As an e-commerce store owner, you are always looking for ways to increase revenue. And while finding new customers is a sure shot way to increase sales, it comes with its own price – increased marketing and advertising expenses for acquiring new customers.

So can you increase your store’s revenue with your existing customers? Yes. How? By increasing the AOV, or average order value. By squeezing more value out of your already existing customers, you can increase your revenue while saving as much as five times the cost of acquiring a new customer.

This article about AOV was written for us by guys from Stilyoapps.

What is AOV?

Average Order Value (AOV) can be calculated by taking your total revenue and dividing it by your total number of orders.

AOV = Total Revenue / Total Number of Orders.

You can track AOV through Google Analytics by enabling e-commerce tracking in your Google Analytics account. Once that is done, go to Conversions >> Ecommerce >> Overview. Here you will see a lot of important statistics. Average order value is seen under Transactions.

For Shopify stores, this is much easier. All you need is to go to the Analytics section and find your AOV in the Overview dashboard.

What is AOV among Shopify sellers?

Although Shopify is not regularly publishing the average order value of all the merchants, they do publish one during Black Friday. The platform-wide AOV during Black Friday 2022 was $102.10, a slight growth compared to $100.70 from Black Friday 2021.

Interestingly, the AOV also differs by device. Theaverage order value in US e-commerceis $155.75 for desktop, $112.29 for mobile, and $95.51 for tablet. Why is that? Because on desktop, customers tend to purchase more expensive products like electronics or appliances, while on mobile, it's rather fashion or books.

There is no "recommended AOV" as it differs per segment you are in, but you should always aim to grow it constantly. And here are a few tips to help you with that.

6 Ways to Increase The Average Order Value

1. Establish a minimum order value eligible for free shipping or a discount

How many times have we, as customers, tried to find that one product of $10 to qualify for free shipping? More often than not, it works.

Let the customer know what the minimum value of an order is to get free shipping.

You can also offer discounts on minimum order value. So instead of giving free shipping directly, you can set the discount code as a $ amount that the customer will get back after spending a predefined amount.

There are some great apps like Automatic Discount for Shopify that help you generate discount codes that are applied automatically at checkout.

2. Create effective upselling, cross-selling and downselling strategies

Upselling

Upselling is the most highly used strategy to increase the AOV of e-commerce stores. It is the art of talking a customer into buying the more expensive version of the product.

If you can put the right upsell products in front of the customer at the right time, you can increase your revenues by 10 – 30%.

Let’s see how music streaming giant Spotify does it.

While it advertises its service as free, it also has a premium offer that it shows as soon as you choose the free version. In a clear comparison, it shows what features you will receive in the premium version.

Also notice how Spotify upsells – it offers you a paid version for $0.99 for three months, before going all the way up to $9.99 a month after. They are sure that you will be hooked enough in the first month of the free trial and will not hesitate to buy the premium product later.  

Digismoothie offers an excellent app for setting up an upsell strategy on your Shopify store. Candy Rack is a one-click upsell app that creates fully automatic upsells based on a product recommendations API. You can use predefined upsells or you can create your own.  

Cross-selling

Cross selling is slightly different than upselling and involves showing other relevant products customers can buy. While cross-selling might seem like a no-brainer, often e-commerce owners do it wrong. You have to offer value to a customer’s buying journey and not recommend irrelevant products just for the sake of cross-selling.

Take a look at an example of how Amazon does effective cross-selling.

Downselling

The opposite of upselling, downselling can be an exciting way to boost revenue by eliminating the customer’s reasons not to buy. Remember the times when you rushed to the “clearance” section of a store to find, and buy, a product you wanted, but resisted buying it earlier as it was a bit too expensive?

E-commerce stores can also employ such downselling tactics. This will not only help increase the AOV, but it’s capable of making a leaving customer buy. When a customer is about to leave your store, shoot a popup that offers a similar product, at a lower price with lesser features than he was originally looking for. Chances are, the customer might just buy it. And selling something is always better than selling nothing.    

3. Bundle products

Bundling products can be a great way to increase AOV as you can make customers buy more than they had originally planned. Instead of offering discounts on individual products, bundling products and selling them at an overall discount is a great way to increase AOV. You offer the same discount but you get the customer to spend more.

‍Beard Brand creates “grooming kits” by bundling multiple products. This is an intelligent way to bundle products because you are offering value to the customer by offering a discounted price on the kit and by offering related products to create a holistic package (in this case, for beard grooming. Notice how even a comb makes its way into the kit).

You can use a Shopify bundling app to automate the process. For instance, PickyStory allows you to create various bundled offers. It applies AI-powered algorithms to automatically create the best-fitting bundles, as well as lets you offer bundle builders—it's when customers can choose which products to put together for a better deal. The app features a 7-day free trial and remains free until you make more than $100 of revenue through it. Then, the monthly fee will depend on the scale of the additional revenue that you're getting with the help of bundles.

4. Start a customer loyalty program

Loyalty programs can help increase your revenues by 5-10%, sometimes even more. Loyalty programs not only increase your AOV, but they are also great for increasing customer retention.

An excellent example of a loyalty program is the Beauty Insider Program run by online cosmetics giant Sephora. The company does not run the program on auto-pilot; instead, it pays careful attention to the customer experience and the types of rewards that will attract them.

By creating a community, it creates an emotional connection with and among its customers. Sephora constantly tweaks its loyalty program by taking into consideration the changing needs of their customers.

Read all about Sephora’s loyalty program in this article by Loyalty Lion.

5. Use customer support to encourage sales

Giving customers the option to easily connect with you can also help drive sales and thereby, revenue. Live chats are a great way to not only solve customer problems but also to suggest products and upsell.

Tawk, Crisp, and ChatFuel are excellent apps for integrating into your Shopify stores to allow your customers to interact with you in real-time.

Using a click to call widget is taking live chat to the next level. EasyCall is an app that seamlessly integrates with your Shopify store and offers the customer the ability to call you by simply clicking on the click to call widget.

By speaking (instead of “chatting”) to a live person in real-time, the potential to enhance AOV turns bigger.

6. Enable your customers to leave you a tip at the checkout

Tipping can have a surprising impact on your AOV and it won't cost you anything. It's supported natively by Shopify. Learn how to enable tips in the Shopify checkout.

Parting words

So, how do you decide what is good AOV? While you can certainly use industry benchmarks, remember that all businesses are different, even within an industry.

The best and the most productive way is to improve your own AOV, regardless of what it is now. Improving the AOV is a continuous process and the best you can do is make your AOV today better than what it was yesterday.

There are many ways, apart from the ones mentioned, to increase your store’s AOV. But remember to also focus on other KPIs while trying to increase your AOV. Your enhanced AOV will mean little if your conversion rate, for example, decreases. Your overall goal should be to increase your store’s revenue so you need to focus on all aspects holistically, and not in isolation.