Online retailers use many optimization tactics to get visitors to convert to buyers. One of the best ways for retailers to increase revenue is to boost the amount each shopper spends per visit.
Known as Average Order Value (AOV), this key metric measures the average total of every order placed with a merchant over a defined period of time. It also helps retailers determine their advertising spend and product pricing. According to RJ Metrics 2015 Ecommerce Growth Benchmark leading retailers on average have a 36 percent higher AOV. Top performing companies have an AOV of $102.39. Lower performing retailers have an AOV of $74.73.
When done right, AOV optimization gives shoppers the feeling they are getting more value, while boosting the online retailer’s overall revenue.
Here are some proven methods for online retailers to increase AOV:
1. Have a Free Shipping Threshold
Free-shipping a big motivator for buyers. According to Econsultancy, 83 percent of shoppers say that free shipping is the top reason they would shop more online. By offering free shipping on orders that reach a certain threshold, shoppers are encouraged to spend more to get the free shipping. This can be done across a site or just on specific items (such as seasonal products or overstocked products). Retailers will need to set a free shipping threshold just slightly above their respective AOV in order to continue to reach profit margin margin goals.
2. Get Personal
Making the shopper’s experience more personal can increase AOV. User want to feel that brands understand them and their needs. They want retailers to speak to them. That can mean displaying their name when they return to a site. Recommending products based on a customer’s search terms, past purchases, what’s in their current shopping cart, having a wish list, recommending products based on social shares or likes, recommending products based on geographical location, and using the history of customers with similar demographics. Brands that use technology and data to offer customers personalized experiences are seeing revenue increase by 6 to 10 percent–two to three times faster than those that don’t, according to a Boston Consulting Group survey.
By offering a similar but more expensive variant of the product to the buyer, retailers can increase AOV. Let’s say a customer is looking at a grill that costs $129, displaying a model that has more features for $199, makes it hard for them to resist spending more. Going back to 2006, upsells accounted for 35% of Amazon’s annual revenue. However, retailers should only try to maximize transactions where it makes sense.
4. Cross Sell
Upselling on e-commerce sites performs 20 times better than cross-selling, according to PredictiveIntent. But cross-selling can still increase AOV. Cross-selling is different from upselling. Rather than offering buyers a more expensive option of the item, shoppers are shown complimentary items. So, if a consumer is buying a BBQ grill, they might see a set of grilling utensils, a meat thermometers, and wood chips as additional products. The suggestions must be relevant. Otherwise, the online retailer can be seen as pushing unnecessary products rather than being helpful.
5. Offer Volume Discounts
According to KPMG, the number one reason that consumers shop online is convenience (58 percent), followed by the ability to compare prices (54 percent), or to find online sales or better deals (46 percent). Retailers can combat some price sensitivity issues by offering volume/bulk discounts. Displaying the savings for buying multiples of the same product prior to checkout can boost AOV. This doesn’t work for all items. But for consumable, repeated-use products (everyday household items, pet supplies, office supplies, health and beauty, etc.), it can raise AOV. When a shopper knows prior to checkout how much they can save buying two or three of a product, they will likely be enticed to make the bulk buy. A word of caution: retailers must determine the right discount that attracts customers, but doesn’t cut into their profit margins.
6. Use Limited Time Offers
Understanding the psychology behind what drives customer behavior can help boost AOV. Creating a sense of urgency through scarcity or limited time offers is a proven motivator for shoppers. Research has proven that people derive more satisfaction from avoiding a loss (missing a sale) than from achieving a gain of equivalent value. So, Adding a limited duration to the offer can create a sense of urgency among visitors and encourage them to buy immediately. For example, “Limited Time Offer: Get 30% off on all products for next 2 days”, compels shoppers to act right away.
7. Show Best Sellers/Trending Items
By featuring trending or best-selling products above the fold on category pages, retailers can lure shoppers to make impulse buys. Customers are more likely to add featured products that are generated on the basis of popularity by views or sales to their shopping carts. Again, people have a fear of missing out (FOMO). If everyone else is buying something, other shoppers will want to as well.
8. Use Shopper’s Browsing History
Display products that a visitor has recently viewed or previously purchased. The customer may be prompted to make a repeat purchase. Or they might just pull the trigger on an item they were previously only considering.
9. Incentivize Customer Purchases
Rewarding shoppers for purchases makes them want to spend more and come back. It also gives retailers valuable data about their buying habits. This allows for highly-targeted marketing after the purchase as well. According to Customer Loyalty Statistics, engaged consumers buy 90 percent more frequently; spend 60 percent more per transaction, and are five times more likely to buy from that brand in the future. Online retailers can reward shoppers with loyalty points, gift vouchers, or cash back. Retailers can use anything that is redeemable on a shopper’s next purchase.
10. Market to Repeat Customers
Returning shoppers, who are already familiar with an online retailer, will spend more on each order. Marketing to returning customers, has both a good return on investment and a positive impact on AOV. According to an Adobe study, 40 percent of online revenue comes from repeat buyers. In the U.S., a shopper making a second purchase from a retailer is likely to spend three times more than a new customer would. And a shopper who makes three or more purchases from the same retailer is likely to spend five times as much as a new customer on each order.