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. This Shopify average order value calculation is an essential metric for understanding your store’s performance.
To visualize, here is the Shopify Average Order Value Formula:
Average Order Value = Total Revenue / Total Number of Orders
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.
How to Find AOV?
To find out how to calculate the average order value of your Shopify store, follow these simple steps:
- Log in to your Shopify admin panel.
- Navigate to the left-hand menu and click on “Analytics”.
- Once on the “Analytics” page, locate and select the “Overview” dashboard.
- Below the graph, you will find the crucial metric of “Average order value” (AOV).
The AOV metric is a vital performance indicator for your online store, providing insight into the average amount of money spent per order. By increasing the AOV, you can boost your revenue, enhance customer lifetime value, and foster sustainable growth for your Shopify store.
Take advantage of these steps to gain valuable insights into your store’s performance and optimize your business strategy.
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.
For instance, Fashion Nova often bundles related products together (like a summer outfit set) and offers them at a lower price than if purchased separately. This strategy not only boosts sales but also enhances the shopping experience by providing coordinated outfits ready for 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.
Amazon excels at the technique of upselling and cross-selling with its “Frequently bought together” feature, which displays products that other customers have purchased in conjunction with the item currently viewed, which is a prime example of effective cross-selling.
This encourages customers to purchase additional, related items that they may not have initially considered, thereby increasing the AOV. Similarly, Amazon’s “Customers who bought this item also bought” feature acts as a form of upsell, prompting customers to consider higher-priced alternatives or add-ons. According to Forbes, these strategies have significantly contributed to Amazon’s impressive sales growth.
Similarly, 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.
Use Gift Cards
Offering gift cards can be an effective strategy to encourage customer loyalty and increase the average order value (AOV).
By providing customers with the option to purchase gift cards, you are giving them the opportunity to not only buy products for themselves but also to share the experience with others. This can lead to repeat purchases and higher spending.
Successful businesses have leveraged gift cards as incentives in various ways. One prime example is Starbucks, where customers can enjoy beverages, food, and merchandise using their gift cards.
This not only stimulates repeat visits but also boosts overall spending as customers utilize their gift card balance.
Another notable case is Amazon, which allows customers to purchase and send digital gift cards to their loved ones. By doing so, Amazon not only cultivates customer loyalty but also attracts new customers to their platform when these gift cards are redeemed.
Best Practices for Increasing Average Order Value (AOV)
1. Improve Customer Touchpoints
Improving customer touchpoints is crucial for businesses to foster stronger relationships and increase customer lifetime value (LTV).
By engaging with customers through multiple channels such as email, social media, and personalized marketing, companies can effectively connect with their target audience and enhance their overall experience. A holistic approach not only improves customer satisfaction but also results in higher AOV sales.
A good example is the outdoor gear company, Patagonia, which has a well-designed customer journey across various touchpoints leading to increased customer loyalty and higher AOV.
By adopting a comprehensive strategy that encompasses various channels and tailors communication to individual preferences, businesses can not only deepen their relationships with customers but also drive long-term loyalty and growth.
Emphasizing the importance of customer touchpoints based on real-life scenarios and backed up by credible sources is vital for enhancing business performance in today’s competitive landscape.
2. Ensure a Seamless Brand Experience
Ensuring a seamless brand experience is crucial. Studies have shown that providing a consistent and high-quality experience across all touchpoints can significantly impact customer loyalty and increase their lifetime value.
A study conducted by Forrester Research found that companies with strong omnichannel customer engagement strategies retain an average of 89% of their customers, compared to only 33% for those with weak strategies.
For instance, Four Sigmatic was able to increase their active subscribers by 50% after switching to Upscribe which provided a more seamless subscriber experience. This was particularly due to the implementation of comprehensive customer portals.
Another case study from Starbucks demonstrates the power of a seamless brand experience. By implementing a mobile ordering and payment system, they saw a significant increase in customer satisfaction and loyalty. This resulted in a 20% increase in the average customer spending and a 9% increase in overall revenue, a good result from the coffee enthusiasts out there!
These statistics and real-life examples highlight the importance of providing a consistent and high-quality brand experience. By doing so, businesses can foster customer loyalty and increase their long-term value.
3. Optimize Your Subscription Program
Tailor your subscription offerings to align perfectly with your customers’ needs. Consider providing customizable bundles, adjustable frequency, and a range of personalized options to enhance their experience.
Adobe Creative Suite underwent a significant transition from a one-time purchase model to a subscription-based model. As a result, they now offer their software as a service (SaaS), which has attracted more customers and increased the overall value they provide to their users.
This demonstrates that tailoring your subscription program to meet the needs of your customers can lead to increased customer satisfaction, loyalty, and revenue.
By offering customizable bundles, adjustable frequency, and other personalized options, you can create a more seamless and enjoyable experience for your subscribers, ultimately increasing their lifetime value and average order value.
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!