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What is more efficient for an online store looking to grow: gaining new customers or getting every one of them to pay greater on every purchase? A second option is more beneficial -- increasing an average amount of orders.

Why? To increase the number of customers, you have to spend the money to market. To boost the amount of orders you receive, you don't necessarily need to conduct any kind of marketing; simply do an efficient job at selling the products you already have.

There are proven methods you could implement to boost the average value of your orders This is the reason we'll be discussing this morning.

What is average order value?

The average order value (AOV) is precisely what it says it is the typical value of money a client spends per order. The more money each customer spends, the greater your average order value will be.

Companies that sell higher-priced products tend to have a greater average value for orders. However, that doesn't mean they earn more however. It's possible to sell 2 000 pieces of furniture, but even if you sell only ten per year, you're making less than businesses selling products for $5, and making millions.

Therefore, the average order value differs from profits and revenue. It's a way to measure how much each customer is spending on every order, and it is linked to the lifetime customer value (LTV) in that if you also know how many orders the average customer makes throughout their life, you could use AOV to determine LTV.

And knowing your average lifetime value will help you decide what amount of money you should spend on marketing to reach potential customers.

How do you calculate the an average value for orders?

It's a simple process. In order to calculate the average order value, just take the total amount of revenue you earn over a period of time, such as a year, and divide it by the number of orders placed. Here's the math:

Average Order Value = Total Revenue/number of transactions

Average order value is among of the most crucial metrics because it helps inform business decisions like your pricing for products and marketing strategies. The health of your business is contingent on understanding your income potential which in part depends on knowing how much your clients spend.

Considerations with calculating AOV

It is possible to perform your average order value calculations by using different measurements of time. This way, you will be able to discern patterns. For example, suppose you calculate the AOV using the amount of revenue and orders over a year, and you receive an average amount of $150.

But then, you might determine the AOV for every month of the same year of history on purchases, and find it steadily increasing from January through June. It then experienced a nosedive in the summer and fall, and it soared to $225 in December.

This could provide some valuable information. For the first part of this year, the effort to increase the average value of transactions appeared to have been working. But the shifts in routines of consumers during the fall and summer months appear to have affected your plans. Also, the holiday season caused a dramatic rise in the average size of transactions.

It's just a hypothetical. The point is that you'll get a greater amount of detail on the monthly data that if you just looked at an AOV figure over the whole year.

Media and mean

Another factor to consider when doing AOV calculation is the kind of average that you're trying to calculate. This formula is what's known mathematically by the term mean. In general, the mean is what you need to use when calculating mean order value.

However, in certain circumstances, you might want to use the median. The median marks the halfway point. This means that 50% of your data points are higher than it, and half are below it. Microsoft Excel can easily compute any kind of average like other programs.

The median makes more sense in situations where a few extremist outliers could cause a deviation from the median.

Let's say you sell various products that cost between $20 and $300. You also have something that's worth $3500, like a personal coaching or consulting service. A majority of customers will buy your usual products. But whenever someone buys the coaching program that will boost the value of the order by a significant amount, which will make it slightly less precise. By using the median, you can eliminate the impact of outliers with extremes.

It is also possible to calculate two methods. Choose one which excludes high priced products, and then do one that incorporates them. This will give you a sense of an average customer's amount of transactions. Second, you can get the actual average amount and reflect your revenue more precisely.

The benefits of an increase in value of orders

Retailers who sell online pay lots of attention to attracting potential customers and new leads. But successful ecommerce businesses also depend on their profit margins, not just the number of customers. What your customers pay is important, and we'll show you the four methods it can benefit your company.

Higher revenue

It's pretty straightforward. When you can earn more per order, you make greater profits. Higher revenue is always better over lower revenues, and when you are able to achieve more revenue with less customers, that's even more beneficial because it does not require the same amount of effort or expenditure from marketing.

Higher profits

More important than a higher level of revenue is higher profits. If you have less cash to invest in marketing in order to generate the same or higher revenue, your gross profit margins will be higher, too.

Why is this true? Alongside marketing, think about costs such as packaging, shipping, and the inventory. When you have larger orders those other costs won't rise as fast as they do when you have smaller orders, but they're more.

A bigger box won't cost more than two smaller boxes. The majority of the time, according to your products, there's wasted space in shipping containers. For customers who purchase additional items, packaging costs and shipping costs don't increase -- you just make more profit.

Faster profitability and Return on Investment

The majority of e-commerce companies start in the red. This means they have invested funds in order to establish the business, and want to get the most value from the investment. The earlier you start, the better because then you can develop, expand, and increase revenue and profits.

With higher average order values and higher average order values, you'll be able to reach profitability earlier due to the fact that your net profit per transaction are more.

Higher customer lifetime value

Achieving a new customer's trust is much harder than keeping a customer. Both are crucial, however when you have higher average order value it is possible to earn more from each customer over the course of their life.

It means that you are able to run your marketing plan more effectively with confidence that the long-term returns will be worth a higher investment. If every customer generates higher revenue during their time with your business, you will be able to justify an increase in customer acquisition cost in the first place.

Higher customer lifetime value gives a business more stability.

Strategies to boost the value of an order

You've heard about the advantages of increasing your average order value and how to figure it out. Let's find out the best way to achieve it.

You can start implementing several of these strategies simultaneously and they don't take very much time or effort to achieve. Many of these methods succeed because they influence consumer behavior such that everyone feels like winners.

Give an additional size

Based on the products you offer depending on the product you sell, this could be the most effective strategy to improving the value of your orders. It is easy to see the effectiveness of this strategy by using easy illustrations. Is it true that the larger drink price more at restaurants than a medium drink? Of course not -- the larger size increases their profit.

Any product could be upsized as long as you've got the packaging. Furthermore, the behavior of customers shows that they prefer choices. So even if they don't buy the bigger one that could make the smaller size even more appealing. And if someone is buying a variety of things, purchasing the cheaper size allows them to justify spending more money on other products. Thus, the larger size -- even if not purchased, can result in a larger order value.

An upsize is one type of an upsell. It's which has been proven to be a successful strategy to increase the size of transactions.

Offer an upsell or two

When it comes to online shops it can be accomplished quite easily. Once a customer orders something and you have an upsell page that provides them with the best deal to boost the value of their purchase. Before reaching your checkout page, customers have the option of either taking that deal or say "no thank you."

Expert in online funnels Russell Brunson calls these a once-in-a-lifetime offer- an OTO.

Suppose you're ordering the dog food bag for $29.99. But if you take advantage of this limited-time offer that you buy two bags of dog food for $49.99. When you buy products often, bulk discounts such as these are great for the customer because they'll be using the product in the future. For you, it boosts the price of your orders.

It is possible to offer a variety of items as upsells. You can offer complementary products. Gift cards are a great option. Give a membership. Find things that will appeal to the person who is shopping for a certain item. Or, offer these things to anyone who buys anything from your store, and make it a standard part of check-out.

Are upselling and cross-selling equivalent? cross-selling?

Some people find that they're very different. Some will tell you that "upselling" is referring to a bigger or more expensive version of the same product and/or buying more than one, as in the above example.

The term "cross-selling" refers to the sale of items related in some way to the purchase. The gift card could technically qualify as a cross-sell in this sense.

While these two terms may not be the same, in many ways, they're with no distinction.

Why? because the reason you're giving these options are the same -- to increase AOV. It doesn't matter if you're offering an increased or better version of the product or another product that is appealing for the buyer and you're providing both once they've made the decision to purchase by using the same strategies and with similar technology.

Which is better? Upselling or cross-selling? What is the answer? whichever one works to your company. Or both.

Make use of urgently

It is among the easiest and most time-tested methods to influence customer behavior. Urgency achieves several positive outcomes. One of these could be larger average size of orders.

The OTO is an illustration of the urgency. In order to get this offer, you have to decide today, or else it will go away. This deal isn't available elsewhere and you're giving it to customers to show appreciation for customers buying through your store online.

It is also possible to use the time-deadlines of inventory, scarcity in stock as well as holidays to demonstrate the urgency.

Increase your prices

The change in your pricing strategy is the easiest approach to increase your overall order volume. Just raise your prices. Suppose you're selling 1000 widgets per month at $12.99. Increase it by one dollar, to $13.99 which means you've increased your total revenue from the product by $1,000. And almost all of that additional revenue is profit, because there was nothing else changed.

Do you risk losing clients when you increase your price? There's a mathematical element to this. How much are you able to rise your prices in order to offset losses to customers?

Check out the streaming market. The industry is mulling over various pricing strategies and marketing methods as well as ad-supported and free solutions, as well as other methods. When they raise their prices they see some customers drop their subscriptions. How does this affect the revenue they earn?

If a streaming business costs $7 per month and has 125 million customers. That's $875 million in per month income. If they increase their prices up to $8 per month and 10 million people have their memberships cancelled then what happens? With an average of 115 million customers paying the higher price, they'll earn $920 million each month. Although they've dropped customers, their income is much higher. At that volume, one dollar can go a long way.

It's an excellent real-world pricing strategy example that lots of people are talking about.

The e-commerce company you run can accomplish exactly the same. However, on a less scale, the principle is exactly the identical.

At some point, you are able to justify a greater price, even if you have to pay for some clients, since your income still increases.

Make bundles of products

Bundling is an excellent method to increase price per order since you're creating a package of items that doesn't have a clearly comparable price anywhere else.

In product bundles, the idea is to combine multiple products into a new complete collection that is sold as a set. Thus, the Backyard BBQ collection, the Backyard BBQcollection The Backyard BBQ collection, the Summer Getaway collection, the Christmas Grab Bag and so on are some of the common names that you will see on bundles of products.

Very few people are going to research the cost of the 8 items that comprise your package. They'll be happy with the basic order of the assortment of complementary products.

You can sell additional items. Then you ship them all at once. Customers pay more than they would otherwise and is satisfied by the bargain price and excellent service provided in the bundle.

Benefits for purchases that exceed the minimum threshold of purchase

It is among the top strategies for increasing the average value of orders, and it can also boost your conversion rates as will many strategies in this article.

The idea is, get people to spend more by rewarding them if they spend more. Similar to bundling, this method works well because everyone feels that they're receiving a good bargain. They are.

The following steps will help you make this process work. The first step is to look over your sales data and calculate the current value of your order. Next, select a figure 15-20% above that. Last, decide what reward to give to those who purchase more than the average amount.

If, for instance, your average customer spends $50 on a purchase, you can provide a worthwhile bonus or incentive for those who spends over $60. The types of benefits you can offer are:

• Free gifts
• Entries into a contest
• Entry into a customer loyalty or VIP program
• Free shipping
• Discounts on flat dollar -- not per centages

A good example of how this last item works is "Spend 60 or more dollars and you'll get $5 off."

If your typical order is $50, the ability to get them to spend at least $60 can result in a big growth in your revenue. But wait, you might think that if they buy $60, wouldn't it be discounting the extra amount that they have spent?

The majority of times, there's no. People won't spend exactly 60 dollars. They will spend more than $60. The flat dollar discount, because regardless of how much more than $60 they have spent it is identical. If you give 20% off, the amount you refund to them will be increased regardless of the amount they pay.

Free shipping

The cost of shipping isn't getting lesser. This is why more businesses are beginning to offer an unrestricted shipping limit for those who don't want to be stung by paying more for shipping.

As mentioned, consider what that your clients pay for their purchases, and decide at what point you're willing to enact the free shipping threshold to pay for the shipping costs in order to earn their business. This could be 50, $100, $75, or a different amount.

And there may be more reasons that affect this selection beyond the average value of an order. In particular, how massive are your goods? What's the average weight? How much shipping costs have you already baked into your pricing strategy?

It isn't a good idea to be stuck paying huge amounts for shipping to appease potential new customers by setting unreasonable expectations. But, to win higher worth business, providing free shipping with a set limit is something to think about. When customers make more purchases than the threshold, they'll feel liberated to buy more so your average order may simply increase.

Provide memberships

Memberships increase customer lifetime value as well as retention of customers and also increase the value of an order at the moment you join.

After they've joined, you can begin selling more often through the members' membership at reduced prices and with whatever benefits come from membership. This is probably one of the more difficult strategies mentioned in this article. However, if you can succeed then you will reap the benefits of recurring revenue, in addition to bumping the average value of orders as well as bolstering your customer base.

In answer to the question of free shipping You can make free shipping a benefit from membership. This way, your current customers can enjoy free shipping and you're partially covering cost through membership.

Provide add-ons

Add-ons to products are small products that the consumer already purchases to make it more desirable. As an example, an air pump that comes with an extra set of needles and a handy case for storing them.

It is a concept that an addition should just increase an purchase online by a tiny amount. The product isn't an offer in a bundle because it's a pre-planned bundle of products that might share one or two commonalities and aren't connected.

A add-on is an added feature that can make the item they're buying already a bit more appealing. It could also be something such as gift wrapping.

Feature social proof on key pages

It may not be an effective strategy for increasing AOV but take a look at your higher-priced products. They face a little more opposition from the average buyer. They are also the ones who increase your purchase size.

Through effective social proof such as product reviews, testimonials, and even screenshots, you are able to assure shoppers who are hesitant that this item is indeed worth purchasing and that the price shouldn't stop them.

Most people don't buy based on price alone. Positive social proof could convince people to buy more.

Live chat support for customers

Like social proof, sometimes consumers aren't able to purchase due to doubts, questions or other confusions holding their backs that can be resolved if they could speak to someone. However, talking to a person can be difficult, particularly online as a majority of e-commerce companies aren't equipped with complete phone support.

But live chat is slightly less expensive as a result of labor costs as well as a more straightforward way of communicating with customers engaged in a shopping spree and may have a question or two they need answered.

If they don't have live chat, they'll purchase the two they were already contemplating buying and leave the others in place since they're unsure and don't want to hassle with assistance forums. If you have live chat, and it is possible to address these issues, they may decide to purchase three or all four products.

In this way Live chat doesn't only provide good customer service to support the long-term loyalty of your brand, it's one of the marketing strategies you can use.

Customers can include personalization cards

An individual greeting card has an enormous amount of value when someone is sending gifts to someone else. To relatives and friends that reside far away, including a note with the gift will make the whole gifting and receiving it much more meaningful for anyone. It's an intangible worth that is not connected to the merchandise itself.

And adding a service like that to your product will cost you very little after you've got the software in place for it. The charging of $5 or some other cheap price will increase the value of your orders while satisfying an need that some of the customers you serve will. They'll be willing to pay an extra cost that carries with it great emotional and relational value.

Provide a payment plan

The main reason that holds people back from buying higher-priced products could be... price. price. They want the product however they can't buy it now.

If you are able to offer your customers similar to this a plan of payment choice, they could opt to take advantage of it. If you have this option in place and you'll be able to make greater sales with your more expensive products.

It is important to clarify that "higher-priced" could mean something around $100. Pay later, buy now services (BNPL) were designed to allow customers to buy higher-priced products and not have to purchase the entire purchase at one time. In general, consumers can split the payment into four installments. Additionally, the services provided by BNPL generally cover the entire cost of the item upfront. This means that you are paid in full at the point of purchase And the buyer repays the BNPL service in four installments.

Raise your average order value

Look back over the strategies for pricing and marketing that you've read then choose which ones you'd like to implement at first. There are a few of them in place at the time you finish your day. Some require more time.