Increasing profits is a challenge for every business. Growth can be organic under the right situation but often isn’t. Increasing revenue can often be done by reducing costs and increasing sales. Moving either lever can make it challenging to get the right mix that truly has a positive financial impact. One area is optimizing the average order value (AOV). Understanding this metric can help you recognize the profit opportunity and distinguish the value that resides in your customer.
Average order value defined is the average amount spent per customer.
Cross-sell
Cross-selling is the tactic to recommend a related product or service after a customer has decided to purchase. For instance, an online shopper may purchase a pair of shoes and while checking out is offered a pair of popular socks. This simple gesture works both online and offline such as restaurant asking you would like to add dessert at the end of the meal.
Upsell
Using an upsell can help increase your average order value. In many cases, business use a good, better, and best model in which customers tend toward the middle of the three options. Most customers have chosen a particular option because they have made a quick benefit to needs analysis. To entice the customer up, you may need to draw out benefits they potentially didn’t see before. For instance, a cheap product may only have a 1-year warranty while a more expensive one has a 3-year warranty.
Make an Offer
Offers are powerful as it can help initiate the purchase and drive the AOV up. Offers can come in the form of discounts, time-based specials, and limited quantities. In considering an offer, be sure to recognize that it needs to push the purchase total up. If you were to make an offer through a discount for shoes, it might look like a discount with an order minimum. Let’s say the average order is $50 per customer. You may offer a 20% discount on purchases of $100 or more. If every customer who purchased something during the offer purchased a $100 in merchandise, then you would have increased the AOV by $30.
Bundle
Bundling is powerful as it can increase AOV by forcing how much someone buys. A couple of ways to bundle is by selling quantities of the same product or similar products. One way to think of this is track items that are frequently bought together. Then combine those things to make a product that goes together. Selling shoes you could bundle a set of laces, socks, and cleaning kit. If all the shopper intended to buy was a pair of shoes, but they saw the incredible bundle, you’ve just increased the AOV.
Loyalty Programs
Loyalty programs are special benefits to good customers and can have a positive impact on your average order value. For instance, Starbucks provides points by purchase for those signed up for the loyalty program. They then make offers to get you to purchase a combination of food and drink for extra points. Or come in a buy the next couple of days and earn extra points. The result is perhaps you coming in another day or buy one extra thing to earn more.
Conclusion to AOV
Increasing your AOV can have many approaches and should be tested to see what moves the purchase amount. When you do approach this, be careful with implementing as overlapping tactics may hide the real results from your marketing efforts. How have you used tactics like this to increase sales?