Welcome to Part Four of our New Year Blog Series, Back to the Basics: How to Increase Average Order Value On Your eCommerce Store.
This article was originally published in September 2019 and has been updated.
BVA is taking a full-service approach to helping you prepare for the new year. We’ve gathered insights across all of our teams, and are here to uncover what we consider to be the best tactics from a perspective that combines storefront strategy, marketing, creative, user experience (UX) design, Amazon, and more.
When it comes to increasing average order value (AOV), it’s important for merchants to focus on factors such as customized user experience (UX) that can easily lead to quick increases in order totals. As a part of this strategy, adapting or adjusting your target buyer personas and delving into historical data to curate a more intentional eCommerce strategy is a must.
On the other hand, when it comes to Profit Margin, it’s important to mind the balancing act of discounts and deals while maintaining a healthy level of profit. Prioritizing conversion rate and AOV, while avoiding the urge to become too heavy-handed with promotional deals is crucial.
Here are our top 4 recommendations when it comes to increasing AOV & Profit Margin:
1) Personalizing the Customers’ Journey to Checkout
Personalization can ease shopping anxiety and create a positive experience with your brand. As a merchant, you need to create a simple, intuitive, and profitable experience for both you and your customers.
Studies show that 80% of customers are more likely to buy something if they are offered a personalized experience, and that 68% of customers will pay more for this type of experience.
We see three main opportunities for personalization: pre-checkout, during checkout, and post-checkout.
Pre-checkout: The opportunity for personalization starts when shoppers arrive on your website. You want to make sure your home banner reflects the promotion currently available and that your messaging is fine-tuned to your personas, as well as clear on the promotion’s nitty-gritty details (dates of the discounts or offers shoppers will get access to).
Additionally, your customer’s journey should be consistent across your storefront, which means making sure you use the same messaging and promotions so as to not confuse your audience and potentially lose their interest.
During checkout: Now that you have your customers excited about your promotion and products, you want to make sure you maximize their cart value to increase AOV.
Oscar Pan, Lead Full-Stack Developer at BVA, recommends using Shopify’s custom script; small pieces of code that let you create personalized experiences for your customers in their cart and at checkout to add an extra layer of personalization.
“You can use scripts to create discounts that are applied to a cart based on the items in that cart as well as other cart properties. You can also use scripts to customize the shipping and payment options that are available to your customers,” (as explained on here).
Another benefit to using personalized messages in the cart to easily communicate information on shipping and delivery that will allow shoppers to make a more informed decision and reduce cart abandonment.
Keeping all of these tools in mind, perhaps the most efficient way to implement a personalization strategy during checkout is through customized cross-sells. Cross-sells should follow a normal thought process instead of showing shoppers similar products. By looking at historical data, you can see which products people usually pair together and use this information to make relevant, useful recommendations.
Additionally, you want to make adding items to the cart as easy as possible. When it comes to UX design tactics, using checkboxes makes cross-selling flawless and frictionless.
Augustine Bader using checkboxes to cross-sell on product page
Post checkout: So your customer submitted their order and the cart value isn’t as high as it could have been… well, there is one last thing you can try: a customized up-sell!
Shopify offers a variety of post-check-out upsell add-ons to give you one last chance to get those additional dollars. For example, one of the features of this add-on will have a pop-up appear after customers submit their order, prompting them to choose a higher-end version of the item already in their cart for only a relatively small amount more.
Alternatively, you can also promote limited time offers, available only to customers who submitted a purchase (see example below). This tactic allows customers to instantly add new items to their order without having to re-enter their shipping and payment information and for you to bump each cart value up a few additional dollars.
Limited Time Offer Pop-up Post Check-Out. Source
2) Bundling, The BFF You Never Knew You Needed
Bundling is a great way to provide value to your customers, sell more products, and increase AOV.
The most common mistake when bundling products is pairing inexpensive items with premium products. The issue with this bundling strategy is that instead of encouraging customers to buy more things, a poor product grouping can confuse the customer’s purchase intention and decrease the bundle’s perceived value.
A study conducted by Harvard Business School on this paradox highlights that a cheap add-on paired with a premium product makes the whole bundle less appealing and therefore makes purchase less likely. This noted, the study did not conclude that low-priced items devalue the expensive ones, but rather that these types of bundles are generally not as effective.
Now that you know the science behind bundle, here are our 4 tips to get bundling right:
Emphasis on savings: Whether it’s by demonstrating that the cost of the bundle would be less than buying the items individually, or by offering a discount to make the product bundle more appealing, showcasing the dollar amount customers save by buying the bundle will highlight the offering as a deal they shouldn’t pass on.
Commonly paired items: Going back to our previous section on cross-selling by presenting items your customers usually pair together, creating bundles using historical data on purchase behaviors can help you pair the right items together and create a very appealing offer to your customers.
Singles vs Bundles: Sometimes making a bundle appealing is as simple as showing the product by itself and then the bundle next to it on a category page. If you see that the product you were going to buy is included in a bundle with other complementary items, the decision becomes a no-brainer!
Personalized bundles: Last but not least, build your own bundle is our absolute favorite way to allow customizability and make the customer feel in control of their buying experience. Best Buy is a great example of this tactic because they strategically place the “Build A Bundle” button below “Add to-Cart” that sends customers to a list of Best-Selling items that are complementary with their current product.
Best Buy “Build A Bundle” feature on product page followed by a selection of “Best-Selling items to go with it”
If you’re interested in adding product bundles or custom bundles to your store, Shopify offers a great selection of add-ons.
3) Tiered Pricing
Tiered pricing is a great strategy to not only help increase AOV, but balance conversion rate and profit margins. This powerful tool is often overlooked by merchants, but it can be an easy way to add excitement and give the customer the feeling of “winning” as a shopper. Tiered pricing is like a security blanket for your brand; it gives customers good deals while also making sure the discounts you offer aren’t eating away at your profit.
Tiered discounts work by highlighting the savings a customer will make as they add more items to their carts and get closer to more savings (as we have seen previously, this was also an important aspect of bundling). Shopify can help you set-up tiered pricing very easily with pre-approved scripts, making it something every Shopify merchant should consider using.
There are several tiered pricing options; among them are tiered pricing bulk purchases (buying a lot of the same item, similar to “buy two, get one free”) and tiered pricing by spending thresholds (the discount becomes activated after a minimum cart value).
You can use tiered pricing to entice shoppers to reach the next tier with messages like “You are only $10 away from saving 20%!” or “Add one more item to your cart to get 20% off!”
“Tiered pricing is an incredibly valuable strategy because it allows customers to pay you more money. If you’re not offering multiple price points, you’re almost certainly leaving money on the table. If more than 20% of customers are purchasing the most expensive product, chances are you could introduce a new tier. Lean into purchase behavior and eCommerce data to determine the right price point and the effectiveness of any new tier,” says Dax Young, Director of Strategy, BVA.
Some of the most important considerations when it comes to Tiered Pricing are:
- AOV Goals: Offering discounts only after the user has reached your AOV goal number can be the most viable strategy in order to keep your profit margin looking pretty.
- Average Product Price: It’s important to consider how many items need to be bought to hit the AOV target. This is done by looking at your average product price and understanding how many products typically need to be purchased to reach your AOV goals.
- Profit Margin Goals: In other words, how much of a discount can you actually afford to offer?
4) Easy Returns, Happy Customers, Better Margins
How can you prevent returns from eating away at your bottom line?
Beware of serial returners: There are two types of serial returners, the ones who will wear or use an item once before returning it, and the ones who will replicate the brick-and-mortar experience at home by purchasing different sizes and colors of the same item, pick their favorite, and return the rest.
So how can you protect yourself from serial returners? What’s important is to separate serial returners from the rest of your customers by tracking them. To do that you will want to use a customer relationship management platform like Shopify Flow that will allow you to identify and segment serial returners and exclude them from free shipping and/or full-refund offers by using an onsite personalization tool or by creating a shopping script.
Find a partner to lighten your load: By collaborating with the right partner you can make returns less painful for you and your customers.
Amazon and Kohl’s have partnered to allow Amazon customers to drop off their returns at their closest Kohl’s location, for free. With more than a thousand Kohl’s locations nationwide this new partnership is sure to delight Amazon’s customers and boost in-store foot traffic for the retail giant.
But for the retailers of this world that aren’t Amazon or Kohl’s and still want to reduce the friction of returns, there are still options. Loop Returns and Returnly (just to name two) will act as the middleman between merchants and their customers to truly automate returns for the brand.
We hope that some of the ideas we’ve shared in this article will help you maximize your core metrics in 2021.
Be sure to check out our previous three articles in the series for all your other eCommerce metric needs:
Have a project in mind or want to chat about any of these topics? Feel free to reach out to us here!