AOV (Average Order Value) 101: What is AOV and How to Increase It
Average Order Value: What is AOV and How to Increase It
Companies will do anything in their power to increase sales. They have entire departments dedicated to improving sales performance that spend time, money, and resources to drive up conversion. When they want to see if their efforts are effective in increasing profitability, they look at key performance indicators like AOV and purchase frequency. Though the latter is pretty straightforward, you might not be familiar with AOV. To get quickly acquainted, read what it stands for and the right way to calculate it.
What does AOV stand for?
AOV stands for average order value.
What is the right way to calculate AOV?
Though an AOV calculation is simple to do, it is incredibly significant in gauging your company’s sales performance. To find AOV, simply divide total revenue by the number of transactions. For example, say a company made $27,000 in total revenue with 300 transactions; their AOV is $90. On average, their customers spend $90 per transaction.
Why is AOV important?
When you focus on maximizing your company’s AOV – not just new customer numbers – your company’s performance radically improves. This article offers 4 strategies your company can implement to boost AOV and increase profitability.
How to Increase Average Order Value
Some customers come to shop for one thing and one thing only. They may have researched a particular product and have their heart set on buying it. By offering product recommendations, you can open their eyes to other available goods and services your company provides. Strategically thinking about opportunities like this to upsell boost your company’s AOV. Although some businesses fear that distractions in the purchase path may depress closing rates, studies show a commitment to buying one product make a buyer more susceptible to adding more products. When they are already in the purchase funnel, this is your chance to entice them to look around. You can:
- Insert product recommendations at checkout, invoking the same strategy of in-store register placement for impulse purchases.
- Upsell to more premium versions on product search result pages.
- Recommend complementary accessory products.
- Show products purchased by customers with similar profiles.
- Recommend general category goods that the majority of your customers tend to buy each visit.
- Product recommendations are not just about bigger purchases and a larger AOV, they help customers visualize a product in a larger context and, in some cases, demonstrate your company’s full value.
Promote Conditional Discounts and Special Offers
Though discounts and special offers give customers incentive to make purchases and increase your company’s AOV, they can also undermine them if they are not set up correctly. Make sure you set minimums to discounts and special offers to effectively drive up AOV. For example, only offer free shipping on orders over a certain amount. Some customers will do anything to avoid the cost of shipping, including increase the size of their order. If you set the minimum to a reasonable amount, it will encourage them to fill up their carts more until they qualify. Promote these discounts and special offers on social media, via email, mail, and all over your company’s website. The more attention you grab, the more traffic you will bring in to drive up conversion and raise AOV.
Bundles and Packages
Offering bundles and packages is also effective for maximizing AOV. Customers want bang for their buck. Bundles and packages make shopping more convenient for those that want to buy several related items, but can get them all slightly cheaper when they buy them together. These customers are even more willing to purchase an extra item or two, if they think it is a good enough deal on the items they originally wanted. Bundles and packages make customers re-evaluate their shopping carts, especially when they can appreciate a deal. It is a clever way to stimulate growth of your company’s AOV.
Reward Returning Customers
When your company sets up a rewards program for repeat customers, it demonstrates an appreciation for its customer base that keeps them returning for more. Simply showing customers your company cares can optimize AOV. Rewards programs increase the chance that first time customers will return to take advantage of exclusive deals and offers. This is a surefire way to improve customer loyalty and drive up AOV. Rewards programs create a channel for your company to increase brand awareness and build stronger customer relations. Customers want to feel special. Rewards programs make them feel like a member of your organization and allow you to capitalize on their loyalty.
Implementing any of the above techniques will increase average order value. Customers also respond well to companies that give them more purchasing power. The most effective way to show business customers you are making an effort is to establish a customer financing program. Offer them a Behalf business line of credit and increase their purchasing power up to $50,000. Customers send instant payment with their line and enjoy up to six months to pay for each purchase. Behalf’s business purchasing line of credit restores confidence in your customers that are hesitant to make purchases because, like any business, they strive for disciplined working capital management. Cushion your business customers’ capital reserve and empower them to choose their own payment terms with Behalf’s flexible, on demand payment tools. Then watch your company’s AOV grow.
Learn more about how Behalf is transforming the way business buy and sell here.