Average Order Value, Why It’s Important, and How to Boost It

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When you hear the word “metrics,” what are some of the first things that come to mind? For a lot of us, the answers may skew towards conversion rates, revenue, and traffic. But what about average order value? Why does it seem like this one falls by the wayside sometimes? 

The truth is, average order value, or AOV, is just as essential a metric to track as the others. It may not be a perfect metric to keep tabs on or the only indicator of business health, but it should be looked at. Especially for businesses that want to increase their revenue or optimize their return on ad spend. 

Hearing that alone won’t do anything to sway you, though, so let’s delve in more. Why is it so important? Why should you focus on increasing it? How can you increase it? We’ll get into all that good stuff.

What Is Average Order Value?

Average order value, or AOV as I called it earlier, is the average dollar amount that a customer spends when they’re placing an order with your business. The best way to figure out your business’ AOV is by dividing your total revenue by the number of orders taken. There are ways to know what it is without the math, though. Purply offers users access to a ton of different metrics, including their AOV. 

Why Is Average Order Value Important?

Outside of knowing how much your customers tend to spend per order, AOV gives you some great insight into the purchasing behavior and buying patterns of your customers. It’s a great way to gauge the value of not only your marketing strategy and efforts but your pricing strategy as well. 

What Are the Benefits of Increasing Average Order Value? 

Simply put, improving your AOV has a direct impact on your sales margins and profit. It’s a fickle metric to work with sometimes, but worth it. Here are just a few benefits to increasing it: 

  • It helps increase your revenue and profit, which are both signs of a healthy business. When your AOV goes up, it’s natural to see a rise in both revenue and profit. From the most dialed back standpoint, the more you earn per order, the more you make overall. 
  • You get a more cost-effective return on your marketing compared to increasing traffic, for example. Having a solid AOV strategy will help you see more profit from what you spend on marketing. 
  • By rolling out an effective AOV strategy, there’s a good chance you’ll sell more products or services. 

Three Ways to Increase Average Order Value: 

1. Offer free shipping or gifts with a minimum purchase amount

You might be surprised at how easy and effective this one is. Looking at what your current AOV is and offering customers things like free shipping or little gifts is a great way to encourage them to moderately outspend that value. For example, let’s say a customer has $40 worth of items in their cart and they see a message that says something along the lines of, “free shipping on all orders over $50” or  “free reusable tote with a purchase of $50 or higher.” They might just be compelled to make that threshold. 

Still, tread lightly. Free shipping thresholds can help with increasing your AOV, but can also decrease the number of transactions. Especially since customers prefer free shipping regardless of what they spend. It’s all about finding a sweet spot, and A/B testing can be a good way to figure out how to go about it. Test between no holds barred shipping and shipping that’s free after a minimum order value. Then track things like cart abandonment, clicks, and revenue to see what your best move is. 

2. Offer discounts with a minimum spend

This is kind of similar to the last one. Similar to free shipping, discounts can help improve your AOV. It’s about more than extending a flat discount to get rid of your slow-moving products, though. Employ your creativity and provide discounts on minimum purchases of $50, $75, or whatever makes sense to you. 

It’s kind of a give-a-little-take-a-little thing. Ultimately, you’re at the vantage point of being able to understand what your inventory and customer behavior look like and how much you’re willing to invest in getting more of your product out of inventory and into orders. 

3. Create a time-sensitive offer or campaign

From what we know about online shoppers so far, they tend to mull over their purchases sometimes. If there’s no time crunch in place, items may sit in their carts for weeks to months. I know whenever I see “40% off on all products” on a website’s banner, I’m in no big rush. 

To create a bigger sense of urgency, think about offering time-sensitive deals that encourage them to buy more at once. Something like, “40% off on all products for the next 48 hours,” may just inspire your customers to act right away before they miss out. This is just the opinion of one writer and online shopper, but I can’t tell you how effective it’s been when I’m shopping online. It’s psychological as all get out, but as soon as I see offers like that, I’m on my way to checkout. 

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Outside of shamelessly showcasing my own online shopping tendencies, it was great to bring AOV to the forefront and talk about the three-letter acronym in more detail. I hope that you find this helpful and maybe even think about implementing some of these strategies for raising your AOV.

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