When it comes to ecommerce, success isn’t just about attracting new customers, it's also about maximizing the value of each sale.
That’s where average order value (AOV) comes in. AOV measures the average amount customers spend per transaction.
Though less known than other ecommerce key performance indicators (KPIs)—such as return on investment (ROI) and customer acquisition cost (CAC)—AOV is a powerful metric that directly affects your bottom line.
So, let’s give the AOV the attention it deserves by discussing why it works so well and how to boost it.
Understanding Average Order Value (AOV)
Before we get into specific strategies, let’s break down how it’s calculated and its importance as a KPI.
Definition and Formula for AOV
Average order value is calculated by dividing your total ecommerce revenue by the total number of orders.
As a formula, it looks like this:
AOV = Total Revenue ÷ Number of Orders
Despite its simplicity, this metric provides insight into your customers’ purchasing behavior and highlights opportunities to grow your revenue more efficiently.
Importance of AOV in Business
Since AOV measures your revenue per transaction, it’s a highly influential KPI for raising your bottom line.
By earning more on each transaction, you can boost revenue without needing to host more traffic or attract new customers. Increasing AOV directly improves your ecommerce store’s overall profitability.
Tracking and improving AOV is essential for scaling your growth sustainably.
Strategies to Increase Average Order Value
There are many paths you can choose to increase AOV. Some are so simple that you’ll wonder why you haven’t done it already. Others are more technically involved, but even better at driving sales. Let’s dive in!
Upselling and Cross-Selling
Encourage customers to purchase higher-end products or complementary items.
For example, if a shopper adds a new laptop to their cart, you could suggest a model with more storage space (upsell) or offer accessories like a wireless mouse or carrying case (cross-sell).
These techniques increase the order’s value but also enhance the customer experience. Sharing premium or closely related options helps your customers discover more products that they might’ve otherwise missed.
Bundling Products
Smart product bundling can offer your customers convenience and savings while increasing your AOV.
A bundle is a collection of items you already sell that offer a slight discount when purchased together. Bundles help customers feel like they’re getting more value, which can nudge them toward larger purchases.
For instance, a skincare brand might bundle cleanser, toner and moisturizer, providing customers with a time- and cost-efficient way to get these closely related items in one transaction.
Volume Discounts
Reward your customers for buying in larger quantities. Offering tiered pricing, such as “buy two, get one 50% off” or “buy three, get one free,” can motivate shoppers to spend more and maximize their savings.
This approach is another win-win that naturally increases order sizes while improving your customers’ shopping experience.
Product Recommendations
Sometimes, you don’t know you want something until you see it, and suddenly you have to have it.
Use data-driven recommendations to suggest relevant products as customers browse or go to checkout. Highlight bestsellers, customer favorites or items frequently purchased together.
Pro Tip: Sending product recommendations via automated email workflows is a great way to turn abandoned carts into sales.
Intelligent recommendations can lead to impulse buys that raise the order total. Your customers also benefit by finding more of your products.
Free Shipping Threshold
Set a minimum order value to qualify for free shipping. This strategy often encourages shoppers to add just one more item to reach the threshold, effectively boosting AOV with minimal effort on your end.
The best threshold depends mainly on your product prices. Setting it too low could cost you more in shipping than you earn from the added sales. Too high, and customers may not feel motivated to reach it.
Aim for a threshold slightly higher than your AOV to make sure you’re encouraging bigger purchases.
Leveraging Technology to Boost AOV
Now that we’ve covered the basics, let’s get into more complex strategies to seriously supercharge your AOV.
AI and Machine Learning
AI tools can personalize ecommerce experiences by analyzing user behavior and suggesting the products they’re most likely to purchase.
These automated systems adapt in real time to present products or promotions relevant to the customer’s preferences.
AI and machine learning systems improve your website’s personalization, which is arguably the most impactful feature in modern ecommerce.
Analyzing Customer Data
Understanding your customers is the first step to truly connecting with them.
Data on your customers’ browsing behavior, buying habits and other preferences helps you understand what they want and how they want it. Using this data to personalize their shopping experience makes it more likely that they’ll find what they need quickly.
You can even segment your audience based on their past purchases, allowing you to create targeted campaigns and promotions that resonate with specific customer groups.
Offering these features as convenient value-adds is enough for many to opt in voluntarily.
Measuring the Success of AOV Strategies
Aside from consistently measuring AOV, there are more nuanced ways to evaluate the success of your efforts.
Key Performance Indicators of AOV
Instead of considering AOV as a standalone metric, evaluate it in relation to other KPIs to see the full impact of your strategies.
- Conversion rate: the percentage of users who take a desired action. Conversions on your ecommerce site should increase with well-implemented AOV strategies because all the aforementioned methods also improve the user experience.
- Customer lifetime value (CLV): the total revenue you can expect to earn from a customer over their lifetime interactions with your ecommerce store. Regardless of your average customer lifetime, you should see a marked increase in CLV after implementing AOV strategies.
- Cart abandonment rate: the percentage of users who add items to a cart without completing the purchase. There are several reasons why cart abandonment happens, but one is a low level of buyer commitment. Most AOV-boosting strategies encourage customers to add more or higher-value items to the cart, which increases their desire to finalize the purchase.
- Revenue per visitor: your average earnings per web user. Because tactics that improve AOV apply to visitors at any stage in the customer lifetime, you should see a noticeable increase in revenue per visitor if your strategy is working.
Regularly reviewing these KPIs alongside AOV helps you determine what’s working and what to adjust. Your strategies should evolve as customer behavior and market conditions change.
Increase Your AOV with Human
Average order value is a strong indicator of how well you're maximizing each customer interaction. By applying the above-described strategies, you can effectively increase AOV while improving your profit margins.
AOV strategies are a tremendous asset for growing your ecommerce business without always relying on new traffic. Make AOV a key part of your performance checklist and watch your revenue rise.
If you’re having trouble choosing the best approach for your business, connect with Human and discuss it over a free consultation.
