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5 Cost-Effective Ways to Increase Average Order Value on Your Store

By Reading Time: 6 minutes

Every online retailer wants to generate more revenue, there are absolutely no exceptions here.

Some concentrate on driving more traffic to their website. Others continuously expand their product line, or test new marketing channels in search for the one that works best for their target audience.

In fact, most business owners are so obsessed with the idea of constantly generating new sales, they forget they can increase their revenue simply by getting their customers to spend more with each order.

If you, too, want to increase the average order value on your store, you’re in the right place. Read this blog post to learn how to calculate and further increase it at hardly any cost.

Calculating the average order value (AOV)

As a store owner you probably spend quite a bit of your time monitoring the performance of your business. The total revenue, customer acquisition cost, conversion rates, and other metrics help you understand how well your store is doing.

But can you tell how much your customers spend on average? Or to put it differently, do you know how much money to expect from every customer who’s browsing your store?

If you’re not calculating your store’s average order value yet, you should definitely start. This metric is one of the best indicators of your customers’ shopping habits. Besides, it can help you measure the success of different marketing and sales strategies. Last but not least, once you know the average order value on your store, you have a better idea of how to further increase it.

Convinced? Let’s get to calculating then.

Method #1 – Revenue/Purchases

In this basic method, you divide the total revenue by the number of purchases in your store.

For example, if your total revenue for the year was $146,000 and you had 1,700 successful transactions, your AOV is around $85.

Keep in mind this formula only shows your AOV in relation to overall revenue. If you want to know how much profit from each order on average, you need to add one more value to the formula – costs.

Method #2 – (Revenue – Costs) / Purchases

In a more advanced formula, you take your store’s revenue, subtract the costs of running the business, and then divide that by the number of purchases in your store.

Your costs should include all your business expenses:

  • fees and subscriptions
  • advertising and marketing
  • salaries and employee benefits
  • office equipment and supplies
  • any other fees you pay to run your business.

So, let’s incorporate $65,000 of business expenses in the formula used in the previous example. Now your AOV would come out as $47.

Now that you know your average order value, let’s see how you can increase it.

1. Encourage purchases with special offers

Rewarding customers who decide to spend more is a common practice used to generate more revenue. The idea behind this strategy is simple. You present your customers with an opportunity to save which influences them to add more items to their cart.

Most commonly, stores offer various discounts or loyalty points for customers who spend more. Another popular variation of this strategy is offering free shipping for orders above a certain cart value.

A free shipping banner from CraftBuds

It will come as no surprise to you that 9 out of 10 shoppers say that free shipping is the number one incentive to shop online more. Moreover, they prefer free shipping to same or next-day shipping!

2. Sell products in bundles

Most customers love online stores with a wide range of products to offer. But sometimes a great number of options can get overwhelming. That’s why, to make a decision to buy a lot easier and quicker, consider bundling products that work together well.

This task shouldn’t be that difficult because as a store owner you probably know which products are complementary. Or you can check out the most popular product combos from your customers’ purchases.

By creating product bundles not only are you helping your customers make a wise purchase, You’re also getting an opportunity to increase the value of each order.

A bundle recommendation on iHerb

  • Offer a free product that comes with a bundle. This is a popular way to increase order value for customers who simply can’t resist the idea of freebie.

Buy 2 Get 1 free offer by Blissworld

  • Offer a special price for bundle purchases. Buying products in bundle sets mean that customers can get products for a lower price than buying them separately. This approach works great on shoppers who’re always on a lookout for steals and deals.

Source: iSenseLabs

Keep in mind that bundling products will only work if you make the offer relevant to customer’s needs and interests. I always recommend bundling products around your best-sellers as these products have already earned the trust of your customers.

3. Cross-sell and upsell like there’s no tomorrow

Many products work or look better when purchased together. For instance, a new electronic device would be more secure in a cover or pouch. A dress would look even more amazing with a matching handbag. And a beautiful fountain pen would make journaling in a new notepad so much nicer, right?

Unfortunately, most customers don’t know that they can make their purchases even more exciting by adding a few accessories. To change this, you need to start cross-selling and upselling on your store.

  • Cross-selling encourages a customer to purchase an additional product or service that is different yet related to the product the customer is already set on buying.
product recommendation

Product recommendations on Pilot Coffee Roasters

  • Upselling, on the other hand, encourages to purchase a more expensive variant of the same product, or the same product with additional features.
Upselling example

Product upselling by size example on Sephora

These two sales techniques work because many customers rarely conduct a complete research into every single option. Offering additional items or a bigger, more advanced product variant can reveal possibilities they didn’t think they had.

4. Use urgency to elicit more sales

There are online shoppers who do a thorough research before making a decision to buy something. They compare items, read product reviews, and look for better deals. While this behavior can help your brand be discovered, as customers continue their research, you run the risk of them losing interest in your products.

To prevent this, online retailers often try to create a sense of urgency on their websites.

An add to cart widget on Bulova mentioning the remaining quantity for the item

A website popup promoting a time-limited offer on Leesa

Implied urgency convinces shoppers to act now, often on impulse. Promotions that highlight limited product availability or offer expiration time can help you increase order value without having to worry about boosting the number of orders.

5. Have a straightforward returns policy

At least 30% of products ordered online are returned, and there are two most common reasons why:

  • product arrives damaged
  • product looks different in real life

You might think that customers who return your product won’t be shopping at your store again because of the unpleasant experience. But that’s not the case. InvestP reports that 92% of customers would buy something again provided that the return process were easier.

What’s more, 30% of customers say they’d be willing to spend over a thousand dollars on a single purchase, if they knew the return process was both free and straightforward.

Keep in mind that 67% of online shoppers check the store’s returns policy before making a purchase. This clearly suggests that streamlining (and then, of course, communicating) the returns process could entice visitors to shop more, or consider purchasing more expensive items.

What’s the secret behind offering a hassle-free returns system? Well, a simple returns process reduces the risk associated with purchasing expensive products that you can’t see or try out first. As a result, customers feel more comfortable spending more knowing that they can return the item and get their money back.

Closing thoughts

Every online retailer wants more revenue. How they go about achieving it, however, differs greatly.

Instead of chasing every new trend, concentrate on this simple and cost-effective method increasing the average order value on your store. By the end of the day, getting your customers spend more with each purchase results in profit growth. And the best part is it usually comes at very little or no additional costs at all. 

Ben is the founder and CEO of WisePops. You can find their popup app on Magento and Shopify.

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  1. Ivan

    Hi guys,
    Thank you for this summery. I really would love to use some of these techniques.
    Is it possible to create a bundle products with printful woocommerce plugin and hot it is gonna work?
    Can you point me to some info how to do it?
    Thanks

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