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How to Increase Average Order Value For Your E-Commerce Brand

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Your e-commerce brand has been up-and-running for a while now: your website is converting leads to customers, you have a steady stream of revenue, and you have a stable customer base.

What’s next?

When the time comes to scale your e-commerce brand, you’ll need a few important metrics to measure your success thus far. With the proper data, you’ll understand the popularity of your products, the success of your marketing campaigns, and your return on investment (ROI).

One of the most valuable measuring tools for your business is the Average Order Value, or the AOV.

What is the Average Order Value and Why Does it Matter?

Your e-commerce brand’s AOV is the average amount that customers spend on each online purchase from your store.

It is calculated by dividing your total revenue by your number of orders. So, if your company made $15,000 last quarter and sold 150 orders, the average value of each order was $100.

Using AOV will give you insight into the popularity of products and where to direct your advertising efforts. Ultimately, this will grow your business.

Take, for instance, your online store’s AOV of $100. If your e-commerce brand sells three products for $50, $100, and $125, customers likely favor your more expensive products. Future advertising efforts that center around these items likely will see a greater ROI.

But if your store sells three products priced at $75, $100, and $150, the opposite would be true. Advertising campaigns focused on the most expensive product may not be worth the cost.

How Do I Calculate My E-commerce Brand’s Average Order Value?

You can find your AOV by using the following formula:

Revenue / Conversions

If you don’t want to do this manually, many average order value calculators are available online.

You can find your AOV for any amount of time that want, whether it’s a year, a month, or even a day. It’s best to track AOV on a weekly or daily basis, though. This way, you’ll really be able to see peaks, dips, transaction trends.

What is a good average order value?

That depends. If you sell seasonal products, your AOV will vary greatly from month to month. Certain industries see large differences between their AOVs. In general, a good AOV is one that’s improving.

Ways to Increase Average Order Value

To improve your e-commerce brand’s AOV, you can usually go one of two routes.

  • Raise the price of frequently bought items, or
  • Motivate customers to purchase more items in each order

The following four ideas can be applied to either method you choose or a combination of the two.

Profit From Scarcity

Today’s buyers are more educated than ever, but they remain fallible to every person’s need to avoid loss. Spending more on a product to avoid missing out, then, is perfectly justifiable to many shoppers.

Market your products according to this scarcity model, and your AOV will likely go up. Instead of displaying the number of people who have purchased your product, display the number of items left. Include a feature on your website that says “Hurry! This item is running low” when less than 10% of that item is left for sale.

Using scarcity is especially effective when customers tend to re-order items. If a customer who purchases a certain shampoo from your site notices that it is running low, he may purchase two.

Create Minimum Order Rewards

Incentivize people to spend more on your website by rewarding them the more they spend. Promote a minimum order to be eligible to receive the reward, whether it’s express shipping, a percentage off the purchase, or a gift.

For even higher AOVs, provide greater rewards the more that customers spend. Consider this example.

  • 10% off any order of $100
  • 15% off any order of 150
  • 25% off any order of $200

Not only does the consumer save more the more she spends, but the discount rate also increases. Customers who have the means to purchase more will be much likely to do so when the benefits are greater.

Use Color Psychology

Color plays a large role in how we interpret the world around us. All of us subconsciously associate certain colors with certain moods, feelings, and actions.

  • Bright colors usually call for urgency and action
  • Pastel colors create a relaxed, calming experience

Use a color palette that is consistent with your intended brand experience, and you may see your average order value go up – 85% of consumers buy because of color.

Are you using bright pink as an accent color on your website that sells relaxing spa products, or a pale blue on your custom skateboard page? A few updates could be a game-changer.

Make the Return Process Simple

Online shopping gives customers the benefit of trying a variety of items without leaving their homes, saving them time and effort. With an easy shipping and return process, buyers will be even more motivated to spend more online.

If customers shopping on your e-commerce clothing website knows the return process is free and takes only three days to refund their purchase, they’ll be much more likely to add more items to their order. In their eyes, there is no cost to them if they decide they don’t want anything.

What this does for your business, though, benefits you in the long run. Customers who purchase more items likely will end up keeping more pieces than if they had just bought the one or two things they were originally looking for. You also gain trust, so buyers will be more likely to return to your store and spend more on the next order.

Learn More About Growing Your E-Commerce Brand

Increasing AOV is just one of the ways to grow your e-commerce brand into an even more profitable one. By using the right metrics to analyze your business, you’ll better understand your audience and what you need to do next.

Apply what you’ve learned and discover even more skills to scale your business with our E-Bootcamp

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