Blog

Apr 11, 2023

10 Best Ways to Increase Your Average Order Value in 2024

Running an eCommerce business with great website traffic and conversion rates

There’s just one more thing you might want to monitor while growing your business - the average order value. While many of your customers are shopping with your brand frequently, their total spending on checkout might be low. 

A low average order value means your business is making less money from every transaction. Clearly, this is a metric you need to observe in order to make your business more profitable.

Modern marketing strategies are designed to make the shopping experience as convenient as possible. And thanks to responsive websites and mobile applications, customers tend to buy only what they really need. This often results in a consistently low average order value.

So how to increase average order value?

This article covers 10 ways to increase your AOV and how you can implement them to scale your business.

<div id="What_is_Average_Order_Value_(AOV)?" fs-test-element="What is Average Order Value (AOV)?"></div>

What is Average Order Value (AOV)?

AOV is the average of the amount your customers spend on an order they place on your eCommerce website. It is a crucial benchmark to evaluate brand performance and customer behavior. 

Knowing and working around your average order value allows you to figure out which products are performing well. You can also develop a clear picture of what your customers are interested in. 

Retailers who evaluate their AOV regularly also direct their efforts to get customers to spend more than the threshold value. The simplest of these efforts comes in the form of a free shipping offer, which can increase the AOV from $20 to $25.

Analyzing Your Current AOV

Average order value is one of the metrics that can be analyzed based on different time periods or in smaller increments. Once you have a definitive value, you can use it as a standard to track future AOV and make better business decisions.

Moreover, analyzing your current AOV helps determine whether your ongoing strategy is working or not. Over time, you can monitor AOV trends and identify the key areas that make customers spend more on each order. 

<div id="How_to_calculate_Average_Order_Value" fs-test-element="How to calculate Average Order Value"></div>

How to calculate Average Order Value

Average order value can be easily calculated by adding up your brand’s total revenue and dividing it by your total number of customers. 

How to calculate Average Order Value

<div id="Benefits_of_increasing_your_AOV" fs-test-element="Benefits of increasing your AOV"></div>

Benefits of increasing your AOV

Higher revenue and profit: The most obvious benefit of increasing your average order value is a subsequent rise in profits and revenue. As you begin to earn more with every order, you can uncover new revenue streams to grow your business.

Prevent overstocking: Whether you have stored stock in your inventory for a brick and mortar store or an online store, having excess items is never a good sign. Increasing your average order value means you are selling more items with every order. As a result, more items go from your inventory and you can avoid overstocking.

Cost reduction: Given that you are spending approximately $20 on your marketing strategy, if you have an AOV of around $50, it’s not worth it. Taking into account inventory costs and tax deductions, your business will not be so profitable. However, with an increase in average order value, you can turn this around and earn more while spending the same amount.

<div id="10_Ways_to_Increase_Your_Average_Order_Value_(AOV)" fs-test-element="10 Ways to Increase Your Average Order Value (AOV)"></div>

10 Ways to Increase Your Average Order Value (AOV)

Now that we have covered the benefits of increasing your average order value, let’s get back to the main question - How to increase average order value in eCommerce?

1. Offer product bundling

One of the best ways to increase your average order value is to offer bundle deals. You can do this by selling relevant products along with what your customer wants to buy. E-Commerce platforms like AliExpress offer bundle deals like buy two items and get 1 free, or buy 3 and get the fourth free. 

Offer product bundling

An example of product bundling by eCommerce retailer Dollar Shave Club.

Although you need to consider profit margins while putting up such promotions, this strategy helps in getting customers to buy more per order. The products you offer for free or at discounted prices must not impact your preset margins. It’s important to set prices of products in a way that you can automatically cover the cost of the third item you are giving for free.

2. Implement cross-selling and upselling techniques          

Cross-selling and upselling are great ways to show customers complementary products. In most cases, suggestions of products from similar category or a different category can lead to a bigger sale.

Some eCommerce platforms have implemented ways to add relevant products to customers’ carts to make them buy more products. While brick and mortar stores have to rely on salespeople to convince customers for higher value purchases, online stores are another story. 

Upselling

With upselling, you have better chances of compelling a customer into upgrading the product they are willing to buy. For example, a customer is looking to buy an item from your store’s electronics section. In this case, upselling would mean that you offer them a product of superior quality in that specific category. While quality convinces your customers, you get more dollars per order.

Cross-selling

Similarly, cross-selling allows you to tap in to separate but relevant items by suggesting them to customers. For instance, a customer who is looking to buy a shirt may also be convinced to buy a pair of pants if you pitch it in the right way. 

By analyzing past searches, product interactions, and cart items of customers, you can show your customers the right products for both upselling and cross-selling purposes.

As you provide more value to your customers using automated product recommendations, they tend to spend more with each order.

Offer Personalized Recommendations with XStak

Try Out the Recommendation Engine Today!

Book a Demo

3. Use pricing strategies

Studies have shown that customers associate higher price tags with higher quality. Capitalizing on such consumer behaviour, retailers can use pricing strategies to sell more per order. Value-baed pricing is a way to set prices based on customers’ perceived value of the given item. 

This customer-focused approach allows companies to price their products in a way that makes customers believe its worth. Such a strategy does not involve factors like the cost of production or storage, but is solely based on customers’ brand perception.

Pricing strategies are especially suited to business that offer unique products and services. They can extract maximum value from value-based pricing as they know what their customers really want. To be able to offer such prices, companies must implement a system to constantly analyze sales trends.

4. Offer free shipping for orders above a certain value

Apart from payment methods, the only major concern for customers is shipping cost. 

61% of shoppers abandon their cart if shipping is not free.

So here is something you can take advantage of. 

In order to increase your average order value, you can set a threshold order amount that allows your customers to get free shipping. This strategy gets customers to add more items to their cart knowing that they do not have to pay any additional dollars for shipping.

Offer free shipping for orders above a certain value

What’s more important than offering free shipping is to display it throughout your eCommerce platforms so that your customers know it first hand. It is also a good practice to display free shipping badges or banners at checkout, giving customers peace of mind.

The easy way to determine the value you want to set as threshold for free shipping is as follows: 

  • Calculate your current average order value
  • Add 30% to your current AOV
  • Set the sum of the two values as threshold amount

To make sure that the free shipping strategy works, you can implement a notification system. Your can notify customers whenever they checkout with an amount that doesn’t add up to the minimum free shipping threshold. This tactic can further increase the chances of increasing your average order value.

5. Implement a loyalty program        

Loyalty programs are the definitive marketing tools to ensure repeat purchases. As loyal customers are known to spend more than first-time buyers, you can use rewards to increase average order value. 

According to a study, loyalty programs boost AOV by about 14%. The strategy which is primarily used for customer retention also proves to be useful in convincing customers to add more items to cart.

Setting up a loyalty program is not a tough task when you have an all-in-one retail management solution by your side. XStak’s loyalty management system offers dynamic customer segmentation to help your business offer personalized rewards. 

You can configure your own loyalty program features with the help of real-time data analytics and records of customers’ preferences. As you offer your customers loyalty points on purchasing more products, you will be able to increase average order value.

Another great way to offer better loyalty rewards is by giving away items that have been sitting on your shelves for too long. Labelling the said products with markings saying that purchasing them will earn the customer extra loyalty points often gets the job done. 

Not only are you able to increase average order value by rewarding customers, but also get rid of slow-moving inventory items.

Increase AOV with Personalized Offers

Explore XStak’s LMS Module Today!

Book a Demo

6. Use social proof to showcase customer reviews and ratings

Nothing provides customers the confidence to shop more products like social proof and reviews. Positive reviews from existing customers can lay a strong foundation for new ones, convincing them to make bigger purchases.

According to a study, 72% of customers do not purchase a product before reading positive reviews about it. For this reason, retailers must gather feedback and reviews from customers in order to increase their average order value. 

Once you start getting positive reviews, you need to display them appropriately on your website, mobile apps, and in stores to get the maximum benefit.

7. Offer limited-time promotions

Creating a sense of urgency leads customers to make impulsive purchases, or at least gets them to add more items to cart. You can use this method to increase average order value. For instance, you can offer limited time discounts on items that are popular among your customers.

When the customer sees that their favorite product can be purchased at a lower price within a 24 to 48 hour window, they will add more items to cart. This method is also useful when you are looking to sell a large amount of items in a short period.

8. Deliver outstanding customer service

Customer service is one of the major decisive factors in improving sales. Regardless of the nature of your business, if your customers do not get a timely response, they are likely to abandon the purchase. 

Considering you are aiming to increase your average order value, your customer support must be top notch. According to Forrester study, eCommerce business with live chat support sell 10 to 15 percent more per cart.

When you have a cohesive live chat support team in place, your customers get instant answers to their queries. This, compared to an experience with delays in customer support, increases your chaces of greater sales. Live chat support has been labelled by experts as the ‘underutilized weapon’ for improving average order value.

9. Provide product recommendations                           

As hinted earlier, product recommendations play an important role in improving AOV if they are done right. It’s important to ensure that the recommendations you offer are highly relevant to your customers’ interests. 

AI-based retail solutions allow you to develop a better understanding of customer preferences and purchase behaviours.

Recommendations that are put together smartly have greater chances of improving customer journeys and help sell additional products. According to Salesforce, product recommendations help improve order values by 24% and boost revenue by 26%.

Product suggestions can simply include items that pair well with the item your customer is willing to buy. That being said, you need to send a clear message showing that these products are of maximum value when paired together.

Increase your AOV with XStak

Try out the Recommendation Engine Today!

Book a Demo

10. Offer financing options

Last but not the least, providing flexible financing options is also a viable method to increase average order value. Even when you have ensured a smooth customer journey and immersive user interface, your customers may still perceive some hurdles. These can be in the form of highly priced items, large quantities, and high-value product bundles.

The way to get around this matter is to offer financing solutions and packages. One of the popular options that you can use is offering installments with 0% interest rate. Financing options also prove to be highly useful in reducing order abandonment in both online and physical stores. 

<div id="Final_note" fs-test-element="Final note"></div>

Final note

Monitoring average order value helps eCommerce retailers determine how well they are performing. Once you have calculated your AOV over a given period of time, you can design and execute new strategies to get the ideal number. Regardless of the methods you choose, increasing average order value definitely puts you on the right track towards business growth.

Become An Omnichannel Retailer

Take a personalized tour of XStak's retail operating modules with our Sales experts and learn how XStak can enable you to grow.