4 Ways to Increase the Average Order Value (AOV)
In a world where business owners and salespeople are constantly chasing the next big technique that will skyrocket their sales, it’s easy to overlook the importance of checking the basics. The secret of success can be as simple as using the right pricing strategy and replicating a few tactics that work for you. One key to stimulating revenue growth is calculating average order value (AOV) and taking active steps to improve it.
This article is a short guide that will take you through four simple yet incredibly effective ways to positively influence your AOV and increase the total revenue of your online business.
Key takeaways
To increase the average order value for your POD store…
- Upsell your customer a bigger and better version of a product
- Cross-sell accessories and smaller products that complement a client’s primary choice
- Entice buyers to go for bigger orders with appealing bundle deals
- Raise profits with volume discounts
- Improve customer retention by providing quality services that go well with your on-site offers
What is the average order value?
In brief, the average order value (AOV) measures how much money a typical customer spends on one order. Along with other important metrics, such as customer lifetime value (CLV) and conversion rates, AOV helps you earn more from each customer. Moreover, the insights you gain are essential for adjusting your marketing and pricing strategies.
A higher average order value will increase your revenue and gross profit. On top of that, more customers are satisfied with your products and services, which is the best advertising a business needs. And more loyal customers will bring more qualified traffic to your business channels.
How to calculate the average order value?
The formula for calculating the average order value is straightforward. All you need to do is divide the revenue by the number of orders for a specific time frame (year, month, week). E-commerce businesses typically calculate average order value every month.
Example: If your store generated $4,000 from 200 orders a month, your average order value is $20 (4,000 / 200). You can calculate the same value for a different period (yearly, quarterly, weekly, or even daily).
An online retailer has to decide whether a $20 AOV is enough for their e-commerce store, for instance. Some businesses choose to increase the number of orders, while others focus their marketing strategies on increasing their average value per order. Either method has the potential to stimulate revenue growth.
Increasing your average order value means having larger orders. Let’s dive into the four essential techniques to stimulate buying and increase your print-on-demand store’s average dollar amount spent per order.
1. Upsell to improve average order value
Upselling, a widespread technique, involves suggesting to customers a higher-priced version of the product they are considering.
Why it works
A bigger, better version of the main product is an easy way to increase average order values in your online store. Whether it is a premium functionality, a VIP subscription, or a luxury version with additional perks (quantitative or qualitative), upselling offers more at an extra price.
How to use upselling in your POD store
If your customer is considering a blanket that is $15, you can upsell it by suggesting a premium blanket for $25, capitalizing on its added value. You can also recommend a larger canvas size, especially when their custom design features smaller details and would benefit from a bigger display.
Tips: There is a fine line between trying to be helpful and coming off as pushy. People don’t like being talked into making a buying decision. Aim at helping your customers by providing more of what they already want. You cannot create demand artificially, but if you assist your clients to the best of your ability, you have more chances to increase your customer base and profit margins.
2. Cross-sell to increase average order value
With this technique, you suggest products that complement the customer’s order. Online retailers often use this method to raise their e-commerce average order value – it is quick to set up and easy to implement.
Why it works
Customers may often go into intricate details on a product, comparing prices and shipping costs, looking at delivery dates, etc. It’s easy to overlook other options, and that’s why recommendations for complementary products are appreciated. A few simple suggestions can nudge customers to buy more, thus increasing AOV.
How to use cross-selling in your POD store
An easy sell in the print-on-demand industry suggests a tote bag – a universal item ideal for holding smaller purchases such as a custom T-shirt, a personalized mug, or a puzzle featuring a custom photo. The tote bag would act as an accessory.
If a client adds a bed sheet to their order, you can suggest pillowcases, duvet covers, and cushions. Most stores add them at the bottom of the page as “products often bought together.” Alternatively, a salesperson may directly prompt customers to a product that goes well with their order.
A range of frames can be a good cross-sell for a personalized canvas. If the product already has a standard frame, you could have an upselling option for a premium frame. Avoid having too many options, though, as they may confuse customers. Three top relevant options are typically enough, with the possibility to view more with the click of a button.
Tips: Cross-selling works best with products that cost less than the main item. Accessories such as custom phone cases or coasters are a great example that may go well with almost any order from your print-on-demand store.
3. Create bundle deals to boost average order value
Bundles are products sold together as a set. They are appealing due to their price, which is lower than the combined cost of all the separate products. On top of that, a client gets everything they need in one convenient pack, reducing the frustration of manually combining different products. They make good options around the holiday season, helping busy shoppers save time and effort.
Why they work
Bundle deals are a win-win – customers get a good discount, while entrepreneurs can increase their AOV. It is ultimately a numbers game – you need to weigh multiple options before pricing a bundle to make it reasonable and attractive to customers. Alternatively, you can connect to apps that automatically create bundles from the product catalog within your e-commerce store.
How to use bundle deals in your POD store
The options are limitless in print-on-demand – combining several products and then connecting them through a common custom theme is easy. For instance, you can have thematic holiday bundles for Mother’s Day, Father’s Day, his and hers sets for Valentine’s, and many more. If your niche is into cozy movie nights, you can sell bundles combining a blanket, a cushion, and a mug. Add a dog bed for pet owners, and you have a different set. On top of that, you can encourage customers to create their custom bundles.
4. Increase average order value with volume discounts
You may know them as bulk discounts. Incredibly popular with retail stores, volume discounts are often helpful in moving out old stock. In the print-on-demand industry, some customers wait for discounts to purchase products at lower prices. And it is a wonderful idea to meet them halfway, especially during the low season, when there is increased interest for bulk deals.
Why they work
Entrepreneurs sell more with bulk discounts. Even if the margin is lower, the profit grows due to the quantity sold. As for the customers, they can get better prices from businesses that offer discounts on larger orders.
Let’s say you usually sell around 20 T-shirts a month at $30 a piece, making a revenue of $600. Dropping the price to $25 to sell 100 T-shirts at once brings you a revenue of $2,500. Assuming that one T-shirt costs $20 for you as an entrepreneur, your overall profit for a larger quantity is also bigger ($250 for 20 units and $500 for 100 units).
How to use volume discounts in your POD store
Some niches that may benefit from bulk purchases are companies that order corporate T-shirts, custom welcome packs, or branded gifts and artists or businesses preparing merchandise for an upcoming event.
Bonus tips for a better average order value (AOV)
Building upon the above-mentioned tactics, consider additional tips that can raise the order value on your e-commerce website.
- Learn more about your customers’ behavior to optimize customer acquisition costs and improve your store’s conversion rate.
- Leverage popups with a discount code or a recommendation to increase your average order value.
- Design a customer loyalty program to win lifelong clients and increase your AOV. Existing customers are more responsive to buying from a business and cost less than new clients.
- Consider offering website visitors time-limited discounts to speed up their decision-making process. A 10% discount valid for only a few days can look very attractive.
- Keep your offerings straightforward. Online users may be skeptical of buying from a new e-commerce store or feel overwhelmed if bombarded with too many offers.
- Do the math for your clients. Tell them exactly how much they will save – it helps them realize they are looking at a good bargain, as most people will not take the time to crunch the numbers on their own.
- Set up a free shipping threshold. Many POD stores offer free shipping whenever a customer places an order above a certain dollar amount.
Summing up
The average order value (AOV) measures the average money your customers spend for one order. To calculate the average order value AOV, divide your revenue by the number of orders processed during a specific time frame. The e-commerce metric provides insights into customer behavior and buying habits, helping you tweak product pricing and increase the average dollar amount per shopping cart.
Online businesses can increase their AOV by upselling and cross-selling, while bundle deals offer customers discounts on sets of products. Online marketers and store owners utilize a store’s AOV and other key metrics to increase revenue, improve conversion rate, and make better business decisions.
