Average Order Value
Average order value (AOV) is the average dollar amount that customers spend at your business, per order. It is one of the fundamental metrics you should be tracking and working to increase over time.
Read on to learn:
1. How to calculate 3 kinds of AOV
2. 15 tactics to increase AOV, with examples of how some of the most successful brands are putting them into action
How to Calculate Average Order Value
To calculate overall average order value, divide total revenue (specifically, total gross sales) by the number of valid orders (both data points must be from the same time period):
We also recommend calculating and tracking AOV for new vs returning customers, which may require segmenting your customer base, respectively, by 1) customers who have purchased once and 2) customers who have purchased more than once.
Here's the formula for new customers:
And here's the formula for returning customers:
Other Potential Areas for AOV Analysis
You can also further segment customers and run further analyses. For instance:
- What is your nAOV among different (time) cohorts, e.g., customers acquired in Q4 vs. Q3? How does it change over time? Could certain marketing strategies have pushed it higher in some cases? How might seasonality affect it?
- Is your AOV among high-value customers higher than among lower-value customers?
- What impact do discount codes have on order value?
- Do certain geographical regions have higher order value than others?
- Does your order value vary among zero-party data segments? Is it higher/lower by gender? By product preferences?
How to Increase Average Order Value
Improving your average order value comes down to experimenting with a variety of marketing strategies in your store. Some may work better than others, depending on your business and what you sell.
Cross-selling means offering a complementary product(s) that a customer can add to their order. To take this a step further, label the cross-sell in a way that is relevant to your brand, if possible, rather than just saying "You might like..."
Daasity customer Harper Wilde does a great job of this with its "Fill Your Drawer" cross-sell option on its product pages:
Bundles can function like a pre-packaged cross-sell or upsell (see upsell below), or they can serve as a combination of a cross-sell and upsell. A brand selling winter sports apparel could create a bundle of a pre-built skiing look. A kitchenware brand could sell a "Home Bartender Starter Pack" with a cocktail shaker, strainer, bar spoon, and a fruit peeler.
Here's an example of a bundle from Bones Coffee (conveniently, customers can find bundles at the top of the site navigation bar), in which they include several coffees as well as a mug—thereby blending a cross-sell and an upsell.
Sub-tip: How to improve your cross-selling and bundling
To make your cross-sells and bundles offerings more effective (i.e., in order to have a meaningful impact on your average order value), you really need to understand what people are buying together (i.e., in the same cart), or what they are buying in sequence (i.e., what their first purchase is, and what their second purchase is).
While it may seem logical to cross-sell or bundle certain products together based on what makes sense or what you would purchase together, the only way to be sure is to dive into the data.
The best way to tackle this is through product affinity charts. For cross-sells and bundles, you'll want to look at what your customers are buying together:
Using this chart, you can highlight what customers are most commonly purchasing together by highlighting the different flows from one side to another, and you can drill down further into the data in order to see the actual frequency of products being ordered at the same time:
A first-to-second purchase product affinity chart will show you what customers are purchasing in sequence. This is another effective way to pick cross-sells and bundles (additionally, it can be used in post-purchase email flows to drive repeat purchases):
Offer more of a product, or a premium/upgraded version of a product. For example, if you sell pottery, offer a customizable or premium finish to a plant pot. Or, "Would you like a 10-pack instead of a 5-pack?"
In the case of a volume upsell, the goal is for the customer to be saving per unit but ultimately spending more in their purchase. In the 10-pack vs. 5-pack example, the price per unit might be $5.99/item in a 5-pack but $5.59 in a 10-pack.
Here's how Kopari Beauty successfully builds upselling into its PDPs:
Bulk buying options
If you have a smaller subset of customers who are buying a lot more of your product, consider offering larger versions. If you sell 1lb bags of protein powder, and customers are purchasing multiple 1lb bags, they may just want to purchase a larger bag.
Supplement brand MyProtein, for example, offers protein bags up to 11lbs (this is also a volume discount: the offer is $10 cheaper than buying two 5.5lb bags):
In the case of offering a much larger bulk option, however, you may want to do some customer research to see whether there is interest or (more importantly) actual demand for much larger sizes.
Post-purchase discounted cross-selling or upselling
An effective technique is to offer customers a discounted purchase opportunity after they've already purchased. For example, if you sold a customer a 3 piece suit, you could offer a matching tie at a 20% discount if they purchase it right now.
You can show these offers immediately after purchase using tools like CartHook (to directly increase AOV on the same order), or offer customers discounts in post-purchase email/SMS flows, in order to increase AOV on their next order (and, as an added bonus, customer retention, repurchase rate, and customer lifetime value).
Here's an example of how supplement brand Calgee offers a post-purchase upsell (they also add a timer to the offer):
By offering customers low-cost additions to their cart or product enhancements/preparations, you can drive average order value up more than you might expect. This is a great profitability move, too, because if the product add-ons are low cost to you, you make easy profit.
John's Crazy Socks does a great job of this by offering customers a gift wrapping option. In the case of the order below, that would increase cart value by over 20%:
Free shipping threshold
If you have a free shipping threshold for customers to hit in order to get free shipping, customers may spend more in order to hit that threshold.
Heatonist keeps a free shipping banner up on all screens, which keeps customers encouraged to hit the shipping minimum when they're shopping.
Gifts with Purchase at Price Threshold
In the same way that you can offer customers a price threshold for free shipping, you can offer customers a price threshold for free GWPs (if the economics work for your brand).
Beauty brand La Roche Posay, for example, offers a 4-piece free sample GWP on orders over $70. Customers love receiving extras and free samples, and increasing the size of their cart will make them feel that their dollar has gone a lot further with your brand.
Product recommendations for a partner, friend, or family member
A great way to increase average order value is to recommend products for someone else in your customer's life. This is a simple tactic that can double cart value.
As an added bonus, by encouraging your customers to give their loved ones your products, you'll be introducing new people to your brand, thereby potentially increasing your customer base, and getting a cheap acquisition: the marketing cost to acquire the gift-giver may go twice (or more) as far!
MeUndies, for example, dedicates an entire section of their site to bringing folks together via the power of comfy (under)clothes:
If you don't already have one, we recommend starting out with a set-and-forget loyalty program. Your customers will thank you, and you'll be rewarded in kind: customers who use loyalty program points to purchase spend 39% more on average.
If you're thinking of implementing a loyalty program, ensure that the economics make sense for your brand: your loyalty points (and tiers) must be both compelling enough for customers to want to take advantage of them, but they also must not impact your profitability.
Additionally, it's key to style and design your program in line with the rest of your brand. Here's how Glow Recipe styled theirs:
Offer a customer a coupon code or discount to sign up for an email list or after hitting an order minimum. As an added bonus, try to get some zero-party data in exchange for a discount.
Here's an example of community-building coffee and tea brand Blk and Bold offering a discount in exchange for an email and birthday month (a great setup for a birthday promotion) via an exit-intent pop-up:
Multiple payment options, including Buy Now, Pay Later
Giving customers payment options, such as BNPL, is a popular way to increase AOV—potentially 45% or more. Customers might find it easier to pay a smaller amount four times than a larger amount once.
Other ways to increase AOV
Find your most valuable marketing channels: Does one of your marketing channels lead to a higher average order value? We often see that sales sourced to organic have higher AOV and LTV -- what about your brand?
Analyze AOV by segment: You may find that your high value customers (HVCs) are also your biggest spenders per order. To figure out who your HVCs are, we recommend RFM Analysis (recency, frequency, monetary) and scoring your customers 1-10 (1 being the best) based on their purchasing behavior. Once you've identified your HVCs, start sending them your best offers, loyalty/membership opportunities, and experiences. They'll appreciate it, and your AOV will, too.
Show customers (or potential customers) their browsing histories: A "Pick up where you left off" reminder may encourage a customer not only to purchase what they're looking for on a current site visit but what they were considering in an earlier visit.
Using an AOV Dashboard for tracking and analytics
Looking to track and increase your average order value on Shopify and Amazon? Stuck in Google Analytics? We can help. Daasity is a data and analytics platform, purpose-built for omni-channel consumer brands.
In our Orders & Revenue Dashboard, you can track your important metrics and KPIs, including average order value:
You can drill into your AOV in dozens of ways. For instance, you can break it down by order channel, which enables you to get a better idea of your marketing efficacy and customer journeys. Why might your buyers coming in via paid search have a 20% higher AOV than those coming in from paid social?
For more about Daasity and how we can help you with your data, you can check out our on-demand demo here.
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