Within the dynamic e-commerce landscape, achieving a successful business is not just about listing products. In 2024, a thriving e-commerce business is frequently evaluated using a range of metrics, including conversion rates and customer acquisition costs. Among these factors, one that stands out is increasing Average Order Value (AOV). AOV plays a crucial role in boosting e-commerce revenue without the need to acquire new customers. By encouraging existing customers to spend more per transaction, you can significantly enhance your profitability. Before we dive into the strategies to increase your AOV in 2024, it is important to understand the concept of AOV and its importance to business.
What is the Average Order Value?
Calculating the average total value of orders placed on an e-commerce platform over a specific period is known as Average Order Value (AOV). The calculation is based on dividing the overall revenue by the total number of orders. In terms of calculations, the AOV can be determined by dividing the total revenue by the total number of orders.
For instance, if an online store generates RM10,000 in revenue from 500 orders in a month, the AOV would be RM20 (RM10,000 / 500). This means that, on average, each order placed on the website is worth RM20.
Why is AOV Important?
Revenue Optimisation
AOV offers valuable insights into your customers' spending habits. By gaining insight into customer spending habits, businesses can fine-tune their pricing strategies, offer additional products, and create customised offers to maximise the value of each purchase.
Profitability
Increasing AOV has a direct impact on the overall profitability. By having a higher AOV, businesses have the potential to generate more revenue without having to rely solely on expanding their customer base or increasing website traffic. These factors can contribute to an increase in profits and longevity
Example:
Consider an e-commerce business with a RM50 Average Order Value (AOV) and 100 monthly orders, resulting in $5000 revenue.
If they increase the AOV by 20%, which to RM60
Increased AOV=Current AOV+(Current AOV×Percentage Increase)
Increased AOV= RM50 + (RM50 X 20%)
Increased AOV= RM50 + RM10
Increased AOV= RM60
AOV = revenue/100
60=revenue/100
60x100=revenue
RM 6000=revenue
Revenue increases to RM6000 with the same number of orders. This RM1000 revenue boost directly enhances profitability without expanding customer base or traffic. It represents a sustainable profit increase, unaffected by fluctuating costs or market trends.
Marketing Efficiency
AOV impacts marketing and budgeting. Businesses can evaluate their marketing initiatives' Return of Investment (ROI) by knowing the average order value. They can optimise their marketing by targeting high-value buyers.
Customer Experience
Understanding AOV lets businesses adapt the shopping experience to attract bigger purchases. Volume discounts, free delivery thresholds, and personalised product recommendations can increase client spending and happiness.
8 Strategies to Increase AOV in 2024
In order to boost the Average Order Value (AOV) in 2024, it is crucial to take advantage of the user bases of established marketplaces, including Shopee, Lazada, and the currently popular platform, TikTok Shop, in addition to your own web store. Utilise these platforms to boost your AOV by implementing the following strategies:
Upselling and Cross-selling
Upselling and cross-selling are classic techniques to increase AOV. Upselling involves encouraging customers to buy a higher-end product than the one they're considering, while cross-selling suggests complementary products. Use personalised recommendations based on browsing and purchase history to make these suggestions more relevant.
For example, when a customer is purchasing a laptop, suggesting an upgraded model or complementary accessories such as a mouse or keyboard can improve their purchase.
Implement Product Bundling
Product bundling involves offering a set of products together at a discounted price compared to purchasing each item individually. This strategy encourages buyers to buy more than they initially intended which can increase the total value of their orders.
As an example, if you specialise in the sale of baby products, you may offer a diaper alongside a nursing bottle. The bundle offer may be more appealing than purchasing each item separately due to its perceived value.
Sellercraft also provides product bundling recommendations and reasons why you should use this feature. With Sellercraft, you can effortlessly identify complementary items to bundle together, maximising cross-selling opportunities and increasing AOV. Previously, we have shared tips on how product bundles can help overcome old products in your online store in our blogpost.
Offer Free Shipping Thresholds
Customers are sometimes encouraged to place additional items in their carts in order to qualify for complimentary shipping on orders exceeding a specified threshold. Determine your average order value and establish a free shipping threshold that is slightly higher. This strategy not only increases AOV but also improves customer fulfilment by offering additional value.
Create Loyalty Programs
Loyalty programs can incentivise repeat purchases and higher spending. By providing customers with points for each dollar spent, you motivate them to increase the value of their orders. This serves as a motivation for them to earn more rewards. Ensure that your loyalty programme is user-friendly and provides valuable incentives to maintain consumer engagement.
Leverage Limited-Time Offers
Urgency is an exceptionally effective motivator. Customers may be encouraged to make larger purchases by limited-time promotions, including flash sales, discounts, or exclusive deals. Create a sense of urgency and drive higher order values through highly promoting these offers on your website, marketplaces and through email marketing.
Enhance Your Product Design Pages
As discussed in our previous article, mastering product design pages (PDP), including your product information, is one of the vital strategies for running a successful business in 2024. This strategy also helps you in increasing AOV. Detailed and compelling product pages can significantly influence purchasing decisions. Use high-quality images, videos, and comprehensive descriptions to showcase the value of your products. Highlight features, benefits, and customer reviews to build trust and persuade customers to add more items to their cart.
Personalise the Shopping Experience
Personalisation is essential to increase the average order value (AOV). Make use of data analytics, such as the Sellercraft Data & Analytics tool, to gain insight into buyer habits . Customise product recommendations and email marketing to meet the specific needs of each consumer. Customers are more inclined to spend more when they receive personalised experiences, which creates a sense of appreciation.
Take Advantage of Customer Abandonment Tools
Cart abandonment is a common problem in e-commerce; however, it can also serve as an opportunity to boost the average order value (AOV). Use customer abandonment tools to recover lost revenues. Benefit from email marketing and marketplaces such as Shopee's Chat Broadcast feature to give out personalised offers and reminders to customers who have abandoned their purchases. These tools can assist in the recovery of potential sales and in encouraging buyers to complete their purchases with additional items.
Tracking and Optimisation
Data Analysis
Regularly analyse AOV trends to identify areas for improvement and track the impact of implemented strategies.
Sample Example:
- Scenario: Your data analysis reveals that customers who visit the site between 6 PM and 9 PM tend to have a higher average order value (AOV) compared to other times.
- Action: Based on this data, you decide to run targeted promotions and special discounts during these peak hours to further boost AOV.
- Outcome: After implementing this strategy, you observe a 15% increase in AOV during the targeted time frame.
A/B testing
Experiment with different pricing, promotion, and upselling techniques to see which ones have the most significant impact on AOV.
Sample Example:
- Scenario: You want to determine if offering a discount on bundled products increases AOV.
- Action: You create two versions of a product page: one with a bundle discount (Group A) and one without (Group B). Half of your traffic is directed to each version.
- Outcome: After running the test for a month, you find that Group A had a 20% higher AOV compared to Group B. You decide to implement the bundle discount site-wide.
Customer Segmentation
Segment customers based on purchasing behaviour to tailor strategies for different groups and maximise AOV.
Give example:
Purchasing behaviour
- Customer A - every 3 months - purchase check out large
- Customer B - every month - small size of check out size
- Customer C - randomly
Sample Example:
Scenario:
You segment your customers into three groups based on their purchasing behaviour:
- Customer A: Purchases every 3 months with a large checkout size.
- Customer B: Purchases every month with a small checkout size.
- Customer C: Purchases randomly with varying checkout sizes.
Action:
- For Customer A, you send personalised emails with exclusive discounts on bulk purchases just before their usual purchase time.
- For Customer B, you offer loyalty points and small discounts on frequently purchased items to encourage more frequent purchases.
- For Customer C, you run retargeting ads with personalised product recommendations to remind them of past interests.
Outcome:
Each customer segment shows an increase in AOV, with Customer A's average order size increasing by 10%, Customer B's purchase frequency improving by 15%, and Customer C showing a 12% increase in overall spending.
Conclusion
Increasing your Average Order Value (AOV) is a pivotal strategy for enhancing e-commerce revenue without the need to constantly acquire new customers. By understanding the importance of AOV and implementing targeted strategies such as upselling, cross-selling, product bundling, and leveraging loyalty programs, businesses can significantly boost their profitability. Additionally, utilising marketplaces like Shopee, Lazada, and TikTok Shop, along with tools to recover abandoned carts, can further enhance AOV.
In 2024, personalization, limited-time offers, and optimised product pages will continue to play crucial roles in encouraging customers to spend more per transaction. By continuously analysing data, experimenting with different techniques, and segmenting customers effectively, businesses can adapt to changing market trends and customer preferences. By doing so, they not only increase AOV but also improve overall customer satisfaction and loyalty, ensuring sustained growth and success in the competitive e-commerce landscape.
