What is AOV?
Average Order Value (AOV) is the average amount of money a customer spends per purchase. It’s determined by keeping track of the total revenue divided by the total number of purchases. When AOV increases, it means that customers are shopping more or buying products of greater value.
What is AOV used for?
AOV is used to evaluate and analyze a retailer’s performance. It provides a multi-dimensional view of the buying behavior of customers. And, this data can be used to improve the effectiveness of marketing activities and pricing strategies.
By tracking AOV, retailers can see which marketing channels are driving the most valuable customers to the eCommerce website. For example, if a retailer has been running a Facebook campaign for the last month and their AOV is higher than during other months when no campaign was run, then Facebook is obviously contributing positively.
Examples of AOV
Below are two examples of AOV in a Shopify store.
- Example 1:
Total revenue: 100$
Number of purchases: 5
Average Order Value = 100 / 5 = 20$
- Example 2:
Total revenue: 400$
Number of purchases: 5
Average Order Value = 400 / 5 = 80$
The difference between Example 1 and 2 is that in Example 2 you have the same number of purchases, but a higher total revenue, thus a higher AOV.
How to increase your Shopify store’s AOV?
eCommerce businesses typically want to maximize their AOV because it helps increase the total dollars they generate, but this is a tricky task. Increasing your AOV can be difficult, but there are a number of tactics you can use to help boost your Shopify store’s AOV:
Cross-selling is one of the most powerful things you can do to increase your AOV. It involves selling other products to your customers while they are on the checkout page.
This does refer to a typical upsell where you suggest additional products by suggesting items customers might “also” be interested in. While this can be effective, the new cross-selling techniques involve more personalized recommendations.
Today, retailers are using data to create a more tailored experience for each customer by segmenting their eCommerce store by interests and other data points. The new wave of cross-sells is much more personalized, and this makes it much easier for retailers to steer customers toward products they will be interested in.
Upselling helps increase your Shopify store’s AOV by selling to a customer who has bought from your store rather than selling to a brand-new one.
It involves selling a more expensive variant of a product to increase the overall sale amount. If you sell an item for $100 then you can offer an upsell for $150 with a bundle of more premium or upgraded products to increase the overall volume purchased.
How to Upsell in your Shopify store to increase AOV? Use merchandising tools to squeeze out more sales and, thus, boost your Shopify store’s AOV. Be sure to set up your high-profit margin products to show up first on the Shopify Collection page, Shopify search bar, and search result page to attract more customers.
3. Volume discounts
“Volume discounts” refer to giving a discount when customers purchase a large volume of products in a single transaction. This can be done either by giving cash discounts or giving the purchaser a product at no cost.
This is an effective tactic because they allow customers to purchase more products than they would have and a higher total order value which results in higher overall revenue.
4. Free shipping threshold
Similar to volume discounts, you can also offer free shipping if customers purchase a certain number of products.
However, you need to ensure that these thresholds are at an amount where they are not excluding your customers from making a purchase. For example, if the threshold is set at $100, then you will not be able to attract your customers who typically spend less than that.
Coupons are one of the most powerful tools that you can use to increase AOV. They are typically used to create savings when a customer buys a product. This can also help boost AOV if you offer better product deals.
For example, you can offer a 15% off coupon for a visit to your store and if the customer makes a purchase, then maybe you will also offer free shipping for the next purchase.
This is very effective as people will take advantage of both offers, and it can help boost AOV significantly.
6. Return policy
Since AOV is calculated from the purchase price, you need to ensure that you do not include the cost of returns in your calculation. If a customer returns a product, then this cost should be ‘eaten’ by the company and not passed onto the customer.
You can offer various return policies such as a money-back guarantee, free shipping for returns, and even a cash refund. These are all great ways to increase AOV and make sure that customers feel safe making a purchase from your store.
Boost your store’s AOV with a powerful Shopify Product Filter and Search tool
Product Filter and Search by Boost offers a beautiful and intuitive way to organize your product offerings. With Boost, you can quickly find what your customers are looking for and eliminate the clutter that makes it difficult for them to shop.
By offering specific searches by categories, Boost simplifies the shopping experience for users, reducing their frustration and enabling them to find the products they want and need faster.