How to increase Your Shopify Average Order Value (AOV)
There are many different eCommerce KPIs, each supplying a vital piece of the success puzzle. Like any puzzle, its up to you to put the pieces together. Your average order value or for short AOV, , is a big piece of that puzzle, an important KPI for making your Shopify store profitable and a big piece of that puzzle.
AOV is one of easy to access pieces of data, commonly displayed in the analytics part of most eCommerce platforms, even in the basic Shopify Admin. It’s easy to calculate, so there is no excuse for not monitoring it.
By going even deeper into your analytics with Conversific’s order report, you can make some killer savings, cutting your acquisition cost per customer by increasing conversion rates through utilizing the intel it provides.
So what is AOV and more importantly, what should you do with it?
Understanding Average Order Value
What Is Average Order Value (AOV)
Your average order value metric provides real-time insights into your customer behavior day to day since it tracks the amount spent, – updating every time an order is placed. Based on this data you can make some valuable business decisions (examples coming later).
Ultimately what it boils down to is that by maximizing your AOV you are making the most of each customer obtained, increasing revenue, and over the long term, if maintained, you can increase customer lifetime value (CLV).
By increasing AOV you increase the value of each customer, making it worth investing more into customer acquisition efforts (its more cost effective). Of course, nothing can be handled in isolation, – what I mean by this is that without investment in brand development and building brand loyalty with the aim of maximizing conversion and repeat business, your acquisition efforts might bring less than optimal returns – ie revenue or profit.
The difficulty for any store owner is understanding what optimal is, so how can you benchmark your store vs industry average? This is where Conversific can help.
How AB Testing Can Help Improve Your Average Order Value
How can you persuade your customers to spend more? The answer, which is at the heart of Conversion rate optimization is simply by increasing the perceived value of what you are selling, – and I don’t mean just the product. For example, building trust adds value, which in turn increases the amount a customer is willing to pay for an item, even if it’s cheaper elsewhere.
There are many psychological effects and biases that can be used online which can increase perceived value and AOV, for example limited time offers, or bundling products together utilizes various psychological effects.
Whether building trust or leveraging psychology you need to test what you are doing to determine whether changes are successful or not.
Just as you would test advertisements on Facebook or Google Ads you should test content changes on your website as onsite campaigns. This can be achieved using tools like OptiMonk for AB testing, by differing messages and implementing the winning campaign. Even the slightest of changes such as background color or an image can have a big impact on the conversion outcome.
To know what changes to make, and what to test and optimize, is entirely down to your ability to interpret your eCommerce data, and thereby, to know your customers (KYC) and their jobs to be done (buying motivation). Which once again brings us back to the value of Conversific for customer analysis.
How to Calculate the Average Order Value
Simply put, you calculate AOV by dividing your total revenue by the number of orders. With every order taken this figure will change, therefore this figure is constantly in flux and must be monitored closely over time.
A low AOV is an indicator that more should be done to encourage customers to spend more. This would include building up trust and loyalty. It is also an alert that you should check out the competition and test some alternative targeting/messaging/products/offers.
A high AOV is a sign of rude health in terms of eCommerce business. Therefore, do more of the same but don’t be complacent. Be innovative, consider what more could be done and perhaps extend your product range?
Of course, much more can be learned by delving deeper into your Conversific Order Report (more below).
What Is a Good Average Order Value - AOV Benchmarks
Knowing where you stand can be difficult to figure out. Average AOV figures vary from industry to industry, country to country. There are many different studies from various sources, all of these yield slightly different results.
Therefore look for a data source most relevant to your needs, those that reflects your business environment and industry segment.
Once again Conversific can greatly help here with its industry benchmark data. A large percentage of Conversifics users (across all industries) are using Shopify, and therefore it provides a reflective comparison figure if you too are also using Shopify.
There are many sources of data, one of the best free sources can be found at IRP Commerce, an example of such is below in the form of a graph.
Average Order Value by Industry
Understanding your industry trends data enables you to determine how well your store is doing vs the industry as a whole. For example (image below) if you had a fashion related store, then the graph below would enable you to adjust your goals to a more realistic level considering the market conditions.
If working for a larger retailer where stakeholders need to understand performance, benchmarks are invaluable to provide context to results, providing a baseline for comparison.
Average Order Value by device
The below image shows the AOV of online shopping in the USA for the 2nd quarter 2020 by device. While AOV is significantly higher on desktop devices, the gap is narrowing between desktop and mobile devices year on year.
This is a consequence of eCommerce platforms adapting their offering to be more user friendly on mobile/smart devices as well as the increasing awareness of the need for conversion rate optimization.
My view is that it is only a matter of time before Mobile catches desktop in terms of AOV.
How to Increase Average Order Value
- Offer bundles for products with high average quantity –
- Cross-sell + upsell in the last step of the checkout flow –
- Cross-Sell + upsell in the cart –
- Optimize your free shipping threshold –
- Upsell + cross-sell on the thank you page
- Carry out Conversion rate optimization for all content
- Sell the outcome, not just the product
- Focus on the Jobs to be done + auxiliary tools for the job (recommendations engine).
- Leverage psychological effects.
- Add perceived value (mentioned above)
(could explain all these but the article is plenty long enough already)
Other ways to use Average Order Value
By using Conversific you can determine the number of items in each order (Item count distribution) and determine your best selling price ranges. In combination with OptiMonk you can then target user carts with specific cart amounts, to either upsell or cross sell with a juicy discount to bump up your AOV.
A timely OptiMonk popup can be triggered as the visitor goes to pay supplying a discount code for carts, enticing them to spend more to get the discount, or a free shipping for products of over a specific value is a powerful motivator to buy more.
As an example, in the graphs above from Conversific’s order report, you can see that 74% of sales are comprised of only 1 item and that the majority of those are low value $10-15 (the image was taken from a store with a base currency in hungarian Forint), so by only targeting that range you can incentivise the purchase of a second item with a discount or by bundling products that are commonly purchased with the item for a discounted price.
Using OptiMonk you can set all kinds of different item or price range triggers with various offers which can be AB tested to find the optimal combination. By using OptiMonk’s AI feature the winning offers can automatically be selected, automating much of the AB test analysis work involved.
In combination with OptiMonk, Conversific insights into AOV provide an easy way to improve revenue. This is just one way to optimize your store, using just one metric, by leveraging all the reports of Conversific and unleashing the targeting features of OptiMonk, much more can be done, – should be done, and certainly prior to paying for PPC to massively improve your conversion rates on your website and of your paid advertising.