Average Order Value: How To Increase Your AOV by 75% [With Examples]

Okay, say you have two customers:

• Customer A purchases the same three consumable products from your store on a weekly basis
• Customer B purchases a different set of three consumable products, and does so on a monthly basis

Which customer is better for your business?

Alright, you probably didn’t fall for our way-too-obvious trap, here:

You need to know the cost of the items being purchased before you determine which customer is more valuable to your business.

Which is where average order value comes into play.

In a hurry? Here's what you'll learn in this article:

• What is Average Order Value (AOV)?
• Why should I track and improve average order value (AOV)?
  • The importance of knowing and tracking your AOV
  • The importance of improving your average order value (AOV)
• AOV marketing for eCommerce: 3 keys to improving your average order value (AOV)
  1. Segment your customer groups into three groups: High, Average, and Low Spenders
  2. Use these AOV-based marketing initiatives
  3. Improve the overall customer experience

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What is Average Order Value (AOV)?

Average order value (or AOV) refers to the average amount of money your customers spend in a single purchasing transaction.

The formula for calculating AOV is simple:

(Total Sales Revenue) / (Total Number of Orders)

So, if you sell $1,000 worth of goods in ten sales transactions, your AOV would be $100:

($1,000) / (10) = $100

As one of the most important key performance indicators for eCommerce businesses, AOV can be tracked on an audience-wide, segment-wide, or even individual basis. We’ll discuss the importance of each use case in the following section.

Before we move on, let’s quickly address the notion of what a “good” AOV is.

As you can imagine, what’s considered a “good” AOV will vary based on a variety of factors, including:

• Industry
• Sales channel
• Device used by consumer

While you certainly can - and should - use industry averages as benchmarks to gauge your own efforts, it’s more productive to always focus on improving AOV, regardless of where you stand against your competition.

So:

A “good” AOV to strive for tomorrow is one that’s higher than today’s.

With that in mind, let’s talk about why tracking - and improving - AOV is vital to the success of your business.

Why should I track and improve average order value (AOV)?

In considering the importance of AOV to your business, there are two aspects we need to focus on:

• The importance of knowing and keeping track of your AOV
• The importance of continuously working to improve your AOV

Let’s discuss each separately.

The importance of knowing and tracking your AOV

As we mentioned above, knowing your AOV allows you to know where you stand against the various other brands in your industry in terms of the revenue you generate per transaction.

But why is knowing this information so important?

Firstly, it allows you to gain a better understanding of your customers in a variety of ways, such as knowing:

• How they shop: Are they the type to make a beeline to their desired product pages, or do they browse around, often making additional purchases “on the fly”?
• What they buy: What items do they purchase often? Do they purchase complementary items in addition to their “main” purchases
• How much they’re willing to spend: When they spend above their average order value, what makes them do so?

Once you have all this information (and more), you can then start identifying opportunities where you can get your customers to spend just a little bit more, as well as areas where you are potentially making it less likely that your customers will go outside of their normal spending range. We’ll get more into the specifics of this in the next section.

The importance of improving your average order value (AOV)

Okay, so the main reason for improving your AOV is pretty obvious:

The more money your customers spend per transaction, the more revenue your company will generate. To be sure, making money is the name of the game, right?

Looking at this another way, if your customers are spending more throughout each order they place, this means their overall lifetime value will increase even if their lifespan with your company doesn’t increase. Similarly, if a customer’s AOV increases, you’ll also be making more money from them over the same time period even if their purchase frequency doesn’t increase, either.

(Quick aside: Of course, you ideally want to increase these metrics over time, too...but that’s a discussion for another day.)

Shifting gears a bit, it’s worth noting that a higher CLV means good news for your acquisition and retention costs, as well:

Increasing AOV means you’ll be able to recoup the cost of converting or retaining a given customer more efficiently and cost-effectively. In turn, you can then reinvest the time, money, and other resources you’ve saved into your company’s various initiatives.

As we move into the part of the post where we’ll talk about how to improve AOV, it’s important to keep in mind that it’s not just about getting your customers to spend more. Rather, it’s about getting them to spend more because there’s value in it for them.

With that in mind, let’s dig into the three keys to improving your AOV.

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AOV marketing for eCommerce: 3 keys to improving your average order value (AOV)

In this section, we’re going to discuss three overarching strategies to implement as you work on improving your average order value:

• AOV-based segmentation
• AOV-based marketing initiatives
• Improving customer experience

Within each, we’ll explain why the approach is key to improving your AOV, and provide examples from brands who have experienced massive success with their AOV-related initiatives.

Let’s get started.

1. Segment your customer groups into three groups: High, Average, and Low Spenders

As we mentioned earlier, it’s important that you focus on improving your AOV for:

• Your entire customer base
• Your specific customer segments
• Your individual customers

But, taking a one-size-fits-all approach to doing so simply isn’t going to work. As with all modern marketing campaigns, your AOV-related initiatives need to be highly-tailored to a specific customer or audience in order to be effective.

In order to make this happen, you’ll first need to segment your audience accordingly — focusing specifically on data related to AOV.

To start off, you’ll want to segment your customers into three groups:

• High spenders
• Average spenders
• Low spenders

(Pro tip: While you can create your own definition for “high” and “low” spending customers, an effective way to do so is to use standard deviations from your true AOV as guideposts.)

Once you have these basic segments set up, you can then segment each section even further based on supplementary data (e.g., their purchase frequency, the type of products they purchase, etc.)

As we’ll get to in the next section, segmenting your customers based on AOV-related data enables you to develop marketing campaigns, initiatives, and offers for your target audience. In turn, you can provide dynamic content, relevant offers, and a sufficient value trade-off that will make your individual customers just that much more likely to spend just a little more than usual during their next transaction.

2. Use these AOV-based marketing initiatives

Once you have your audience segmented based on their AOV and other related information, your next order of business is to begin creating highly-relevant — and massively enticing — offers for each audience.

Here, we’ll discuss some of the most effective offers to present your customers—and present examples of brands that have taken these strategies to a whole new level altogether.

[AOV Marketing #1] Upselling: Offer a highly relevant product that is worth the extra expense

Upselling is the process of showcasing similar — yet more valuable — products to customers considering a specific purchase.

For example, Best Buy ensures individuals in the market for a new television see what else is “out there” when checking out a specific model:

(Increasing AOV strategy: Best Buy's “People Ultimately Bought” | Source)

As we’ve hammered home throughout this article, the importance of relevance and perceived value when making upsell offers simply cannot be understated. For this reason, it’s vital that the products you recommend are in-line with your individual customer’s needs, expectations, and point along their buyer’s journey.

So, going back to the above example, you’ll see that many of the showcased televisions cost more — and provide more value — than the item the customer was originally looking at. This is basically upselling 101:

If the customer is willing to spend $279 on a 50-inch TV, they very well might be interested in spending an extra $50 to increase their screen size another five inches.

But this is merely scratching the surface in terms of personalizing your upsell offers. In order to get laser-specific with their upsell suggestions, Best Buy would, for example, need to know a variety of other information, such as what the customer is looking for in a new TV, how much they’re willing to spend, and what might make them more likely to spend a bit more.

In addition to providing upsell offers on product pages, you might also test similar promotions on pages your customers will encounter later on in their buyer’s journey. For example, Mixbook allows customers to add or edit their cart for a certain period of time even after they’ve completed their purchase:

(Mixbook allows customers to edit their cart post-purchase | Source)

Regardless of what your upsell offer is, or where and how you showcase it, what’s most important is that you ensure the offer is highly relevant and is worth the extra expense in the eyes of your customers. While it’s not realistic to think you can double a customer’s AOV by upselling them on products way out of their price range, the goal is to get them to start spending incrementally more and more with every purchase they make.

[AOV Marketing #2] Cross-selling: Display supplementary or “frequently bought together” products

Cross-selling is the act of showcasing products or services that supplement the “main” product a customer is focusing on.

Perhaps the most popular example of a cross-sell offer is Amazon’s “Frequently bought together” section:

(Amazon likes to bundle products | Source)

The premise of a cross-sell offer is to pile additional value onto the customer’s experience with the product they were initially checking out. In the example above, Amazon points customers in the market for a new gaming system to a popular video game and to a separate controller—neither of which can be used, of course, without the actual system.

Online grocery store Ocado takes a similar approach, showcasing supplementary food products that go well with the customer’s initial purchase:

(Ocado offers supplementary food products | Source)

Here’s where cross-sells can really affect your AOV:

Say a customer goes to purchase the above bagels and notices the cream cheese offered on sale on the product page. They decide to give the cream cheese a try and absolutely love it. From then on, whenever they go to buy more bagels, they also buy more cream cheese — adding a ton to their AOV in the process.

Now, this might not be the best example of how to implement cross-sells, since you should typically offer products that cost less than the original product in question. Still, there’s something to be said about using loss-leaders to get your customers primed for more expensive purchases in the future.

At any rate, this approach worked wonders for Ocado, who saw conversion rates of recommended products skyrocket by 800% after implementing a laser-focused approach to cross-selling. Needless to say, this certainly had a positive impact on their AOV, overall.

As with upselling, your main focus when providing cross-sell offers should be on providing added value to the customer. This means knowing how they intend to use the “main” product they’re interested in buying, and knowing what other products you offer that will allow them to get more out of the initial product — whatever “more” means to the individual customer.

[AOV Marketing #3] Incentives: Integrate purchasing thresholds and loyalty program

So far, the AOV-related offers and initiatives we’ve discussed have been focused on getting customers to buy specific additional products.

But, it’s also possible to get your customers to spend more by providing them with an incentive to do so.

First, let’s talk about purchasing thresholds.

Purchasing thresholds offer to provide some type of discount once a customer’s order value reaches a certain point. Typically, this offer involves a percentage or dollar amount off the total order, free shipping, or a choice of add-on items.

In a case study from GrowthEverywhere, VP of Marketing at Mobovida, Edwin Choi, explains that his team implemented a mathematical formula to derive and dynamically provide an optimal threshold offer to their individual customers. After some fine-tuning (which we’ll come back to in a bit), Mobovida was able to increase their overall AOV by a whopping 15.81%.

You can also increase your AOV through your loyalty program initiatives, too — in two different ways. For one, those looking to rack up loyalty points will likely be open to purchasing additional items, making larger purchases, and engaging in purchasing “challenges” you create for them.

Starbucks is the king of loyalty program incentives:

(Starbucks is the king of incentives | Source)

Companies also have a chance to increase a customer’s AOV once a customer has earned their reward.

Using Starbucks as an example, if a customer that typically purchases a regular coffee earns a free specialty drink — and ends up loving it — they might end up buying the more expensive item at least every once in a while moving forward (which they might not have done had they not gotten to try it for free).

Over time, even an additional “special occasion” purchase will lead to a drastically increased AOV — both on an individual and audience-wide basis.

For some hard evidence as to how loyalty programs can affect AOV, look no further than the data Smile.io collected in 2017 on programs from over 2,000 companies. Overall, the data showed that loyalty programs increase AOV an average of 13.71%. In some cases, loyalty programs led companies to increase their AOV by a whopping 75%!

(Pro tip: Whether offering upsells, cross-sells, or incentives to your customers in the interest of increasing their order value, you need to remember that it’s not just about selling more. Rather, it’s about providing an offer to a given customer at a given point in time that’s so irresistible that they have absolutely no problem spending a little more cash to receive it.)

3. Improve the overall customer experience

The final overarching area to focus on when looking to improve AOV is your overall customer experience.

Think about it:

The easier and more pleasant it is for your customers to navigate your site, the more likely they are to do so. In turn, this means they’ll have countless opportunities to be exposed to your various products and offers — potentially leading them to make additional purchases whenever they engage with your brand.

On the other hand, if navigating your site proves to be too frustrating, your customers might not be willing to browse around and see what else you have to offer. While they might still put up with your site long enough to make a necessary purchase, they probably aren’t going to make too many additional purchases throughout their lifespan with your company.

And we’re not speaking hyperbolically here. Remember the case study on Mobovida we mentioned earlier? Well, as it turns out, their initial efforts failed specifically due to problems with the site’s UI — which disrupted the customer experience entirely.

While the AOV of converting customers initially increased by 32%, the brand’s conversion rates plummeted. Essentially, while those who were making purchases were spending more, there were so few people making purchases that their increased order values became a moot point.

However, once the team fixed the CX-related issues of the initiative, they not only increased their AOV by the aforementioned 15.81% — they also kept their conversion rate steady throughout the campaign, as well. So, the company ended up making the same amount of sales, while making 15.81% more revenue per sale.

Not a bad outcome, huh?

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Wrapping up

As we begin to wrap up, one thing worth mentioning:

When working on improving your AOV, it’s important to not sacrifice other KPIs in the process.

(As in Mobovida’s case, an increase in AOV means nothing if your conversion rates tank.)

That is to say, the goal isn’t simply to improve your AOV; the goal is to drive more revenues by increasing AOV.

Once again:

It all comes down to the value you provide your customers.

As long as the value of your offer — as perceived by your customers—is worth the little extra cash they’ll need to spend to receive it, they’ll almost certainly take you up on any offer you provide them.