What is the Average Order Value?
The Average Order Value (AOV) is a metric used in e-commerce to calculate the average amount of money spent by customers per order. It is obtained by dividing the total revenue generated by the number of orders received within a specific period.
AOV is an important metric for businesses as it provides insights into the purchasing behavior of customers and the overall revenue generated per order. A higher AOV indicates that customers are spending more on average, which can be a positive indicator of business performance and profitability.
To calculate the Average Order Value, you can use the following formula:
Average Order Value = Total Revenue / Number of Orders
For example, if a store generates $10,000 in revenue from 100 orders in a given month, the Average Order Value would be $100 ($10,000 / 100).
Increasing the Average Order Value is a common goal for businesses, as it can lead to increased revenue without acquiring additional customers. Strategies to boost AOV include cross-selling, upselling, offering discounts on bulk purchases, implementing quantity breaks, and promoting bundled products.
Monitoring and optimizing the Average Order Value helps businesses understand their customers' purchasing patterns and can inform marketing and sales strategies to drive higher revenue and profitability.
Why is it important to track and improve your AOV?
Tracking and improving your Average Order Value (AOV) is important for several reasons:
A higher AOV means that customers are spending more per order. By improving your AOV, you can generate more revenue without necessarily acquiring new customers. This can have a direct positive impact on your bottom line and overall business profitability.
Efficient Marketing Spend
By increasing the average amount customers spend per order, you can make your marketing efforts more efficient. Instead of spending more on customer acquisition, you can focus on increasing the value of each transaction, which can lead to a higher return on investment (ROI) for your marketing campaigns.
Improved Customer Lifetime Value (CLTV)
A higher AOV often correlates with an increased Customer Lifetime Value (CLTV). When customers spend more per order, their overall value to your business increases over time. This allows you to allocate resources to retain and nurture existing customers, which can be more cost-effective than acquiring new ones.
Cross-selling and Upselling Opportunities
Tracking AOV can help identify cross-selling and upselling opportunities. By understanding customers' purchasing behavior and preferences, you can offer relevant and complementary products or encourage customers to upgrade to higher-priced items. This can lead to increased sales and customer satisfaction.
A higher AOV can help manage inventory more effectively. By encouraging customers to purchase more items or larger quantities through strategies like quantity breaks or bundled offers, you can optimize your inventory levels and reduce the risk of overstocking or understocking.
Enhanced Customer Experience
Improving AOV can lead to an enhanced customer experience. By offering value-added incentives such as free shipping thresholds or discounts on larger orders, you can create a more compelling and rewarding shopping experience for customers.
Ways to Increase Your Shopify Average Order Value
Bundle products or create packages
Create product bundles or packages that combine related items. By offering bundled products at a slightly discounted price, you encourage customers to purchase more items in a single transaction, thereby increasing the AOV.
Cross-sell & upsell complementary products
Recommend additional products that complement what customers are already purchasing. Highlight related items on product pages or during the checkout process to entice customers to add more to their cart and increase their AOV.
Cross-Sell & upsell in the cart
During the checkout process, showcase complementary or upgraded options to customers. This could include suggesting higher-priced alternatives or add-on products that align with their original purchase, encouraging them to spend more and boost their AOV.
Offer “Subscribe & Save” Subscriptions
Implement a subscription model where customers can subscribe to receive recurring deliveries of their chosen products. By offering a discounted price for subscribing, you incentivize customers to commit to regular purchases, increasing their AOV over time.
Implementing these strategies can help you maximize your Shopify AOV, drive revenue growth, and improve your overall business performance.
How this Shopify store increased the AOV from $30 to over $50 using Bundles
Alejandro started 3 years ago and as an inexperienced merchant, he did not maximize the Average Order Value (AOV).
Little by little he improved his store in different aspects. One of them was the AOV. It allows you to profitably invest more money in ads and beat your competition by bidding more for the same advertising space.
When you want to improve your AOV on Shopify, you can offer free shipping when your customers spend a specific amount on your store. Or you can also provide a discount when they buy more of the product.
But Alejandro didn't want to do this.
"All the competition uses these solutions, and you have to differentiate yourself."
So he thought about bundling apps and wanted one that made the bundle differently. Because offering several products simultaneously is better for the customer (because he will get more products for a lower price) and for you. It will lower your costs, increase your margin, and thus, profitability.
But one of his concerns when installing a bundling app is: will it affect the conversion rate? Because the goal is to make more money, not less.
The truth is that the first bundling app he tried was WideBundle. It worked perfectly and with pleasing aesthetics, replacing the variants of the theme, which is super important when it comes to conversion rate.
Over the years, he tried many different bundling apps, but he didn't like the others as much as WideBundle.
"WideBundle is easy to install. It's not expensive, and you can customize it to match your store's branding."
The results : Increase your AOV with Widebundle
When Alejandro first installed WideBundle, his first reaction was to be surprised by the results.
To see the importance of AOV, let's take an example:
If you're making 1000 sales with an AOV of $30, your revenue is $30,000.
But if you only increase it from $30 to $40 you get $10,000 more.
And this result without more traffic, more customers and without spending more.
His store made more than $250,000, and it started with an AOV of $30. When he installed WideBundle, in the first month, this AOV increased to $50.
The strategy was to offer 3 different offers:
- Only 1 product
- A couple pack
- A family pack
With that simple move, the customers were starting the offers as irresistible. Before WideBundle, the customers could still buy many units simultaneously, but they didn't even think about it.
But by simply showing the offers, they could make more money.
There are some products where it's difficult to make a bundling offer, but it is highly recommended whenever you can.
"Whenever you can make bundles, please try WideBundle."