5 Tips for Boosting Your Ecommerce Store's AOV and Profits

06/28/2017 11:35 am ET
PEXELS.com

If you own or run an ecommerce store, then you’re no doubt familiar with the concept of Average Order Value—but odds are good you aren’t paying enough attention to it.

If you fall into that camp, then it’s time for your priorities to change. Far from being a secondary consequence of a successful business strategy, your store’s Average Order Value (AOV) is inextricably linked to its profits and profit potential.

“Average Order Value is how much a customer is spending on average when they check out on a company’s store,” says Tanner Larsson, founder of the ecommerce education platform Build Grow Scale and author of Ecommerce Evolved: The Essential Playbook to Build, Grow & Scale a Successful Ecommerce Business. “The higher the AOV, the better things are.”

Larsson says this is mostly because the ability to grow an ecommerce business often comes down to being able to leverage paid traffic. “You can’t build a thriving ecommerce business on trickles of traffic,” he says. “You need consistent and ever-growing traffic to test [different strategies], dial in on what works, and so on. In order to afford that, you need to be focusing on AOV, [which] solves a lot of the cash flow issues that often face ecommerce stores.”

So if a high AOV plays a major role in determining your ability to market your store effectively—and continue growing your customer base in the process—then how does an ecommerce store go about boosting its AOV? I chatted with Larsson to learn five tips for doing just that.

How to Boost Your Ecommerce Store’s AOV

Offer free shipping.

“Everybody loves free shipping, and thanks to Amazon [consumers] kind of expect a retailer to offer it,” says Larsson. In fact, one study found that 58 percent of customers are willing to buy more items if they then qualify for free shipping. While there are substantial benefits to utilizing a free shipping model, Larsson says many retailers are doing it all wrong—and it’s costing them money instead of helping them earn it.

Instead of offering free shipping on every sale, Larsson recommends only offering free shipping on orders that are larger than your current average cart value. For example, if your current average cart order is $20, you might only offer free shipping on orders of $35 or more. This simple strategy can result in sales boosts of as much as 30 to 50 percent. “It’s an easy front-end way to boost AOV through incentivizing your customers with free shipping,” says Larsson.

Suggest an order bump.

“An order bump is a special offer that’s designed to increase the order value before a customer checks out,” says Larsson. These types of offers show up on the checkout page (typically above the “buy” button) to offer a complementary upsell or companion product that’s relevant to the product(s) already in the cart. For example, if somebody is purchasing a face cream, you could suggest an order bump of a digital guide to healthy skin or a beauty mask.

Whatever it is, Larsson recommends that the product represent an additional $10 or more tacked onto the original order. “The worst-performing order bump is still typically around an 18 percent [increase in AOV],” says Larsson. “This adds huge profit margins to the business.”

Utilize a one-click upsell path behind checkout.

Unlike an order bump, which is presented to customers before they check out, this type of upsell path kicks in after the customer has completed their purchase but before they see the order confirmation page. “The upsell path shows them one or more offers to get them to buy something else,” says Larsson. For example, if a customer has just purchased kinesiology tape, you might try to upsell them on a foam roller or sore muscle ointment. You can increase the perceived value of these kinds of offers by positioning them as a one-time offer with a special discount or as a bundle.

There’s good reason to wait until the customer has already made a purchase to try to sell them on something else: It allows you to take advantage of the euphoric “buyer’s high” state. There are just two caveats:

  • Make it as easy as possible for customers to complete the purchase (e.g. with one-click buying), or else you risk the high wearing off before they follow through on the order
  • Don’t offend your customers by bombarding them with a never-ending stream of upsells. Limit their choices to three upsells or two upsells and a downsell, says Larsson

Do a basket analysis.

This involves analyzing your order data to identify products that are most commonly purchased together. Pay attention to this data even if it seems weird, says Larsson. For example, you might find that 80 percent of customers buy a yoga mat, a yoga towel, and a T-shirt with the slogan “Namaste”. In that case, you could create a bundle that offers all three of those products at a slight discount and/or add in another product and sell it as the “Namaste special offer”. You could further incentivize purchasing this bundle by combining it with a free shipping offer.

“You can get a nice boost in sales by selling bundles,” says Larsson. As an added bonus, bundles are easy (and free) to make because you don’t have to come up with any additional products.

Create a digital offering.

From how-to guides to exclusive memberships, adding digital components to a product offering can increase the perceived value of the offering—which, in turn, allows you to increase the price. For example, if you’re targeting a survival compass toward doomsday preppers, you could add in a guide to mastering orienteering and sell the products as a bundle. “This allows you to sell the same exact product for way more money,” says Larsson. And because creating a digital product only requires one up-front investment, your cost to production (after the investment) won’t go up at all.

“Most ecommerce companies have never considered this,” says Larsson. “Even if it’s $5, that’s $5 of pure profit. Plus it’s a super simple way to add more value to your products.”

Used individually, each one of these tips can significantly boost your Average Order Value. When you combine them all together, your AOV can go through the roof. Larsson has witnessed these surges among his Build Grow Scale students and his Black Label mastermind group. In the process, he’s seen countless ecommerce businesses enjoy more profits and a greater marketing budget, which in turn enables even more growth.

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