As an eCommerce store owner, you probably already know that tracking your most important metrics is crucial to long-term growth. But with so many metrics to evaluate in your Shopify store, knowing which numbers to zeron-in on can be a challenge, especially when you notice that your online store is reaching a dreaded revenue plateau.
Most of the time, business owners focus on marketing strategies that boost their website and lead to higher conversion rates for their stores. However, these strategies usually come with a hefty price tag and can cause you to waste precious resources on tactics that don’t actually generate lasting results. That’s where average order volume comes in.
What Is Average Order Volume?
Average order volume, or AOV, is a key performance indicator that shows the average amount of money that shoppers spend during a single transaction in your Shopify store. This is calculated by taking the total revenue of your store and dividing it by the total number of orders. Rather than trying to acquire new customers for your store, increasing the AOV can significantly boost your revenue by encouraging existing customers to spend more money each time they shop.
Unlike other eCommerce KPIs, AOV is relatively easy to increase and won’t eat up a chunk of your advertising budget in the process. Since most marketing strategies come with higher customer acquisition costs, focusing on AOV is a cost-effective way to improve your store’s metrics without any of these other costs.
In this blog, you’ll learn exactly how to increase AOV through three unique perspectives and how to track this metric more effectively, so you can generate consistent revenue growth.
How To Evaluate AOV Metrics The Right Way
- Mean
- Median
- Mode
AOV Perspective #1: Offers & Incentive
- Buy 1, Get 1 50% Off
- SKU-Based Discounts
- Buy X, Get X% Off
- High-Volume Discounts
- Free Gift With Purchase
- Product Bundles
- Peaks
AOV Perspective #2: Website Optimization
- AOV-Based Merchandising
- Product Recommendations
- Cross-Sells & Upsells
- Discount Minimum Values
- Dynamic Pricing Strategy
- Shipping Thresholds
AOV Perspective #3: Email & SMS Strategies
- Subscriptions
- Full-Size Products
- Customer-Specific Cross-Selling
- Weighted Purchases
- Flash Sales
- Customer Loyalty Programs
How To Evaluate AOV Metrics The Right Way
Sure, at face value, AOV seems like an important metric for an eCommerce business. But when you think about it realistically, the average dollar amount of purchases in your shop doesn’t tell you much about customer behavior, which is what you really need to understand in order to increase your revenue. So, instead of looking just at your AOV on its own, why not break this metric down further by looking at it as mean, median, and mode?
Here’s what we mean…
Mean
Mean is the average of all your AOV data combined. Like we mentioned earlier, the average amount of each order isn’t a very reliable metric on its own. For instance, if the average order volume of your store is $80, that doesn’t necessarily indicate that customers are actually spending that much money with each purchase. It just means that the average of all the orders combined was $80.
Median
Unlike the mean, the median shows you which number is in the middle of your total sales. In other words, if you lined all the purchase values from your orders up from smallest to greatest, the median would be the amount directly in the middle. This is an important eCommerce metric because it shows you the average value that customers have actually purchased.
Mode
Finally, mode shows you the purchase amount that occurs most often in your online store. So, if your median is $80, but the mode is $50, it shows you how much money the majority of your customer base is actually spending each time they shop with you.
By looking at these three eCommerce metrics, you can start to get a better idea of how your customers interact with your store, allowing you to create powerful incentives that impact how much they order at one time.
AOV Perspective #1: Offers & Incentives
The first option for increasing your AOV is to create offers and promotions that incentivize your customers to add more products to their shopping carts. Depending on the behavior of your customers, there are a few different offers that you can use to create these incentives.
Buy 1, Get 1 50% Off
One of the most popular ways to get customers to add more items to their cart is by offering a buy 1, get 1 50% deal. This works best with low-value items, allowing you to increase the volume of their basket without sacrificing your more expensive items. It’s also a great way to clear out inventory for products you might be overstocked on.
SKU-Based Discounts
If you have a particular product that doesn’t seem to be performing well, offering discounts on that SKU is a good way to entice customers to add it to their cart. Alternatively, you can also offer discounts for products within a particular AOV range. For example, giving customers X% off all items over $50 makes it seem as if your shoppers are getting a better value on items they might not have ordinarily bought based on pricing. The best way to determine which products to create SKU-based discounts for is by leveraging the impact of merchandising in your eCommerce store.
For more insight on how to do this, check out merchandising guide here: [link]
Buy X, Get X% Off
Similar to our buy 1, get 1 50% off deal, you can also create promotions that encourage customers to buy multiples of a certain product for a percentage off their order. For example, buying 2 or more of a single item could lead to 25% off their purchase or an additional product for 50% off. Either way, you’re galvanizing your customer to fill up their carts.
High-Volume Discounts
Another way to generate this effect is by using volume discounts, which give customers a percentage off based on the minimum purchase they place in your store. You can even create a tiered structure for this promotion, leading to higher AOV for every level of customer, such as 10% off an order of $25, 25% off an order of $50, and 50% off an order of $100. Having these benchmarks in place seamlessly moves customers up the different levels of AOV, which is always the ultimate goal.
Free Gift With $X Purchase
It’s no secret that everybody loves a free gift, and using free products is an easy way to entice customers to spend more money than they would have initially. Of course, that doesn’t necessarily mean you have to give away high-value items. Instead, you can offer products that you have an excess of in your inventory or create samples of some of your best-selling products. This creates a sense of value and appreciation that keeps customers coming back for more.
Product Bundles
Now, with all of that being said, there are some downsides to running these types of promotions. If you’re not careful, you can offer too many discounts, which seriously impacts your profit margins. That’s why we encourage our clients to focus on more subtle AOV incentives like product bundles.
Here’s a great example from our client Dirtea…
When we started working with this particular client, we noticed that customers only bought one item at a time, which is typical for eCommerce businesses driven by CLTV (customer lifetime value.) Dirtea sells wellness-centric teas and supplements based on specific lifestyle needs, like sleep, concentration, immunity, etc.
So, rather than offering a bunch of discounts that would eat into their profit margins, we started creating bundles inspired by the needs of their customers. This not only incentivized their customers to buy more products at one time, but it also exposed them to items they might not have tried already, leading to an even higher lifetime value for each buyer.
Another way to utilize this same approach is to bundle your best-selling products with newer product launches, encouraging your loyal customers to try the new product while still giving them the one they already know and love.
Let’s look at another example from our client Alpha Loin…
When we started working with this particular client, we noticed that customers only bought one item at a time, which is typical for eCommerce businesses driven by CLTV (customer lifetime value.) Dirtea sells wellness-centric teas and supplements based on specific lifestyle needs, like sleep, concentration, immunity, etc.
So, rather than offering a bunch of discounts that would eat into their profit margins, we started creating bundles inspired by the needs of their customers. This not only incentivized their customers to buy more products at one time, but it also exposed them to items they might not have tried already, leading to an even higher lifetime value for each buyer.
Another way to utilize this same approach is to bundle your best-selling products with newer product launches, encouraging your loyal customers to try the new product while still giving them the one they already know and love.
Let’s look at another example from our client Alpha Loin…
Peaks
Source:- Smart bug media
The final strategy you can use is to promote higher AOV products during peak shopping times or cultural moments. These moments can include popular retail holidays like Black Friday and Cyber Monday or any other period of time where you notice a spike in the total number of orders in your store.
Try using these peaks to your advantage by creating promotions that incentivize volume discounts for your high AOV products, as well as discounts with a minimum purchase. This allows you to take advantage of the moment and rapidly increase your profits in a short window of time.
AOV Perspective #2: Website Optimization
If you don’t want to jeopardize your profit margins by creating offers and promotions, you can focus on your optimizing your website for AOV purposes. It might not seem like much, but the layout and functionality of your website can be extremely influential during your customer’s journey and, when done strategically, can seriously impact their buying habits during the checkout process.
AOV-Based Merchandising
In old-school retail stores, merchandising refers to laying out the store in a way that showcases the most expensive items first while keeping low-value products hidden towards the back. For online businesses, this process works the same way for your website. An easy way to do this is to list your high-value AOV products at the top of the page, forcing your customers to scroll down further if they’re looking for a less expensive item. You can also try removing product pages for low-value products from your dropdown tab, making them less likely to find these pages without searching for them specifically.
Product Recommendations
If a customer is new to your store, using product recommendations and other types of social proof is a good way to entice them to buy products that increase the AOV of their order. These recommended products can include best-sellers, product bundles, and other related products that boost the volume of their cart.
Cross-Sell & Upsell
Cross-selling and upselling are two of the oldest tactics in the book, but that’s because they’re extremely effective at generating results. For example, cross-selling might look like suggesting complementary products as add-ons to their cart during the checkout process. So, if a customer buys an energizing coffee product, you could cross-sell them on accessories like a tumbler or even related products like teas. This is a type of segmentation marketing that allows you to target specific customers within your audience.
If you wanted to upsell the buyer, you could offer them a limited-time discount for choosing the deluxe or premium version of a product they were already interested in buying, causing them to choose the item with the higher AOV in just one click.
Discount Minimum Values
For eCommerce stores already using offers and promotions to their advantage, you can optimize the effects of these incentives even more by enforcing minimum purchases for all of your discounts. For example, you can offer a 25% off discount for all orders over $75, and so on.
Dynamic Pricing Strategy
You might think the pricing of your products is set in stone, with the exception of limited-time offers and promotions. But with a dynamic pricing strategy, you can increase the actual price of each individual product based on consumer demands.
Remember how we used shopping peaks to create discounts based on holidays and cultural moments? You can take this approach to run dynamic pricing. Let’s say you notice an increase in sales on Mother’s Day every year. Instead of slashing your prices, slightly increase them during this period of time. If customers are going to buy your products either way, this allows you to boost your revenue and your AOV fast.
However, dynamic pricing doesn’t work for all eCommerce niches. That’s why we recommend testing this strategy to determine its impact first.
Shipping Thresholds
Let’s face it; everyone loves free shipping, regardless of what they’re shopping for. Unfortunately, shipping costs can be extremely detrimental to your bottom line if you don’t understand how to leverage your shipping strategy effectively.
That’s why using shipping thresholds, or a minimum order value for free shipping, is so important. So, if a customer wants to place a $40 order but doesn’t want to pay for shipping, you can encourage them to spend more money to reach the $50 free shipping threshold. This helps you cover your costs while automatically increasing AOV.
AOV Perspective #3: Email & SMS Strategies
The final perspective you can take on increasing your AOV is a bit different. Whereas offers and website optimization are focused on increasing AOV for first-time customers, email and SMS strategies are a good way to increase AOV for customers who have already purchased from your Shopify store.
Of course, you need to grow your email and SMS list before you can use any of these tactics. The easiest way to do this is to entice customers to subscribe to your list with discounts. For example, offering them %15 off their order if they register for email and/or SMS updates. This allows you to build lasting connections with customers and create special offers tailored to their journey.
Subscriptions
Not all eCommerce products are ideal for a subscription plan. But if you’re selling products with a high CLTV, like wellness supplements or food items, giving your loyal customers a chance to sign-up for a subscription is a great way to increase AOV on the back end. For instance, if you’re selling coffee products, you can offer customers a small discount for signing up for a subscription that automatically ships every month. This keeps their AOV consistent and creates more customer loyalty over time.
Full-Size Products
Product samples are a great tool for exposing your customers to new products you know they’ll love. So, if you know from a customer’s purchase history that they’ve picked up sample sizes of their products, you can create email or SMS marketing campaigns that upsell them on the full-size versions of these items. You can also do this with kits and product bundles, both of which increase the AOV of their orders.
Customer-Specific Cross-Sells
Similarly, you can also use their purchase history to cross-sell them on other products that are relevant to their interests. By creating campaigns based on their specific tastes, customers are more likely to feel a sense of connection to your brand, leading them to steadily increase their AOV per purchase over time.
For example, if you have customers who bought a cooler, you could cross-sell them on products like ice packs, drink holders, and other items that speak to their unique customer journey.
Weighted Purchases
Now, if you’re selling products on the back end, meaning you’re promoting these products specifically to repeat customers, you can also adjust the pricing based on customer demands. For example, if a customer has already bought a product for $50, you can upsell them on a premium version of this item, or a larger quantity of it, for $60 instead. This creates a feeling that they’re getting a higher value for their money and a better quality product while instantly increasing the AOV of their next purchase.
Flash Sales
One of the most impactful tactics for your email and SMS list is to offer exclusive sales for just these customers. This is especially useful if you’ve noticed an increase in cart abandonment or if you have customers on your list who haven’t purchased from you in a few months.
These 24 – 48-hour flash sales typically offer big discounts on some of your best-selling products, encouraging customers to add more items to their cart than they usually would. It also leverages the almighty power of “FOMO,” fear or missing out. By putting a time limit on this sale, customers have a sense of urgency to complete their purchase.
Most importantly, flash sales are an easy way to increase your revenue with rapid speed, giving you a quick sales boost that you can use to grow your profit margins.
Customer Loyalty Programs
Of course, customer loyalty is crucial to the longevity of your eCommerce brand. So, why not use your existing customer base to create a loyalty program? If you already have customers on your email and SMS, you can encourage them to earn rewards points and other exclusive savings by joining a customer loyalty program.
Some of the most effective marketing strategies for these programs are to offer things like exclusive coupons for every X amount of dollars spent, lower shipping thresholds for rewards members, and pre-sale deals for newly released products. This is a cost-effective way to increase the AOV for your returning customers and prevent them from buying from your competitors.
Final Thoughts
Whether you keep your products in stock or use dropshipping tactics, understanding how to increase the AOV of your eCommerce store is one of the easiest ways to improve your KPIs without the acquisition cost of other key metrics.
Our team knows that navigating the Shopify app and other eCommerce platforms like Amazon can be a huge undertaking for small brands and start-ups. So, if you’d like our help to drive your AOV numbers through the roof, connect with our eCommerce marketing experts today.