Your average order value (AOV) is a critical metric for increasing your profit margins. For new customers, a higher AOV means that you can recover or even profit from your initial customer acquisition costs. And with existing customers, higher orders correlate with greater levels of trust in your business, satisfaction, and of course revenue.
In this guide to increasing average order values, we showcase popular strategies that ecommerce companies have been relying on for years, as well as new ways to grow with the power of cause marketing (giving back in order to better connect with and motivate your audience).
What is average order value?
Unless your ecommerce store mainly runs on a subscription basis, you likely offer a multitude of products that customers can choose from, and you hope that they purchase more than one item when they visit your online shop.
The average order value is the average of all orders within a certain time period. It helps you understand (on average), how much customers spend at your store whenever they complete an order.
How to calculate average order value
To calculate the average order value, you need to total your sales for a certain time period, and divide it by the number of orders in that time period. Let’s say you have $125,457 in sales in one month. Those sales came from 1,682 orders. Your average order value is $74.59
“Average order value calculation example: $125,457 in sales + 1,682 orders = $74.59 AOV”
Your average order value is a metric that you should benchmark. To create a healthy benchmark, take the average order value for a time period of 6 – 12 months. If you recently launched your online store, you might calculate your AOV over a shorter time period. An accurate benchmark should be one that, if your AOV dips lower, would alert your team to troubleshoot.
Issues that can cause dips in your AOV
- Account login failures
- Integrations with payment processors
- Recommended products not being relevant enough
- Lack of inventory
- Difficulty finding desired products (navigation, layout, filtering)
When your AOV dips, you’ll want to look at other signals to discover the cause. You might immediately know that it’s an inventory problem, or you might need to review customer sentiment data and feedback from a tool like Hotjar or Mouseflow in order to discover a bug. You’ll want to see if you’re getting less orders overall, or less orders from a specific location or category of customer (guest versus logged in). Finding other affected benchmarks will help you troubleshoot more quickly.
Of course, you don’t just want to keep your AOV at a reasonable benchmark. You want to grow it. Below, we show you the top strategies for increasing your average order value.
Top 4 strategies for improving average order value
There are so many ways to better optimize your ecommerce store conversions. This is not that guide. What we’re looking at below are concrete strategies designed specifically to help you increase your average order value
1. Give back incentives
A give back campaign is when an ecommerce store offers to give to a charity for qualifying orders. To increase your average order value, you’d want to set a minimum purchase to trigger the ability to give back.
Here’s an example from Jupiter, a site that sells reimagined dandruff shampoo and scalp care.
Their bar at the top says
"Shop and give back - Jupiter will donate $10 to the charity of your choice on orders of $75+."
Besides the bar at the top of your website, you might also tell your audience about your give back campaign on social media and with a few promotional emails.
While a minimum order value is a popular choice among Givz customers, it’s not the only way to run a give back campaign that will increase your AOV. If you want to get a burst of new sales while deepening your connection with your audience, you don’t have to set a minimum.
Here’s an example from CBD company Prospect Farms. Any order qualified to donate $25.
On the other hand, eco-friendly brand LOLI, donates 10% of every order to charity.
When you use Givz to manage your cause marketing campaigns, you offer customers the ability to choose which charity their money goes to. You can feature your favorite charity on your Givz page (which opens after a qualifying order is complete). However, it’s ultimately up to the customer to choose which charity to donate the percentage or flat rate amount to.
Towards the end of this guide, we’ll dive in a bit deeper into increasing your average order value by giving back, but first, let’s look at some other popular strategies.
2. Discounts
Discounts are a common way to bump up your AOV for a given time period. They’re probably the most popular strategy of all. However, many brands don’t want to give away discounts, which is why more are turning to cause marketing than ever before.
Discounts can be very effective, but it’s challenging to measure the extent to which they cause your customers to wait for a discount before completing an order. However, very large brands will continuously offer discounts in order to mitigate this downside.
For best results, your discounts should be strategic, and informed by your customers’ buying habits. For example, we can guess that Wine.com’s most loyal customers are the ones who purchase a case of their favorite wine. In order to convert more casual customers into case-buying customers, it makes sense for Wine.com to offer volume discounts.
You could study the buying behavior of your top 10% customers. Calculate the average order value of the 90th percentile. Let’s say your AOV for all customers is $50, but for your 90th percentile, the AOV is $210. That might prompt you to give away a discount for orders of $200 or more. (Keep in mind that, if you don’t want to offer discounts, you could also use this strategy to set the minimum order value of your give back campaign.)
Sephora, as one of the top beauty marketplaces in the world, has likely used percentile data to strategize its sales. Below, we can see that customers who are loyalty members can save $20 off $100 or $15 off of $75, regardless of their loyalty program tier.
In addition to using percentiles to calculate your discount minimum order values, you’ll also want to keep an eye on profitability. Newer businesses might be willing to offer discounts at a loss in order to grow their customer base, but at a certain point, you’ll want to ensure that your promotions are profitable.
3. Free Shipping (and free or low-cost returns)
Offering free shipping boosts your website’s conversion rate and average order value. This works in multiple ways. First of all, free shipping can save a sale. Online shoppers today have become so accustomed to free shipping that they may avoid shopping at stores that don’t offer it. In fact, 9 out of 10 consumers say that free shipping is the top incentive for completing their purchases online.
Fenty Beauty, created by newly minted billionaire Rihanna, offers free shipping to US customers on any order. Returns are also free.
Dr. Martens, on the other hand, offers a free shipping threshold of $50, which most of their products satisfy. And for returns, they deduct $7 from the refund.
Many customers will check your return policy before completing an order, meaning that return policy can absolutely affect your AOV.
And in terms of raising your AOV, a free shipping incentive can do this more directly. For example, if a customer’s cart is at $34, they might feel more excited about buying additional products amounting to over $16, rather than pay $8 for shipping and feel like they lost that money (even if they would’ve spent less overall).
4. Loyalty programs and rewards
Loyalty programs are another important way to increase your AOV. This is particularly common among marketplaces that sell multiple brands. You need to incentivize your customers to purchase from these brands with you, instead of directly, or with another marketplace that carries them.
Most loyalty programs offer direct points for every dollar you spend. You can collect these points to get discount codes on a subsequent order.
Here’s an example from Man Outfitters, which carries various outdoor and leisure brands for men. They have a simple rewards program that gives one point per dollar. Plus, you can get extra points for sharing about the site on social media. These points can be redeemed for discounts.
Of course, once you’ve created a loyalty program, you need to market it to non-members and members alike. Revolve includes loyalty program details with most of their marketing emails, so that customers feel a little extra incentive to click through and shop a look that stood out to them in their inbox.
How to increase average order value with a give back campaign
Give back campaigns allow you to forge a deep connection with customers regardless of their purchase history. When you give back large amounts, and when your cause marketing matches other brand promises, you can immediately turn new customers into advocates.
Because cause marketing is relatively new, many ecommerce store owners aren’t aware that it’s fairly easy to manage. You don’t have to code a give back campaign from scratch on your own.
Here’s how to setup a give back campaign that will increase AOV:
1. Use software that lets customers choose the charity
First, you need software that will manage the giving for you. Choose a platform with these important features:
- Let’s customers choose their own charity
- Works post-checkout so it will not affect your checkout process
- Processes donations to the organizations for you
- Only supports 501(c)(3) charities
- Gives proof of the donation to the customer in the form of a receipt
When you give back instead of offering discounts, you solidify your brand as one that cares about social and environmental causes. Considering that 90% of Gen Z believes that businesses should help address climate change, purpose-driven campaigns will only become more important.
2. Strategize the campaign order limit and gift amount
Next, you’ll want to look into your data to determine the minimum order threshold to trigger the donation page. You could aim for the 90th or 80th percentile to be on the safe side, and make sure that the campaign positively impacts your company, and doesn’t harm profit margins. After all, the more profitable your company is, the more you can give back.
Depending on your upper order values, you might set the minimum to $50 to $300. Rather than a percentile approach, you might also take the cost of your products into consideration. You could make it so that most orders of 3 items or more would hit that minimum.
On the other hand, you could give back a percentage of all sales if you want all of your customers to be able to give back. If your brand is environmental or social in nature, the percentage model might be a better fit for you. Customers might feel more loyal to your brand if they can give back with every purchase. For example, Givz customer Loli gives back 10% of all sales.
3. Promote the campaign across all channels
Next, you need to let your audience know.
Givz customer Terez uses their website and social media to spread awareness about their campaigns. They continually give $25 for every $200 order, but they switch up the way that they market the campaign. For example, for Pride Month, they used rainbow imagery and featured LGBTQI+ organizations on their Givz give back page. Of course, customers can still choose a different charity, but it helps to feature specific organizations that align with your marketing.
4. Begin the campaign and measure results
With your campaign launched, it’s time to measure results. Like other cause marketing campaigns, you might experience higher social media engagement rates, higher email open rates, higher email conversion rates, and of course, higher average order values especially if using the minimum order strategy.
There will also be a big result you’re not expecting: cost savings compared to offering discounts. When H&M ran a campaign with Givz, they saw an 85% cost reduction versus giving discounts, since not every customer selected a charity to donate to post-checkout.
The brands who are early adopters of give back campaigns will be seen as pioneers in the crowded, noisy ecommerce world. Align these campaigns to your brand, and your AOV will increase from the incentive to give back and improved brand loyalty.
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