6 Ways to Increase Average Order Value for Your Online Business
It's a key element of raising overall revenue without cutting costs.
If you're like most entrepreneurs, you're always thinking about ways you can optimize your business to make more money, whether it's increasing revenue or cutting costs. If you're running an online store, one of the best steps you can take is increasing its average order value — in other words, the average dollar amount of products purchased by a single user in a single action.
Increasing average order value, assuming you can retain the same number of transactions, will increase your total revenue. It could also facilitate higher customer loyalty and increase the value of each new visitor who comes to your site.
The question is, what steps can you take to increase average order value?
Introduce or raise the free shipping threshold
One of the easiest steps you can take is introducing or raising the free shipping threshold. Psychological studies show just how much we love free shipping; we're often willing to pay more, in total, for the order when shipping is free than if we're forced to pay for shipping with a smaller total order. In other words, just offering free shipping could incentivize your customers to spend more on each order.
The effect is even stronger when you have a minimum required spending threshold. For example, if you only offer free shipping with orders of $35 or more, and your customer has a cart with $30 of products, they'll likely go find something else to buy to put themselves over the limit.
Offer a discount (at a certain spending level)
Similarly, you can offer a discount to your customers when they reach a certain level of spending within your cart. For example, you might have a short-term program in place to give customers $15 off when they spend $75 or more. It might compromise your profitability slightly, but it will almost certainly get customers to spend more total, ultimately working in your favor. Alternatively, you can give customers a gift card when they buy a certain amount from you in one purchase.
You can also give customers a discount for buying in bulk. Reducing the per unit cost of your products at higher sales volumes will inevitably motivate some customers to buy more.
Group products together in a bundle
Another common tactic is to group products together into a single bundle. If you sell five individual components that share a common purpose, consider packaging all five of them together in a bundle for a slightly reduced price. If people are interested in buying one product from you, they might be interested in buying more — but only if there's a convenient and financially compelling reason to do so.
You can also use packaging and display strategies to make your bundles more appealing. For example, you can show customers an expensive, over-the-top bundle before showing them your most valued bundle, making it seem like a better deal by contrast.
Recommend similar or related products
One of the technological breakthroughs responsible for Amazon's widespread success is its clever recommendation engine; with the power of machine learning, it can recommend similar and related products to customers, specifically prompting them to add more items to their cart (or come back for a new purchase). Your engine doesn't have to be as robust or as far-reaching as Amazon's, but you can increase average order value by recommending the right products to your customers. Push items that go well together and encourage your patrons to add just a bit more to their carts.
Establish a loyalty program
One of the best ways to encourage customer retention is with the help of a loyalty or rewards program. Generally, these systems reward your customers when they shop with you; for example, they might earn a fixed number of "points" for each dollar they spend or each order they place, ultimately getting to cash those points in for more prominent rewards.
If you create a loyalty program that provides points or rewards at certain thresholds, like spending $100 or more in a single purchase, it could motivate people to include more in each of their shopping carts. Similarly, if you host a contest or a giveaway that rewards recent customers, you'll encourage more purchasing as well.
Execute short-term sales
For a limited time only, everything on your site is 25 percent off. It's a big discount that your biggest fans will want to take advantage of. With such low prices, your customers will be incentivized to purchase as much as possible – likely spending more than they would have otherwise.
Keep a close eye on your average order value as you experiment with these and other strategies. You may not see a significant jump overnight, but if you keep adapting to your audience's needs and pushing for higher average order value, eventually, you'll see the results you want.
Entrepreneur Editors' Picks
If You Focus on Problems, You'll Only Find More Problems. Here's How to Focus on Solutions.
Apple Asks This Jarring Interview Question as a Secret Way to Evaluate a Candidate