In the highly competitive e-commerce market, growth isn’t just about attracting new customers but it is also about maximizing the potential of existing ones. An important metric that will help businesses achieve this is Average Order Value (AOV).
Especially for e-commerce apps, increasing AOV can significantly impact revenue, profitability, and customer retention.
With the e-commerce market projected to reach $188 billion by 2025, focusing on improving AOV offers a cost-efficient way to scale business operations. In this blog, we have talked about detailed strategies that can help you maximize your average order value.
What is the Average Order Value?
Average Order Value (AOV) measures the amount spent by a single customer per transaction. It is the average amount of revenue generated per order.
The average order value formula is calculated by:
Average Order = Total Revenue/ Number of Orders
For example, if an e-commerce app generates ₹10,00,000 in revenue from 1,000 orders, the AOV is ₹1,000.
By increasing AOV, businesses can generate more revenue from their existing customer base without incurring additional acquisition costs.
Average Order Value has benefits
- AOV will help you increase your profit margin by covering operational and fixed costs.
- With existing customer increasing their spending helps increase returns on customer acquisition investments.
- Offering higher value per order enhances customer satisfaction and loyalty leading to better customer retention.
Classic example: Zepto launched a Zepto saver that offers products at discounted prices, which initially accepted the initial order value of 200 and then increased to 750 and to 1500.
This is one way of increasing the AOV.
Other ways to increase the Average order value
- Upsell/Cross-sell
The average order value can be increased using cross-selling and upselling.
Cross-selling means suggesting a product that can complement the product purchased earlier. Upselling means recommending products that are higher in price or upgraded versions of the product.
- Upselling Example: Myntra recommends premium brands or newer collections when customers view budget-friendly items.
- Cross-Selling Example: Flipkart suggests phone cases and screen protectors when customers purchase a smartphone.
This can be implemented by making use of AI-powered recommendation engines to analyses purchase history and preferences. Position the upsell and cross-sell options on the product page and at checkout or provide a side-by-side comparison of the product and high-value product.
- Introduce Loyalty Program
Loyalty programs encourage repeat purchases and increase the spending of customers. Rewarding customers with points and cashback at every purchase or after reaching specific milestones can increase the Average Order Value.
According to the Indian Loyalty Report, 68% of Indian customers are more likely to shop regularly with brands offering loyalty rewards.
Providing reward points on every order and providing an option to claim that points encourage customers to purchase
Example: 1. Savana Loyalty Point.
Paytm offers cashback on transactions, redeemable on future purchases.
To implement the Loyalty program for increasing Average Order Value, you can introduce a level base reward program as done by Savana. Brands also use gamification techniques to make earning rewards engaging.
- Product Bundling
Product bundling means grouping the complementary products and offering them as a package at a discounted price. This encourages customers to buy more items than initially planned. Bundling the product can increase the sales by up to 30%.
Example: Big Basket offers bundles like a “Breakfast Combo,” including milk, bread, eggs, and butter, often at a 10% discount.
To implement this you can analyze and identify the goods commonly purchased together, using data. Brands can highlight bundle savings directly on the product page and during checkout.
- Optimize Checkout Pages
In the process of the customer journey where they are actually are actually making purchases, the checkout process is the final opportunity to actually increase Average Order Value. Adding last-minute deals or personalized recommendations like things bought together, you might also like can be an effective way to increase their cart value.
According to Bayard Institution, Optimizing the check-out page can reduce cart abandonment by up to 35%.
An example can be Zomato offers add-ons like desserts or beverages at checkout.
To implement this display complementary items during checkout and use progress bars to incentivize higher spending for rewards like discounts or free gifts.
- Offer Free Shipping
The market is very price-sensitive, free shipping on orders is often a deciding factor when completing a purchase. If you set a minimum amount of money to spend for free shipping, it can make customer add more items to their cart.
Stats says, 63% of Indian customer are willing to add more items to their cart to qualify for free shipping.
Take the example of Amazon India, they offer free delivery for Prime members and to no member they have a threshold of free delivery on orders above ₹499.
To Implement this, you can send reminder notifications to users to remind them of free shipping on orders above.
- Limited-Time Offers
To increase the Average order value you can use emotions like FOMO to increase their order size, by creating urgency such as Limited-Time Offers. Limited-time offers or flash sales encourage quick decisions.
Stats say that limited-time offers create a 22% increase in conversion rates, according to HubSpot.
Nykaa’s “Pink Friday Sale” offers time-limited discounts, prompting customers to stock up on beauty products.
To implement, highlight countdown timers for discounts on the app’s homepage. Push notifications can also be used to alert users about deadlines.
- Showcase Social Proof
To increase average order value, social proof like reviews, testimonials or trending tags encourage customers to explore and purchase more.
Stats say products with reviews can increase the chances of purchase by 270%, according to BrightLocal.
For example, Pepper fry highlights reviews, star ratings, and “best-sellers” on its product pages.
To implement, use user-generated content like photos and videos, which feel like genuine feedback, and can also use recently bought tags to show the popularity of the product.
8. Offer Post-Purchase Discounts
To increase your average order value, customers can be encouraged to return to the website after their purchase by providing discounts or credits on their next purchase.
According to Marketing harp, post-purchase discounts improve repeat purchase rates by 15%.
For example: Swiggy offers ₹100 cashback on the next order if users spend above ₹500 in the current transaction.
To implement, use email and push notifications to remind customers of the discount they have earned, and if it’s about to expire inform them.
Conclusion
Brands should focus on Average Order Value (AOV) to gain maximum value from their existing customer base. Strategies such as product bundling, free shipping and loyalty programs can effectively boost Average Order Value while improving customer shopping experience.
Read Also: Understanding Growth: How Marketing Automation Improves Your Business
Written By – Alisha Limichana
Alisha Limichana is a seasoned growth marketer and part of the MCG team at EnR Cloud, specializing in driving business growth through innovative strategies. She has a proven track record of delivering impactful marketing campaigns. Outside of work, Alisha enjoys exploring the mountains, travelling, and staying active and fit.
