8 Ways to Increase Your Average Order Value and Drive Ecommerce Revenue

Right Side Up recently hosted a webinar on how to increase average order value (AOV) for D2C ecommerce founders and marketers, led by Lissa Regets, a senior growth strategist on the project strategy team at Right Side Up. Lissa shared actionable advice to help businesses improve their AOV, customer lifetime value, and profitability. Watch the full webinar for all of Lissa’s insights.

There’s been no shortage of challenges for the ecommerce industry over the past few years. From the global pandemic, to exponential growth in online shopping, data privacy changes (iOS 14.5+), rising CACs, supply chain issues, and the ever-shifting state of the economy, it sometimes feels impossible to drive revenue growth while keeping CACs low. And although there’s no magic bullet to change the bigger picture problems, there is an often overlooked metric that can be used to our advantage—average order value. 

Improving your average order value (AOV) can be a game changer for increasing revenue, profitability, and lifetime revenue, despite the increasing challenges we face. Let’s take a look at why focusing on your AOV should be a top priority this year.

Understanding Average Order Value

AOV is simply the average amount of money your customers spend in a purchase, and can be calculated by dividing your total revenue by your total number of orders. For example, if your revenue is $100,000 across 1,000 orders, your AOV is $100. Simple enough—but when you consider the impact of even a slight bump in your AOV, you can be looking at a significant revenue increase over time, all while keeping your ad spend the same, and thus, improving your ROAS. Increasing your AOV also leads to higher LTR (lifetime revenue). 

Check out the chart below to see AOV’s powerful effect on your most important metrics. 

“AOV is a critical component of acquisition strategy, and it’s one part of the equation,” said Lissa Regets, who hosted our recent AOV webinar. “If you think about CACs and how important they are to driving new customers in and how much money that gives us to invest in our acquisition plan, that’s only one side of the equation. Conversion value is the other side of that ROAS equation—and what drives conversion value? AOV.”

How to Increase Average Order Value

Now that we understand the huge potential of maximizing the average order value, we have to figure out how to get customers to spend more. Here are eight methods we’ve found to be successful.

Incentivize customers to spend more

Give the customer an offer they can’t refuse by presenting them with incentives to increase their cart size. Try things like adding a top ribbon with a threshold for free shipping over $65, giving $10 for customers that spend over $100, 20% savings on the next purchase, or a buy two save 10% promotion. 

Build a bundle for multiple products in one order

Create value-based bundles, sets, or packs to encourage customers to buy multiples of the same or similar product through:

• Merchandised positioning (complete the look with a top and bottom, mix and match, or curated set)
• Value-based positioning (buy more and save messaging)
• First time customers offers (promote bundles in prospecting to increase ROAS opportunity)

Use smart upsells and cross-sells

Make purchasing additional products feel easier and more natural with thoughtful complementary products, like relevant upsells, cross-sells in cart, PDPs (product detail pages) or post-purchase offers. You should also test lower value cross-sells closer to checkout, as well as smart reminders to replenish products if the customer is coming back to buy other items. Just be careful to avoid overloading your customers and stick to 2–3 additional options at a time.

Make buying fun by gamifying the shopping experience

We all love to get a prize, so why not reward your customers for buying your products? Help them earn freebies and discounts by:

• Offering a tiered discount or free gift when you reach value thresholds
• Giving points, free gifts or loyalty rewards for higher AOVs
• Proving a build your own bundle, set, or pack experience

Do the work for your clients with ‘shop the look’ product grouping

Don’t just tell your customers to buy more, show them why they should want to buy more by letting your merchandising lead the way. Get your customer experience and product teams involved to collaborate on:

• PDPs—Suggest other items that go well with that product and make it easy to add it to the cart.
• Buy Now, Pay Later—Giving customers the option of an installment payment plan can lead to higher AOVs since the cost is spread out over time in their minds.
• Shop the look—Does your product shine when it’s surrounded by items that complete the vibe? Show them together! 
• Line of sight—Position best selling, higher-priced products higher on the screen to get more eyeballs on it and make it easier to find and add to cart.  

Increase perceived value, FOMO, and VIP exclusivity with premium pricing 

Perceived value and the thrill of buying something other people can’t have has long been a driver of luxury goods purchases. But you can still help your customers capture that feeling even if your brand isn’t wildly expensive. Test things like limited-run new collections, premium-positioned collections of SKUs, or “this well sell out fast” influencer capsule collections.

Expand into new product categories

If people already like your products, why not give them a wider range of items to buy from you? Consider expanding into adjacent categories that make sense for your niche and customers. For example, if you sell t-shirts for $30, try to offer sweatshirts for $50, and then build out from there.

Use personalized recommendations

You can help customers find products to buy almost before they even know they want them by creating personalized recommendations based on their past purchases or browsing history. We recommend:

• Using website signals and email and SMS marketing to create personalized combinations that convert
• Developing smart repeat purchase email or SMS flows
• Setting up a chat bot or 2-way SMS experience for high-priced longer sales cycle items, e.g. furniture
• Giving customer service reps flexibility beyond returns/exchanges to offer customers ideas to buy products they may like. Concierge personal shopping has been proven in retail environments for years, it’s time for this approach to go digital.

Methodically test your way to an increased AOV

Before you get into experimentation, it’s important to understand your current metrics. Pull reports and look at your AOV, LTV and how various customer segments may differ from one another. Once you know this valuable information, you can pull insights and set realistic goals.

We know there are several ways to increase your AOV, but trying them all at once will leave you with more questions than answers. The key to sustainable average order growth is to test with intention–that means setting a learning agenda with multiple tests you have confidence in making an impact, prioritizing your list, and knocking one test out at a time, iterating along the way and aiming for incremental gains. Move on only when you feel like you’ve found the best result. Pro tip: don’t forget to make an annotation in Google Analytics so you can easily compare results later.

“There are many different methods you can test,” Regets said. “But just because these all hold the potential to be game changers for your business, doesn’t mean you should throw them all at the wall and see what sticks. Take some time, have a conversation and brainstorm with your team, discuss which of these different approaches are most relevant and possible to do given your existing capacity and resources.”

Callouts as you test and learn

Most marketing metrics are interrelated so there are a few things you should look out for. As you increase your AOV, you may notice your conversion rate may decline. One other thing to note is that with increases in your AOV, your CAC may start to slowly rise as well. This is normal and may be caused by increased sales cycle time (customers taking longer to buy). It may not be an issue for you if your CAC:LTV ratio remains strong (3x+). In some cases, as your AOV rises, you’ll start to see slight shifts in your audience because you may be starting to tap into homes with higher HHI (household income). Keep an eye on this and how it might impact your overall marketing plan. The benefits over time are worth the effort to increase your AOV and if a test doesn’t produce overall good results you can always roll back the change. Keep an eye on all of your key metrics as you test and learn and make decisions rooted in your business data and insights.

Unlock the Power of AOV

Average order value is a hugely important piece of your business that plays a significant role in your revenue, profitability, and lifetime revenue. As we covered, the higher your AOV is, the better chance you have to make your ads profitable and generate more revenue. By taking an intentional approach to testing and iterating based on cues from your customers, you can build a more profitable and sustainable business. 

Could your ecommerce strategy use a refresh? Message growth@rightsideup.co to chat with one of our expert growth marketers about how to increase your AOV and see a jump in revenue.