eCommerce

How To Increase A Store's Average Order Value

Jacob Stein
 on 
July 19, 2018

Here’s a scenario:  A new online store is up and running, and the orders are starting to roll in.  That’s awesome!  Yet despite the number of orders being placed, the amount of revenue the store is generating is not that awesome.  What’s going on here?  

This is a scenario that many businesses, of all sizes, often come across.  The issue is that the store’s average order value is low. Average order value, or AOV, is total revenue divided by the number of orders placed.  It’s simply an indicator of the size of the orders a business’s customers are placing.  If a store is fulfilling lots of orders, but the AOV is low, that can be an indicator that customers are only purchasing one item or purchasing small, inexpensive items.  

So, how can online stores get their customers to make larger, more valuable orders? Here are three strategies to increase average order value:

1. Set a minimum order amount to qualify for free shipping

One of the most frequently reported reasons for shopping cart abandonment is shipping costs.  One way to decrease shopping cart abandonment is by offering free shipping. But, by offering unconditional free shipping, stores are losing out on an opportunity to boost their average order value.  When a store sets a minimum order value to qualify for free shipping, it encourages shoppers to spend more.  

Skeptical about that?  A study by the University of Florida found that for stores with free shipping on orders over $75, the average order value was $64.68.  However, when stores offered free shipping to everyone, the average order value was $46.04.  By setting a minimum order amount to secure free shipping, your store should see some bigger packages heading out the door.

2. Bundle products

Who doesn’t enjoy the satisfaction of feeling like they got a great deal?  Bundling products is a great way to give customers the feeling they are getting a bargain.  For example, a store might bundle three tee shirts in different colors at a small discount.  Yes, if the three shirts were sold individually, the store would generate more revenue than if they were bundled, but customers are often more hesitant to buy more than one item at a time.  

The perceived value of bundling products can increase the likelihood that they do buy three shirts instead of one, thus increasing the value of their order.

3. Implement a loyalty program

Customer retention is one of the most important keys to a business’s success, and a loyalty program is a great way to encourage retention.  To put the value of customer loyalty in perspective, a study conducted at the Center for Retail Management at Northwestern University found that up to 70% of sales can be attributed to repeat customers.  Another study found that consumers are 80% more likely to shop places that offer some sort of rewards program.  

So how does this translate into bigger orders?  It’s all in how a store utilizes its loyalty program.  The leading loyalty rewards company, Smile.io, suggests that offering greater rewards to customers who place bigger orders is a great way to encourage more spending and increase the average order value.

Bonus:

Clyde can also help increase the average order value of an online store.  With Clyde, a business makes additional passive revenue with the sale of every extended warranty.  To learn how Clyde does this, subscribe to our blog below or schedule a demo!  

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