Here’s the bottom line. In addition to having a sexy looking E-commerce store with amazing branding, great messaging, and high-quality products, store owners must also implement an E-commerce strategy that ensures they generate more sales. Moreover, due to fierce competition and an increase in expenses, E-commerce store owners are seeing tighter profit margins than ever before. Sourcing products with great margins helps, however additional costs outside of COGS (cost of goods sold) add up quickly. These additional costs may include platform (Shopify, WooCommerce, Magento) fees, shipping fees, returns and refunds, employee salaries, warehousing, advertising, bank and processing fees and so on. The list of expenses is plentiful. 

An E-commerce store’s AOV should be high enough to ensure profitability. Monitoring and being highly analytical of an E-commerce store’s AOV is a must for any successful store owner. This is especially true when factoring in advertising costs. Before taking a look at an example of this let’s dive into what an AOV is exactly.

How Is AOV Calculated?

AOV is calculated as such: The average value of all orders divided by the total number of orders. Be mindful that this order value includes taxes, shipping, and discounts before returns.

Google Analytics Featuring a Store's AOV
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Let’s get to that example: If a product sells for $59.99, and the store’s AOV is $76 and the CPA (cost per acquisition) is $45 the business is probably losing money (remember COGS, and operating expenses have yet to be added). This is why it is crucial to create an E-commerce strategy that includes improving the AOV.

Here are 4 effective ways to increase the average order value of an E-commerce store.

1. Bundling Products

This may be the simplest and most effective method of increasing a store’s AOV. Bundling products increases the AOV by combining multiple products into a single SKU. These products typically supplement each other. This automatically increases the amount a customer spends. Consumers love bundles, especially when presented with great value and savings. With bundling, customers are enticed to spend more without having to add multiple products to their cart.

showcase of bundles

2. Cross-Selling and Upselling

Cross-selling and Upselling are two great methods for increasing an E-commerce store’s AOV. Upselling allows a store owner to sell a more premium version of an existing product at a higher price point. Moreover, customers can now buy a premium version which may include additional features or higher quality material. The customer is persuaded to take an alternative more expensive action.

Cross-selling, on the other hand, offers the store owner the ability to sell complementary products to its customers. Do you want fries with that burger? That is one of the most commonly used examples of cross-selling. The goal of cross-selling is for the customer to buy additional products, increasing the dollar amount added to their cart.

Strategically implementing cross-selling and up-selling into an E-commerce game plan helps increase the AOV and generate more sales.

3. Post Purchase One-Click Upsells

This is one method that when implemented correctly can take a store’s AOV to new heights. With post-purchase one-click upsells, the customer is presented with an upsell after completing the purchase of their initial order. With one simple click, the upsell item is added to their customer’s original order. No additional checkout is needed.  Many call this “one-click” the highest converting click in E-commerce.

Post-purchase, one-click upsells reduces possible friction. The average order will increase because supplementary and complementary products are presented to a consumer that has just checked out. There is no need for the customer to re-enter shipping and payment info. 

4. Implementing a Pricing Strategy

An effective method for increasing a store’s average order value is to have an overall pricing strategy. Store owners should always be testing and amending this strategy in order to see what works best. A store’s pricing strategy should include shipping costs, promotions and the amount charged for each product. Luxury brands with a strong following can simply increase the price of their products by a few percentages. This will instantly increase the store’s AOV.  On the other hand, discount brands may implement a totally different pricing strategy to ensure customers are buying more in bulk. Make sure to measure conversion rates when testing a pricing strategy. Moreover, find a solution that involves increasing the average order, without heavily decreasing conversion rates. 

Your E-commerce Store’s Average Order Value Matters

After defining a strategy that increases the AOV, the next step will be to develop a strategy for increasing the CLV (customer lifetime value). The goal here is to get customers coming back time and time again. Remember, having a clear strategy for increasing your store’s average order value goes a long way in helping reach your ideal profit margins. You may need help defining a clear E-commerce strategy for your store. Contact us to learn how nvision can help grow your business.

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