Average Order Value (AOV) is a crucial metric for any e-commerce business who are seeking ways to improve revenue. Imagine you’ve got a decent base of customers for your business who sometimes go back to make a purchase. But how to make them spend more every time they create an order?

In this blog post, we provide a detailed introduction about AOV: What it is, why it matters, and how to effectively boost it? Don’t forget to check out tool suggestions for each strategy as well!

What is AOV? Definition, metrics, and why it’s important

Definition

AOV (short for Average Order Value)  measures the average amount that a customer spends per order in your online store. This metric can provide valuable insights into customer behavior and spending habits.

How to calculate AOV

It's a simple calculation: total revenue divided by the number of orders.

AOV = Total revenue/ Number of orders

For instance, if your store generated $10,000 in sales from 100 orders last month, your AOV would be: AOV = $10,000/ 100 = $100

A high AOV can suggest you're attracting high-value customers or selling effectively with cross-selling and upselling strategies. Meanwhile, a low AOV is an indication that customers are price-sensitive or prefer smaller purchases.

Why is AOV important?

  • Boost revenue and profitability 

 Even a small increase in AOV can significantly impact your bottom line. For instance, if you raise your AOV by $10 and maintain the same number of orders, that's an additional $10,000 in revenue each month!

  • Provide customer insights

AOV can indicate whether customers are price-sensitive or not. It can also help merchants find out if their customers prefer smaller purchases. Understanding these trends helps them to tailor unique offerings and promotions accordingly.

  • Increase Customer Lifetime Value (CLV)

Simply put, if customers spend more every time they buy, the total spending over
time (CLV) will also increase. These customers also tend to be more loyal, so a
loyalty program for higher spending can further strengthen this connection. As a
result, they will be likely to visit again and again.

3 Practical Strategies To Increase AOV

There are a wide range of strategies to increase AOV for your business and we’ve managed to categorize them into 3 main groups as below:

#1: Pricing strategies

Implement Tiered Pricing

Tiered pricing involves providing a range of product options with added value at higher price points. For example, an athletic sneaker store can offer a basic line, a performance line, and a premium line of shoes with modern technology. The price for each line increases as there are more added benefits.

Make sure to highlight the benefits of each tier, so that you can encourage customers to choose the option that best suits their needs and budget.

Setting up tiered pricing may seem complicated with a lot of steps to do, which can even challenge experienced merchants. But worry not! This is where VolumeBoost ‑ Volume Discounts comes into handy.

This app allows merchants to create tiered pricing based on several factors, such as cart discounts, collection discounts, etc. For instance, with product-specific discounts, they can add tiered pricing for individual items, which is highly beneficial for offering premium versions of products at higher price.

Offer quantity discounts

Quantity discounts refer to the discount program for buying larger quantities of the same product. The most common example of this AOV strategy is "Buy 3, Get 10% Off" or anything similar to this. Quantity discounts can make customers stock up and spend more upfront. Some online businesses have reported that quantity discounts can increase AOV by up to 15%, showcasing their effectiveness in boosting customer spending.

They are particularly effective for consumer goods, where customers usually want to buy large quantities. Makeup sponges, razor blades, paper cups, etc. are some common examples.

If you are worried about all the mechanics or how to set up such a quantity program, take a look at BOGOS.io. This app helps merchants easily set up powerful gift combo and discount offers for their customers. 

Create value bundles

Creating value bundles means that merchants can group complementary products and offer them at a discounted price. This price is usually lower compared to buying them individually. 

For instance, when a customer buys a laptop, he or she would want to buy it with a carrying case, mouse, and headphones. Thus, an electronics store can create a bundle at a discounted price to encourage them to buy the whole package.

There are numerous apps that can help merchants create bundles in a matter of minutes. Take Vitals as an example. This app offers a variety of features, including flexible discount options to bundle rule management.


#2: Promotional strategies

Upsells and Cross-sells

During check-out, merchants can recommend relevant add-ons to improve customer’s initial order. This could be a phone case for a new phone or cables for a new gadget.  

If you can showcase how these additional items add value to the overall experience, there are high chances you can increase the order size and boost AOV. 

Important: The key is to recommend products that genuinely complement the initial purchase, not simply try to push unrelated items

Target Upsells After Purchase

If you think the sales journey ends at check-out, think again. Consider offering a limited-time discount via email after a customer completes their order. 

The email will act as a reminder for them to revisit your store, thus increasing AOV.  

Again, don’t forget to offer them discounts on a related product. For example, after someone buys a coffee maker, you could send an email offering a discount on a coffee grinder or a bag of specialty beans.

Loyalty Programs

A loyalty program can increase the AOV by encouraging customers to spend more to unlock rewards. For instance, you could offer a points system where customers earn points for every purchase. These points can then be redeemed for discounts, free products, or exclusive early access to sales.

According to Bond's 2019 Loyalty Report, 43% of customers spend more to earn loyalty rewards. The case study of LINE FRIENDS has proved that a loyalty program can increase AOV and repeat purchases by 80% within one month.

This strategy not only boosts sales but also enhances customer retention by making the shopping experience more engaging!

To further amplify these benefits, try out Ako Marketing, which offers a comprehensive loyalty program for online merchants. The Ako Loyalty Program boosts retention with VIP Tiers and various ways to earn points, such as referrals, signups, reviews, birthdays, and 1-click social login. By integrating these diverse earning opportunities, Ako Marketing not only increases AOV but also fosters a deeper connection with customers, ensuring they remain engaged and loyal to your brand.

#3: Customer support strategies

Live Chat upselling

Live chat isn't just about answering questions.  Merchants can train their customer support agents to implement up-selling during conversations. They can also address customer concerns more quickly and recommend higher-value purchases.

According to Forrester, customers who engage with live chat are 2.8 times more likely to convert. Websites with live chat support can also experience a 48% increase in sales compared to those without customer support. Therefore, this is one of the top strategies to increase AOV for your store.

Consider using a robust customer support platform like MooseDesk, which offers an intuitive live chat feature to empower your team to deliver exceptional service and drive sales.

MooseDesk's live chat feature ensures you never miss a message and enables swift resolutions across multiple channels. Whether your customers reach out via live chat, email or social media, MooseDesk unifies these interactions into one dashboard for seamless management.

Post-Purchase Support

After the purchase, send a personalized email offering assistance with product setup or usage. This demonstrates that you care about their experience and builds trust.  

One of the most popular options for setting up email marketing is Klaviyo, a powerful email marketing automation tool. It helps online businesses manage email marketing, SMS marketing and even personalize customer experience via different touch points.

You can also include recommendations for customers when they buy any product. For example, someone who buys a new camera might benefit from recommendations for camera lenses, cleaning kits, or memory cards. 

Wrap-up

In conclusion, Average Order Value (AOV) is an essential metric for any e-commerce business owner looking to drive revenue growth. By employing numerous strategies, businesses can effectively increase their AOV and improve customer satisfaction and loyalty. 

Remember, there is a wide selection of tools to support you during the AOV optimization process. By taking advantage of a marketing loyalty app like Ako Marketing or a customer support tool like MooseDesk, your Shopify business will reach sustained success and profitability in no time.

Author information

Riley Nguyen
Growth Marketing Executive

Riley is a marketing enthusiast, who focuses on a data-driven approach to reach explosive growth. She is passionate about tech trends and constantly seeking ways to help SMEs thrive in the e-commerce world.