Want some top tips to increase your E-Commerce Average Order Value? Check out our MD Sarah’s latest video.
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Video Transcript:
“So your average order value, or AOV, is one of the key metrics that you should be tracking in your ecommerce store.
So in this video, we’re going to work out well, why is it so important and how can you improve it?
Now for the best advice on how to grow your ecommerce brand quickly and profitably, hit subscribe, click the bell as well & that means you get notified every Thursday when I launch a new video.
So I’m Sarah, I’m founder of The Fastnet Agency, and we help exciting, up-and-coming ecommerce brands to grow their business sustainably and profitably. So hit the subscribe button to see more videos. So what is your average order value? Well, if we look at a hypothetical situation, if you had 10 orders for £2000, that would mean that your average order value for those 10 orders would be £20. It’s as simple as that – it is the average of your total order value.
So in this scenario, it means that, on average, every person has spent £20 in your store. Now the average order value will only actually give you a partial indication of your users behaviour online. So it’s important that we understand where average order value maybe doesn’t represent the full picture. This is why we use actually three different metrics to track your average order value. Now you’ve got your mean value. So your mean is the average value of all your orders. So this is generically what’s been called the average order value….
It’s a mean value of your orders. Now you’ve got the median. This is the middle value of all your orders. So if you put all your orders on a line, where would the middle be? You’re probably remembering all of this from your high school maths! And then you’ve got your mode, which is the most frequently occurring value.
Now, arguably your mode, in some ways, is the best indicator of the user behaviour on your site, because if 20 people check out for £10 each and then you get one person check out for £150, that’s going to really skew your average order value, or your mean order value, but if we look your mode order value, then you can quite clearly see that the average person spends your £10 at the checkout, and it’s only that one person that skewed the results.
So definitely looking at your mode order value is really important. Now, do you run an ecommerce store? How do you find that you track your various metrics online? I’d love to hear from you, pop a comment below and let’s get the conversation going.
So there are various different ways that we can increase the average order value, or our mode average order value, at our checkout. So here are my five top ways of doing this. Now the first little tool in our toolbox that we can use is to create a free shipping option, or an extra giveaway option, if people spend past a certain point.
So for this you want to have a little look at what actually.. what am I hoping to achieve here in terms of my average order value? What am I trying to push my average order value up to? So say you’re looking to increase your average order value to £30 at the checkout, or £100 at the checkout…
If you can initiate free shipping past that point, it encourages people to put more in their basket and to increase that average order value. Now the second way to increase your average order value is to bundle your products together.
This is particularly good if you’ve got a low value product, maybe something of £20 or less, and you want to increase that average order value at the checkout. So by bundling products together that you know will be useful for your customers, so you have product A, and then you can also use product B and C alongside that to increase the user experience, or to create a better effect, then it makes it obvious to bundle those products together… And you can also do a small discount incentive by bundling things together, so people feel they’re getting better value for money.
But ultimately what you’re doing is you’re increasing your average order value at the checkout, and this is really important. Now, the third thing you can do is you can upsell and cross sell products, so this is a little bit like the bundle, but perhaps less contrived in the fact that somebody adds, for example, say you’re selling camera equipment, if somebody adds a new lens to their bag at the checkout, you could then cross sell them, you know, a bag to store that lens in, and maybe different lens caps or whatever else that it might be that they might need, so you can cross sell them different additional products.
Or it might be you try and upsell this, so you could say, actually, you can get this even better lens and we’re offering a certain discount off today, and you persuade them to actually upsell what they’ve already put in their basket and buy a better version of it for a more expensive price. So cross sells and upsells are a really important way of increasing your average order value.
Number four is to set up some sort of loyalty programme, where people are incentivised to spend more with you in order to gain points. So it might be that for every £10 they spend, they get a point, or a gift voucher or various other ways of ensuring that they spend more on at the checkout, so they’re incentivised to spend that little bit more to get over that threshold, in order to gain their points or to gain their loyalty value. And that’s a really important way of being able to increase your average order value.
Now we’ve talked a lot about average order value and how to increase it, but why is average order value so important? Well, the main thing is that it always costs money to acquire a customer, whether you’re paying for Facebook ads or you’re paying to optimise your site for SEO, or you’re paying for Google ads, whatever that might be, you’ve invested something, whether that’s time or physical money into getting that customer to the site. And so the best way to make a return on that investment is to get them to spend more, it’s as simple as that.
By increasing the average order value, you’re making sure that when somebody’s clicked on your Facebook ad and it’s cost you £3, say, per click and then they’ve purchased at your checkout, you’re getting the maximum return on that click value for your advertising, or indeed any other form of web traffic to your site.
Now, the other metric that we haven’t discussed in this video, which is equally important, is then your customer lifetime value. Now this is slightly different, obviously, because this isn’t just about what they spend as their one-off once they’ve landed on the site, it’s about getting them to return again and again.
So I’ll be doing a video on your customer lifetime value and how to increase this a little bit later on. So that’s it! That’s my really brief overview of your order value and how to increase it.
So thank you ever so much for watching. If you like this video and you’d like to find out more, make sure you hit the subscribe link and ring the bell as well for more great videos on how to grow your ecommerce brand.
So if you want to find out more about email marketing tactics that can increase both your average order value and your lifetime value of your customer, then check out this video that I did all about that over here. And if you want to see how you can grow your ecommerce store using Facebook and Instagram advertising, then check out this video that I did over here.”
