Increasing Average Order Value (AOV): Shopify Complete Guide
Any eCommerce business needs revenue to survive. Online stores can do this by attracting new customers and increasing sales, but if yours has a low average order value – or AOV – returns on investment in marketing can suffer.
The benefit of increasing your average order value is clear. The more customers spend per order, the more revenue you can expect from each customer – driving up your Customer Lifetime Value (LTV).
The hard part is figuring out how to go about increasing your AOV . Here at Upscribe, we believe the key to a successful Shopify store is to compel your customers to spend more on each order and create a loyal base that understands the value you offer.
That’s why we’ve compiled this list of brilliant tips for increasing your average order value. Let’s go!
What is the Average Order Value?
The AOV is the average amount that customers spend per order.
You can calculate your store’s AOV by dividing the total revenue by the total number of purchases in any given time frame.
Let’s look at an example. Say your store takes 200 orders in a month and makes $3000 in order revenue.
Your average order value would be $15.
Of course, this doesn’t mean that every customer spends $15 per order. In fact, certain segments of your customer base may have different AOVs.
Why is it important to track and improve your AOV?
It can significantly affect the profitability of your Shopify store. The higher your AOV, the more revenue you can earn from the same number of customers – i.e. the more profitable each customer is.
Winning in today’s eCommerce market is more difficult than ever. Restrictions on advertising tracking and increased focus on privacy have skyrocketed acquisition costs.
Having a high AOV makes marketing and customer acquisition far more effective. How?
- Say your customer acquisition cost (CAC) through marketing is $20, and on average, a customer will buy one order with an order value of $15. Your Shopify store would see a negative ROI for this (-$5).
- Let’s say you offer a free delivery promotion for orders over $25 and this order value increases to $25. This customer acquisition, therefore, becomes profitable (+$5).
This works on a macro scale too. Measures to tempt customers to spend more on their orders – thereby increasing AOV – helps boost order revenue with the same marketing budget.
Ways to Increase Your Shopify Average Order Value
Now that we’ve introduced you to AOV, here are steps you can take to improve it and compel customers to spend more per order.
Offer free shipping with a minimum order value
Paying shipping and handling fees when shopping online is a significant barrier for consumers. According to Marketing Land, 73% of consumers are more likely to shop online if a store offers free shipping.
The premise behind this is simple: consumers don’t like wasting money on delivery fees. In fact, Shippo found that 33% of shoppers will only shop online if the store they’re buying from offers free shipping.
Unfortunately, for online stores, shipping costs can add up quickly. That’s why so many Shopify stores have a minimum order value to qualify for free delivery – as, for smaller orders, it can be hard to absorb this cost.
However, slapping a minimum order value onto your free shipping policy offers an interesting strategy for increasing your AOV. In fact, HubSpot found that 24% of consumers would spend more money to qualify for free shipping. Increasing your AOV using this incentive also helps you recover minimum shipping-related costs.
The strategy is simple. Pick a target AOV and set your minimum order value for free shipping at or above this amount. Many stores opt for $25 to target an AOV of $20.
It’s easy to set up a free shipping discount within the Shopify dashboard. In fact, you don’t even need to install any plugins.
Offer discounted product bundles or packages
A great way to improve AOV and upsell related products is to offer product bundles – or “build-a-box” packages to your customers. This approach is especially useful if items can be sold as a “starter kit” or if you can bundle common accessories with the main purchase.
Cleancult found that shoppers tended to look around at other stores for home cleaning equipment instead of ordering from one online retailer. In response, they started offering a “Complete Home Bundle” for $89.99 – essentially offering a $70 discount.
The variety of products included in this bundle makes shoppers feel like they’re getting a great deal. Using this tactic,Cleancult increased their AOV by upselling other products and accessories alongside their most popular products.
You can achieve the same effect by offering volume discounts. For example, bra retailer Lively found that shoppers preferred to buy more than one bra at a time. By offering a discount for two or three purchases at a time, this store increased its AOV by 50%.
Upscribe’s bundling and build-a-box features give merchants the ability to set-up different “box” types with varying levels of discounts or pricing structures.
Cross-sell accessories and related products
The famous McDonald’s approach of “do you want fries with that?” is a great policy to follow if you want to boost your AOV.
Products are never enjoyed in a vacuum and consumers will likely need an accessory or related good. It’s your job to cross-sell to them!
Flowers retailer The Sill’s does this well. When users are about to checkout, they offer suggested products for stuff the buyer might need.
Take this approach a step further and offer a cross-sell discount that can only be applied at checkout. Domino’s UK uses this strategy by offering discounts on sides and desserts with their pizza.
The strategy here is to provide an offer that is too good to refuse. Doing this at checkout instead of on product pages helps you avoid applying a discount on items the buyer was already going to buy.
Shopify app Frequently Bought Together automates this process for you. It figures out what products are worth pushing at suggested accessories – eliminating the trial-and-error of manual solutions.
Offer “Subscribe & Save” Subscriptions
This next strategy helps with increasing AOV and your customer lifetime value (CLV). A subscription pricing model helps ensure predictable, stable sales every month.
More people are using subscription-based services. Between 2012 and 2021, the subscription economy grew by 435%. The idea here is to retain existing customers. This is especially important given the rising cost of acquiring new customers – which has jumped by 222% in the last eight years.
That said, many Shopify stores find it difficult to offer subscription pricing for physical products online using the platform’s native features. To solve this, you can use Shopify subscription tools like Upscribe. For instance, our plugin system helped Awesome Coffee Club launch a brilliant coffee subscription service.
Users can choose between a monthly or bi-weekly delivery of their chosen coffee. A subscription model works best for consumable products – such as coffee, shavers, food, stationery etc.
Why not push a “Subscribe & Save” to compel customers to keep ordering from you? An initial discount is a great incentive for convincing users to subscribe.
How do you keep your customers subscribed? Offering a great customer experience helps entice your users back. To inspire their confidence, subscriptions need to be easy to manage and change at any time.
Customers shouldn’t be locked into one product, and may benefit from mixing and matching products every month!
In fact, you don’t need to lock customers into subscriptions to benefit from this approach. Upscribe allows you to offer quick reorder buttons. Our tool can notify one-time customers through your website, email or SMS and ask them whether they’d like to order again.
Increasing repeat sales improves your revenue – as you have a 60-70% chance of selling to an existing customer, as compared to a 5-20% chance for a new user.
For example, Acme Coffee Company sends out automated emails with Upscribe asking existing customers to reorder.
Customers can also easily reorder through their “My Account” page. They’ll be able to see a gallery of products they’ve ordered previously and reorder them easily.
Improve your Shopify Store’s AOV through Subscriptions
Your store’s average order value – or AOV – is an important metric to follow. You can improve your AOV by encouraging customers to buy related products or spend more to receive discounts.
Remember, not every customer is the same. Boost your revenue by leveraging your existing customers and encouraging repeat purchases. The enemy to your store’s profitability is rising customer acquisition costs and one-time purchases.
With Upscribe, you can get a membership subscription process set up in minutes. You can use our tool to:
- Create user-centric subscription plans through our simple 3-step process
- Use Shopify’s checkout to seamlessly convert one-time buyers into long-term subscribers
- Use quick re-ordering to incentivise repeat sales from customers who don’t want to subscribe
Ready to boost your AOV and improve your store’s profitability? Schedule a demo with Upscribe today!