For an e-commerce business, few things are more important to a healthy bottom line than a high average order value (AOV).

In this blog, we’re going to cover what an AOV is, why it’s important, how to calculate it and how to increase it.

What is AOV?

AOV is exactly what it sounds like — the measure of the average amount spent by a customer on a single order. Essentially, it is the total revenue earned divided by the number of orders.

Why is your AOV important?

AOV is important because it provides valuable insight into the overall performance of your e-commerce marketing strategy, as well as your online store. A high AOV indicates that customers are spending more money when they shop on your site.

This, in turn, can help you better understand customer behavior and identify opportunities to increase revenue.

The higher your AOV, the more revenue you earn from your existing customers and marketing efforts — without the need for increasing your ad spend.

Plus, a higher AOV means generating more revenue in a short period of time, allowing you to recoup the costs of customer acquisition quickly.

How do you calculate your AOV?

AOV is a relatively simple metric to calculate — it only requires two pieces of data: the total revenue earned from your e-commerce store and the total number of orders placed.

To calculate your AOV, simply divide the total revenue by the total number of orders. For example, if your store earned $50,000 in revenue from 1,000 orders, your AOV would be $50.

How do you increase your AOV?

There are many ways you can increase your AOV. Here are a few of them:

#1. Offer free shipping

Thanks, in large part, to Amazon, modern consumers have come to expect free shipping from online stores. And, offering free shipping for orders that meet a certain value requirement is a great way to increase your AOV.

Make sure that your free shipping threshold is set at a reasonable level. For example, if you sell funky socks that only cost $4 for a pair, a $100 free-shipping minimum is probably too high to be very effective.

You should also make sure that your free shipping offer is prominently displayed on your website — it should be one of the first things customers see when they visit your site.

#2. Cross-sell and upsell

Cross-selling and upselling are two of the most effective ways to increase your AOV.

Cross-selling is when you persuade customers to add additional related items to their order. For example, if a customer is buying a pair of shoes, you might suggest they also buy a pair of socks to go with them.

Upselling is when you suggest more expensive options of the same product. For example, if a customer is buying a pair of shoes, you could suggest they upgrade to a more expensive model.

Including a “Complete the Look” or a “Customers Also Bought” section on your product pages can help you increase your AOV by making it easier for customers to find related items and upgrade their purchase.

#3. Offer discounts and promotions

Discounts and promotions can also be a great way to increase your AOV.

For instance, you could offer a discount on orders over a certain value. This encourages customers to purchase more items in order to get the discount. Or, you could offer a discount on certain products when purchased in bulk or in bundles with complementary products.

You could also offer free gifts for orders over a certain value, or free samples with every order.

Just like with a free shipping offer, you want to make sure that any discounts and promotions you’re offering are prominently displayed on your online store.

#4. Create a loyalty program

Increasing customer loyalty is a fantastic way to increase your AOV. That’s because loyal customers are more likely to spend more and recommend your store to others.

And, one of the best things you can do to increase customer loyalty is to create a loyalty program.

A loyalty program is a rewards system that offers customers perks such as discounts, free products, exclusive offers and more when they make purchases on your online store.

Creating a loyalty program is a great way to reward your customers for their repeat purchases, as well as encourage them to shop more often.

#5. Run limited-time offers

How do you encourage a customer to make a purchase now rather than kicking the can down the road? One of the best ways is by creating a sense of urgency.

That’s why running limited-time offers is a great way to quickly increase your AOV. You can offer discounts or promotions that are only available for a short period of time to encourage customers to make a purchase now or miss out.

Just like with discounts and promotions, you’ll want to make sure that your limited-time offers are prominently displayed on your site — you don’t want customers to miss out on them!

#6. Highlight product reviews

Product reviews can be a great way to increase your AOV. That’s because customers are more likely to trust the opinions of other customers than the opinion of your business.

By prominently displaying product reviews on your product pages, you can help customers make more informed purchasing decisions.

Product reviews are a powerful form of social proof that can build trust with potential customers and give them the confidence they need to make a purchase.

#7. Be flexible with payments and returns

Offering flexible payment and return options is another great way to increase your AOV.

For instance, you could offer installment payments or allow customers to split their payments over several months. Or, you could offer free returns or extended return windows to encourage customers to make larger purchases.

By offering flexible payment and return options, you can help customers feel more comfortable making larger purchases, which can help you increase your AOV.

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Your AOV is an important metric that can provide valuable insights into the performance of your e-commerce business.

Fortunately, there are many ways to increase your AOV, including offering free shipping, cross-selling and upselling, running discounts and promotions, creating a loyalty program, running limited-time offers, highlighting product reviews and being flexible with payments and returns.

By taking advantage of these strategies, you can increase your AOV and boost your e-commerce business’s bottom line.

Marketing 360® is an all-in-one e-commerce marketing platform that has everything you need to increase your AOV and grow your online store. From one place, you can develop a convertible website, master SEO and content marketing, connect with your customers on social media and so much more.

Learn more and see our plans and pricing. And, subscribe to our YouTube channel for more tips and advice on how to fuel your brand.