How successful is your online store?
“Great! Very! People are flocking to me and buying all the things!”
<inhales sharply through teeth>
Not so fast. Traffic and sales might make you feel like:
...but they’re not the sole measures of eCommerce success.
When it comes to assessing the health of your Shopify store, looking at just one or two metrics in isolation is a mistake. A more holistic approach allows you to catch “leaks” in your strategy before they become problems, and also helps you better play to your unique strengths. An important part of the holistic overview is Average Order Value (AOV).
Even if you have a ton of visitors and your store is making money, a low average order value (especially if it’s coupled with a lower-than-average conversion rate) could be a worrying trend. Here’s everything you need to know about this critical metric.
What is Average Order Value?
Average Order Value is the average amount of money spent with your store, per order. (Logical, right?) AOV doesn’t care how many items are in the cart; it only looks at the total cumulative value of the final order.
If you’re using Shopify to manage your store, you don’t even need to calculate this number (which includes taxes and shipping costs, just FYI). You can view it easily in your Analytics Dashboard. Obviously, the higher your AOV, the better.
We know that merchants are paying attention to the Average Order Value game, since AOV has been on the rise in the last year--across the entire eComm space. That means it’s more important than ever to ensure your store can keep up.
Image Source: Statista
With that in mind, let’s take a look at some of the best ways to grow your Average Order Value.
How to Improve Average Order Value
Bundle Related Products
To incentivize buyers, a bundle should cost less than if the individual items were purchased separately. (Although, there is some evidence that getting a deal isn’t always front of mind for buyers browsing bundles.)
By grouping products in this way, you increase the perceived value of each purchase, making it a more lucrative alternative to buying a single item. If you’re doing bundles right, you’ll be providing a convenient one-stop solution for your customers’ needs. (Even the ones they didn’t know they had.)
No more hunting around for complementary products! You’ve done the legwork for them. And if there’s any piece of advice we never tire of repeating, it’s this: the easier you make it for shoppers to give you their money, the more likely they are to spend.
Case in point: BioLite, an online store selling outdoor energy equipment for campers and other adventurers. The company bundles products together for specific purposes (like the Complete Cook Kit, below) with great success, selling more products than they might if their customers had to piece together their own cooking kit, item by item.
Even if there are one or two items in the kit a customer might consider superfluous, the convenience and perceived value are likely to make it a win. The customer gets everything they need in one shot and BioLite increases their AOV. Huzzah!
In addition to putting together complementary bundles, you may also wish to consider "pure" bundles. In this case, specific items (perhaps highly desirable ones) are only available as part of a bundle.
How to Bundle Products in Shopify
Shopify has oodles of free and paid product bundling apps. A popular one is Frequently Bought Together, which uses an AI-based algorithm to help you build product bundles based on the items that are frequently bought together from your online store. No manual bundling necessary.
You can, of course, manually create bundles as individual products within your admin, but depending on your inventory management system, you might need to create new SKUs for the bundles and make sure your software can track inventory sold alone and as part of the bundle accurately.
Define an Order Minimum
Rewarding customers based on a minimum order value is a great way to nudge them to add more items to the cart. The rewards can include free shipping, a discount coupon, or a free product.
As with so many areas of eCommerce, shipping is a huge incentive here. In fact, 48% of consumers have added items to cart to qualify for free shipping, according to the State of Ecommerce Order Fulfillment & Shipping report.
Image Source: eFulfillment Service
To decide what the threshold value is going to be, take a look at your current modal order value or the range that most of your orders fall in, then pick a number slightly higher than this range.
For instance, if orders are most commonly around $45, you may want to select a minimum order value of $60. The goal here is to make the reward seem attainable to a maximum number of customers.
Why is selecting a value that’s just right so important? Glad you asked.
Setting a low threshold will lead to more orders exceeding the threshold value, but it won’t be significant enough to put a dent in your Average Order Value. On the other hand, you don’t want the threshold to be too high -- the whole point is to be reasonably attainable.
Once you’ve set an order minimum that will work for your shop, you’ll need to make sure your customers see it. Kopari Beauty knows what we’re talkin’ about. As advertised in their store-wide announcement banner at the top of the screen, they offer a free product with every purchase that exceeds $80.
You’ll also want to make sure this promotion is mentioned on the cart page (and minicart, if you have one). Make it extra fun with some custom coding: change the message to say “Congrats! You’ve Earned a Free [Product Name]!” with a celebratory animation triggered once the threshold is reached.
How to Give Minimum Order Perks in Shopify
If you want to allow free shipping for orders that exceed a certain value, you can do so easily from your Shopify admin dashboard. Go to Settings > Shipping and delivery and then Manage Rates.
Locate the shipping zone and click Add Rate.
Give it a name and ensure that the value in the Price field is zero. Next, click Add Conditions and select Based on Order Price. From there, you enter your chosen threshold value, click Done, and you’re all set.
The next step is to add a promotion widget--and you really do not want to skip this step! If your store is on a good theme it probably comes with an announcement bar standard, but if not, you can use an app like Justuno.
Set Up a Loyalty Program
Running a customer loyalty program doesn’t just increase AOV; it also helps you build relationships with your customers and encourage repeat purchases.
Don’t believe us? Science says that customers who are part of top-performing loyalty programs are 77% more likely to pick your business over competitors. Not only do they choose you, but they spend more too. Smile.io (one of our app partners) helped Mpix reap the benefits firsthand, when they saw a 55% increase in their AOV for loyalty club members vs. non-members.
The concept is simple. You put a system in place such that the more money customers spend, the more points they get. They can then redeem these points for benefits such as insider perks, early access to new products, discounts, and free products.
Take bookish crate company LitJoy, for example. Their loyalty program is available for everyone to use, and customers are rewarded with points for a number of activities--leaving product reviews (social proof), purchases (being rewarded for spending money! nice!), referrals, and social media activity.
Redemption rates are generous at 10 points per dollar (extra incentive), and the program is broken up into 3 different “tiers” of achievement, each with their own escalating set of perks. Users have multiple opportunities to accrue points, which can be easily redeemed on future purchases (return customers! yay!). It’s one of the best loyalty programs we’ve seen to date, tbh.
How to Create a Loyalty Program in Shopify
Apps like Smile and Yotpo make it easy to create a loyalty program with Shopify. With Smile, for example, you can take care of everything from designing the program to embedding a widget on your site for customers to join and manage their rewards.
In our experience, Smile is the easier app of the two to get started with (both on the merchant side and the customer side). It’s got all the basics and is great for simple, straightforward loyalty programs. If you want more bells and whistles (and see a need for custom work) you might consider Yotpo, which offers great flexibility through their API.
Provide Live Chat Support
According to Forrester, businesses that use live chat sell 10-15% more per cart--an obvious boon to AOV.
Setting up a live chat system on your online store allows you to instantly answer customer questions — questions that may be holding them back from dropping an additional product into their cart. 👀
Live chat works especially well for high-priced items, such as furniture and mattresses, because a higher price tag typically necessitates greater information and/or assurance for a customer to feel confident about their purchase.
Wood Wood Toys is a great example. The Canada-based online shop sells manually curated Montessori-inspired toys to caretakers worldwide.
By implementing live chat to manage customer interactions, the company was able to trigger a purchase 8 out of 10 times when a potential customer messaged them -- not to mention standing out from the competition by providing a stellar customer experience.
How to Set Up Live Chat in Shopify
Gorgias is the creme de la creme of help desks. Not only can you roll out a totally intuitive, on-brand chat widget, but you can also track all sales generated by support agents over SMS and social media answers.
If you’re looking for something a little less robust (and free!) to start, Shopify provides a business chat app — Shopify Inbox.
Shopify Inbox allows you to manage multiple conversations, customize the appearance of the chat widget, set up canned responses to common queries, and view insightful performance reports right from your Shopify admin. Merchants and customer service teams can respond via desktop or through the mobile app.
In addition, you can choose to receive and respond to messages sent through other messaging platforms such as Apple Business Chat and Facebook messenger.
To set up Shopify Inbox, simply navigate to shopifyinbox.com and log in to your Shopify account as usual.
Optimizing AOV Allows You to Capitalize on a Captive Audience
The best part about improving your Average Order Value is that you’re focusing on high-intent customers who are already on your website to make a purchase. They may even already have some products in their carts--they just need a little nudge to get where you want them to be.
We all know that current customers are an easier sell than new ones (that’s why subscriptions and memberships are a thing). When you work on engaging and persuading the people who are already interested, there are fewer objections to handle.
Instead of greasing the wheel trying to acquire new customers, you can squeeze more value from your current ones by getting them to spend more--all while enhancing their experience and incentivizing them to come back time and again.