The most analysed metrics in eCommerce include: Revenue, Traffic, Conversion Rate, or Cost of Sale. An equally significant and directly affecting the online store’s KPI is the Average Order Value (AOV). The main objective in raising AOV is to increase profitability (total transaction value per user), without increasing expenditure on paid PPC marketing.
How to calculate the Average Order Value in eCommerce?
To calculate the average order value in eCommerce, we will need the total sales revenue and the number of completed transactions for this.
Average Order Value (AOV) = Total revenue / Number of transactions:
Average Order Value in Google Analytics
The enhanced eCommerce module has a built-in AOV calculation feature. The Average Order Value is available under Conversions → Ecommerce → Overview.
Average Order Value in Google Analytics
How to raise the Average Order Value in an online store?
I have compiled 9 key strategies to help increase the Average Order Value in eCommerce in the following article.
1. Cross – Selling
One of the most common methods to boost the Average Order is Cross Selling, you can find out more about this method in an earlier article available here. The Cross Selling method involves increasing the order value by adding complementary (supplementary) products to the main more expensive product. This method can be applied at the transaction processing stages: Product card → Cart.
Note!
It is very easy for a new untested module in Checkout to lower the conversion rate by, for example, taking the user out of the cash register. For checkout, it is best to test the Cross – Sell module performance. Nowadays, it is increasingly common to use checkout with no additional resale options, and to focus more on providing various payment or delivery options.
Product Detail Page
Cross Selling – Product Detail Page
Cross Selling – Cart page
Checkout page
2. Up – Selling
Up-Selling is yet another favoured method of boosting the Average Order Value. Its main idea is to encourage customers to switch from a cheaper product to a more expensive one. Similarly, to Cross-Selling, Up-Selling is applied to the product card and the shopping cart.
Below is a sample strategy for exchanging a product for a more expensive one at x-kom.com store. The variant with 8 GB memory costs £1,100 more than the variant with 16 GB RAM. By advertising a product in advertising networks or price comparison sites, we thus obtain the lowest variant price, increase the chance of clicks, and thus lead users to the product card in our store. Then, through Up-Selling campaigns, we exchange a product for a more expensive variant with 16 GB RAM.
3. Free delivery from X amount
Another approach to increase the order value is to set up free delivery from x amount. The aim of this strategy is to get customers to deliberately add more products to their cart to reach the free delivery threshold. For example, if the Average Order Value is £260. We can raise this free shipment fee to £299 and then verify that AOV has increased. When implementing the amount for free shipping, it is also a good idea to add a module that informs users of the threshold and the amount they need to obtain free delivery. For example, “You have £35 left for free delivery”.
4. Bundles – cheaper as a bundle
This is nothing more than bundles or tying. It involves offering several complementary products at one discounted price. Bundles, unlike Cross – Selling, reduce the price of the entire bundle. Below is an example of bundling products for the Casper.com brand with the option to customise bundles with selected products and variants. Regardless of the variants chosen, the price for the entire bundle will be lower than when ordering separately. Bundles can also serve as a sale of C products (products with the lowest turnover in eCommerce – the most overstocked products).
Bundles – Collections Casper.com
5. 3-for-2 mechanism
The buy X-for-Y strategy we are very familiar with from offline sales, and it is true that it prompts us to buy products that we had not planned to buy :). Sample promotional campaign for empik.com:
Buy 3 for 2 Empik
6. Social proof strategy
The use of social proof to confirm purchase of extra accessories also has a positive effect on increasing interest in extra gadgets that match the main product. Examples of messages supporting social proof for Cross-Selling: “Customers who bought this product also bought: …” and for Up-Selling: “Customers who viewed this product also viewed:…”.
7. Loyalty programme
A loyalty programme is a great strategy to increase the Average Order Value (AOV). The cost of acquiring a new customer is much higher than keeping an existing one. It is so much easier to process an order if you already know the brand and have a positive impression of the transaction processing. Significant increases in the Average Order Value have been reported for participants in loyalty programmes, according to a survey prepared by McKinsey & Company* available here:
Basket size 62%* – responders more likely to spend on the brand (paid loyalty programs)
Basket size 30%* – more likely to spend on the brand (free loyalty programs)
Source: *McKinsey & Company survey here.]
8. Providing a buy-now-pay-later payment
According to Shopify, shopping made using the BNPL (buy now pay later) payment option has increased by 29%* since 2020, and its share now stands at 8% among all payment providers.
*Source shopify.com
The Buy Now, Pay Later Report** (Factors why customers choose the BNPL option over the credit card payment method):
- 39.4% to avoid interest on credit card repayments,
- 38.4% to make a purchase that otherwise would not qualify for the household budget,
- 24.7% to borrow money without extra interest,
- 16.3% do not like using credit cards,
- 14.4% I cannot get consent for a credit card,
- 14.0% used, the total credit card debt was used,
- 3.3% I do not have a bank account.
Buy Now Pay Later
Source: **https://www.insiderintelligence.com/content/buy-now-pay-later-report
In addition to increasing conversion rates, the deferred payment method also increases the order value. It is important to adequately communicate deferred payment options to customers. A frequently used method is to add BNPL information on a product page or a store’s homepage, so as to communicate to the customer the option to pay in instalments at a later date, right at the start of the shopping process.
Buy now pay later paul-rich.com
Buy now pay later affirm.com
9. Additional services included in the cart
The last option for increasing the order value is to add extra services during a transaction processing in the cart, such as:
- Product insurance during shipping
- Wrapping an item for a Christmas gift
- Warranty extended from 2 to 5 years
By definition, these are items that increase the CR Conversion Rate, while they also increase the Average Order Value AOV.
Summary
Some strategies that increase the Average Order Value are intertwined. For example, the implementation of a loyalty program is intended to improve LTV (Life Time Value), while at the same time increasing the AOV (Average Order Value). Out of the most common methods to increase the order value is the use of Cross-Selling and Up-Selling modules. They are described in detail in the article available here. I hope you found the article interesting and that it helps you increase AOV in your online store.
eCommerce Manager at Paul Rich – multimillion jewellery premium watch brand. Shopify & Shopify PLUS consultant, blogger and ex-founder of napnell.pl
