buy something before fully thinking it through before? If the answer is yes, it’s probably because you thought that buying the item was an urgent necessity. Tell your customers that they only have so long to use an offer, and they’re more likely to jump to action.
Just remember, if you do add a countdown timer or limited deal to your website, stick to your guns. Customers that see you’re always trying to take advantage of FOMO (Fear of Missing Out) will begin to lose their trust in you.
10. Have Some Fun!
Finally, why not have a little fun with games and contests? If you’ve ever taken part in the McDonalds Monopoly games before, you’ll know how much competitions can encourage you to buy more. When you know you have a chance to win big, you’re more likely to spend.
In the ecommerce world, one option might be to give your customers a chance to enter a free prize draw whenever they spend a certain amount. If the prize available is attractive enough, your customers will rush to buy.
Boost That Average Order Value
Running a successful business means constantly looking for new ways to improve your bottom line. Whether it’s using competitions to get your customers excited about buying products or offering discounts, there are tons of options.
Try a couple of the solutions above to increase your average order value. Alternatively, why not reach out to the Graygency for some tailored help?