Introduction
Good lead conversion and decent traffic are an indication that your online WooCommerce business is doing well. But, there is another important metric that plays an important role as well.
And that’s the average order value, otherwise known as the AOV.
The average order value is an imperfect, yet important business metric that can tell you whether or not your marketing efforts are yielding proper results. It’s a metric where you get the idea of whether or not your customer retention strategies are working and how well your marketing strategy is working.
Today, we will be shedding some light on the matter. We will be showing you the basics of what is an average order value, how to increase your average order value, answers to some important questions, and more.
But first, let’s try and understand what exactly is the AOV.
What is the Average Order Value?
In order to understand the average order value (AOV) take a look at the following example:
Let’s say you own a clothing WooCommerce store with total revenue of $1500. The $1500 revenue comes from a total of 150 orders. So, your average order value will be:
(1500 / 150)$ = $15
It means each customer spent $15 on each purchase from your WooCommerce business.
Do take note that this is not the only metric to consider when you want to understand the full growth of your business. Still, it’s not something you should take lightly.
From this metric, it is clear that if you manage to increase the value per order, then it will help increase the overall AOV. It’s simple math.
How to Calculate the Average Order Value (AOV)?
From the previous example, you should have a clear idea of how to calculate AOV. So, you can see what the formula is going to look like:
AOV = Total Revenue in Sales / Number of Orders (Sales)
This simple math is very powerful, it can easily tell you how to segment your market efforts based on your customer behavior.
You can get better insights if you use customer segmentation by various demographics – average age, product interaction, ordering styles, and more. This way you will better understand whether your marketing efforts are yielding better results.
How to Find Average Order Value in WooCommerce?
You can easily get this metric from your WooCommerce WordPress website by going to WooCommerce from your dashboard. Then go to Reports>Orders>Sales by Date>Year. Once there, you’ll have to divide the “net sales in this period” with the “number of orders placed”.
This is just one answer. We would urge you to check out the FAQ section where we answer some very important questions.
Why AOV should not be Your Only Business Metric?
According to experts, no single metric of central tendency can offer a complete picture of your WooCommerce business. Rather you need to look at all the relevant metrics to find out the correct information.
For instance, if you only look at the AOV (which is the average of all the orders in a certain period or Mean), and avoid the metrics like the middle or median value of the orders and the orders that are happening frequently, you will not get the full picture of the customer interaction with your WooCommerce business.
For example, if your AOV is $20 but your common amount of purchase is $12, you need to pay attention to both metrics to get the right idea of interactions from your customers.
As a whole, using the relevant metrics, you can easily get a full view of how your users are interacting with your business and whether or not your marketing efforts are bringing you the right outcome.
So, how do you increase your average order value? Before we get into that question, let’s take a look at some important terminology that might help you with the later steps.
Why is Upselling and Cross-selling Important
Upselling and cross-selling in unison can exert a huge impact in increasing the AOV. Before we show you why it’s important, let’s try to clear the concepts first.
Upsell Products
Upsell products are the ones that are higher in value than the ones that a user chooses to buy initially. It is to prompt the user to upgrade to a better product option that is high in price. For example:
- A user may opt for a better watch with better build quality in contrast to the initial option.
- Someone may want to go with a dress with a better design than their initial choice of dress.
- A user may choose to opt for a tablet computer with better RAM and Storage.
Upselling has a direct impact on AOV, as the customer is choosing an item with a higher price than the initial option.
There are instances where customers like the idea of a suggestion for a better product. This happens at times when the customer is looking for a proper upgrade.
Cross-sell Products
These are complementary items that a customer would like to buy with their regular purchase. For instance, if you’re looking to buy an Apple Smartphone, you may need to buy a charging adapter and a lightning cable separately. The charging adapter and the lightning cable are cross-selling products in this scenario.
There are other examples as well:
- If someone wants to buy a laptop, he or she may need a travel case, a wireless mouse.
- Small furniture accessories may be included with a large furniture item.
- Electronic accessory items to be sold with large-investment items [As mentioned earlier].
Cross-selling also has a great impact on AOV. Customers appreciate this as they do not have to spend the time to look for smaller, yet essential items to complete their shopping experience. This increases the customer lifetime value alongside the AOV, allowing you to enhance the overall experience.
Shoutout to Product Bundles
You can also prompt users with product bundles. Product bundles in WooCommerce are optional items. Customers can get these items in configurable quantities with the items they want to purchase.
For instance, if a dress is available with multiple colors of caps and accessories, users can choose between these products by selecting the quantities. The items will be added to their carts.
Like cross-sell and upsell products, product bundles can also play a role in increasing the overall AOV.
An ideal example of product bundles can be shown as below:
Imagine you are selling to someone about to start a rock band. They are looking to buy a top-notch drums set. The price for that is $600. Now if you bundle a good set of speakers, drum rug, drum bags, stick holder all together as a bundle with a discounted price [say the total bundle costs $800 after a discount], it can work as a great Call-to-Action.
Relevant Upsell and Relevant Cross-sell
The relevant upsell is the most effective way to make a sale in business impact. It’s usually a better or more expensive version of a product the customer already has in their cart. Moreover, one that costs more. You can easily do that with a WordPress popup plugin to help you make the sale you want.
For example, when a customer buys an iPhone 128GB, you can try to sell them the 256GB version. You can do this with a WordPress popup plugin and make it more interesting to get people to buy the product you want to upsell.
A relevant cross-sell is the second best type of offer. This product has some connection to the main item in the cart—for instance, a phone cover or case. Something customers might need to use the main product or make it better. Cross-selling can be done easily with a WordPress popup plugin.
You now know the important terms. So, we will now move on to the main topic:
How to Increase Average Order Value
Here are the ways to increase AOV:
Increase the Sales of Accessories through Upsell and Cross-sell products
Previously we talked about the impact of Upsell and cross-sell. It’s now time to put it into practice. You have the option to use WooCommerce in itself. Unfortunately, there are some particular issues with it. So, we will be using the ProductX builder to show you how it’s done.
1.How to Market Upsell, Cross-sell, and Grouped Products
You already know why product upselling is so important in increasing the average order value. You can do so using WooCommerce itself. Unfortunately, there are some limitations to WooCommerce. For this reason, we are using the ProductX single page builder for WooCommerce.
The ProductX single page builder is a super versatile option that’s fully compatible with Gutenberg. Of course, you will need to have the pro version of ProductX to use this excellent feature. Check out the video below to get a full overview:
We will not go into the details of creating the product single page with the builder. You can use the following resource to create a single page from the ground up:
Here’s a demo of the page:
As you can see, you have the opportunity to bring granular level changes using the single page builder. You can change almost all the properties. Here’s a quick view of the builder backend:
As for Upsell and Cross-sell products, we’ve added our custom text and ProductX WooCommerce blocks to showcase them.
***We’re using Logitech products for demonstration purposes only. In real-life, make sure to use your own products!
Things to Follow:
- Don’t be pushy with the customer. Remember, they can easily move from your WooCommerce store. So, make sure to include items that will be useful to the buyer.
- In general, if someone is out to buy a product that is worth $200, it will be hard to convince them to go beyond that budget. Suggesting important items that are useful, yet significantly low in cost can be beneficial. The chances of the customer being willing to spend an extra $20-$50 are logical. But the item you wish to suggest needs to be something the user will be interested to buy.
- Tools like ReConvert, Zangerine, Funnel Wolf, and others offer a unique insight. They tell you which products customers buy together. This way, you don’t risk offering irrelevant items to the customer, which can play a role in increasing the average order value.
Don’t Forget about the WooCommerce Grouped Products
You can take advantage of the WooCommerce Grouped Products, which you can bundle up and sell to increase your customer lifetime value, which in return will enhance the AOV. We have an excellent resource for you to check out:
2.Introduce Viable Product Bundles
Product Bundles are another great way to offer better value to the customer (which in turn will increase the AOV). This way, you are increasing the individual order value for the customer, but offering them a greater value. They are getting more value from a single source, increasing the overall chances of purchase.
Quick Tip: Introducing product bundles is a necessity. We have an excellent resource to share so that you can understand grouped products and how to use them:
Exploring Grouped Products Variation
For example, campers often like to grab all their gear together. If you go to the Wooded Nomad’s website, you’ll see that they have particular bundle options for various customers. This is a great example of product bundles that offer value to the customer while increasing the value.
Facemask can be a great option as well. Many websites offer face mask bundles, allowing the customers to create their own designs, sizes, and quantity. In short, though the pricing increases, the customer gets better value.
3.Introduce Top-notch Customer Loyalty Programs
Customer loyalty programs are there to increase customer retention [meaning you gain your customers’ trust and turn them into your loyal users]. Make sure to have a proper customer loyalty program in place. Here are some tips you can follow:
- Choose a proper name and prepare to create a deeper feel.
- Develop a proper experience. Make sure it feels like a game.
- Ensure customers have different avenues of enrollment.
- Offer value-focused incentives to the users that are non-monetary.
Research indicates that a focused loyalty program can increase the average order value by 12-15%. So, make sure to focus your efforts.
4.Live Customer Support is a Necessity
Live chat is a necessity nowadays. Especially when you’re dealing with sophisticated products. Customers, in general, like to understand how the product works first hand. They want to get a feel for the product before they buy the product.
Even buyers who are “About to” make a purchase may need a bit more push before they can hit the ‘Buy’ button.
In short, Live chat is a promising weapon that is often underutilized by WooCommerce businesses. Experts predict that live chat can increase the overall AOV by 10-15% in general. So, setting up this ‘necessity’ should be imminent.
5.Create “Free Shipping Schemes” with a Minimum Order
Free shipping schemes play an important role in increasing the AOV. But you need to be certain about how to create the threshold for your schemes so that the users can get value out of the scheme while increasing your average order value.
Most experts predict that you should create a scheme with a minimum of 25-30% headroom. You can experiment with more and see if it works for you.
Remember, you’re not trying to weed out weak customers. So, you’ll need to make sure to prepare a scheme that doesn’t hold the customer captive in any way. For example, if the AOV is $25, you can offer ‘Free Shipping’ at $40-$50. Customers would love to include the extra $15-$20.
6.Limited Time Promotions Work Great
Limited-time promotions are a great thing. If you offer a special deal for a very short window (24-48 hours or less), you create a possibility of increasing your average order value. So make sure:
- Offer value-centric Calls to Action.
- Keep the promotion copy small.
- Be honest and specific.
- Make it easy to understand.
7.Make Use of the Social Media Space
Readers are very active on social media. And a huge portion of this traffic likes to buy products after seeing reviews in the social space and real-world use. As a matter of fact, the study suggests that 68-72% of customers will only buy a product from your WooCommerce business after reading an online review (social space on the web).
A good strategy here is to share customer reviews on your company’s dedicated social channel. You can ask social influencers to review your products. These strategies can easily help increase the AOV.
8.Make the Return Policy Flexible
Make sure to have a clear return policy in place. More than 70% of customers make a buying decision based on how clear and well-explained the return policy is to them.
So, you need to make sure that our customers can easily understand your return policy. Make sure to advertise your return policy on your website, emails, and social media.
FAQ
Make sure to go through this section carefully. You will find some useful information crucial to the topic.
What does average order value tell us?
It is the average value per customer order placement. This means if you place an order on a website or a mobile app, the average value per order of a customer is the average order value. It is a key performance metric that helps track customer behavior and help with business decision-making.
How important is the average order value?
The average order value is important for 3 reasons:
1. It helps to increase/expand marketing capabilities.
2. Reduces the customer acquisition time.
3. Reduces the customer payback time as a whole.
Overall, if you can increase the average order value, you can increase your overall market expandability by acquiring more customers and reducing the time to receive revenue.
What is the difference between AOV and ATV?
In many cases, users use the terms AOV and ATV with the same meaning. However, there is a difference between the Average Order Value and the Average Transaction Value.
The average order value is the divided result between the Total Sales Revenue and the Total Number of Sales.
AOV = Total Sales Revenue / Total Number of Sales
On the other hand, ATV or Average Transaction Value is the money that is spent by each customer per transaction. So, if you want to know how to calculate ATV, you can use the following:
ATV = Total Sales Revenue / Total Number of Transactions
The math is simple. Let’s say you’ve had $5000 in revenue for 1 month. The number of transactions in that month is 20.
So, the ATV of that month will be, (5000/20)$ = $25
AOV offers better insights into customer behaviors than ATV. As things like shipping time, taxes on certain items across international borders may be out of the hands of the WooCommerce business owner, it’s difficult to predict the effects of ATV.
On the other hand, AOV doesn’t have any concerns with tax issues, shipping, or other such metrics. As a whole, it offers better insights than ATV.
Does the average order value include taxes?
Yes, AOV in the orders report includes shipping and taxes. However, there may be no mention of returned or refunded orders.
Does average order value include discounts?
Yes, deductions/discounts from customers and other relevant inputs directly impact the overall average order value. So, there is an impact of discounts on the overall average order value.
What does ‘high average order value’ mean?
A ‘high average order value’ or AOV essentially means that you are getting more out of each customer. This results in less effort, yet getting better revenue out of every customer.
How to increase B2B average order value?
The key to increasing the average order value (AOV) for B2B (business-to-business) is to increase customer interaction. A great way of doing this is to increase the overall customer experience by offering each customer a unique experience. You can leverage upselling, cross-selling, product bundling, and other such WooCommerce features to increase B2B average order value.
How do you increase the frequency of an order?
The reason for increasing your order frequency is two-fold. First of all, it helps you gain new customers (getting new customers and retaining them is 4-5 times harder than selling to an existing customer). Second, you increase the overall possibility of sales to the new customer, which increases from about 18-20% to 65-70%.
The calculation, according to experts, goes something like this:
If the number of customers making 1-purchase = 40, the number of customers making 2-purchases = 50 and, the number of customers making 3-purchases is = 20, the order frequency will be:
(50+ 20) / (40+50+20) = 0.63 or 63% (approximately). This is the probability of a customer who made a 1-purchase and is prepared to make a 2nd purchase.
Here are the tactics you can follow:
1. Introduce renewable products to promote the 2nd purchase.
2. Introduce/sell products that are complementary (offer a fast charger with a smartphone).
3. Explore the possibilities of introducing ‘repeat business’ opportunities.
4. Offer ‘micro-emails’ after a certain period of purchase time.
5. Make sure to offer the ‘right product at the right time’ to the customer.
5. Introduce membership schemes if possible.
What is average order frequency?
It is the measure of the average number of orders placed by an individual customer. You can get the average order frequency (AOF) per month by doing the following :
Total Number of Orders per Month/ Total Number of People per Month = AOF for the month.
How do you forecast repeat customers?
Repeat Customer Forecast (RCF) is a key way of evaluating business leads. It can play a major role in increasing the average order value. You can include it in the long-term plan for customer retention, building insights into the lifetime value a customer provides to the business.
The key goal here is to understand how customers can provide lifetime value to the business to ensure overall growth. And this goal also includes the fact that how you can increase your average order value in the long run. Data can only take you so far. You need a concrete strategy-both for repeat customers and Lifetime Value (LTV) Prediction for each potential customer.
For repeat customers:
1. You need to understand how an individual is reacting to your products within the social media platform.
2. Focus on offering a customer personal value rather than looking for business value all the time. This creates customer retention.
3. Understand their shopping pattern and activities.
For LTV prediction:
1. Understand individual customer demographics.
2. Look into purchase behavior pattern change.
3. Understand how is their reaction to your products and business.
4. What they’re purchasing and their shopping preference in a year.
These metrics will help you increase your average eCommerce order value in the long term.
How to find average order value in google analytics?
In order to find the average order value in google analytics, you’ll have to:
1. Go to analytics.google.com and log in to your account.
2. Go to conversions>eCommerce>overview.
You will now be able to see the AOV of your entire business along with other important metrics.
How to optimize AOV on Facebook ads?
Facebook is one of the key places for boosting your online business(s). And without Facebook ads, it’s pretty much impossible to do so.
Facebook has different types of ads, and it’s pretty much a guarantee that you’ll spend quite a big amount on ads for boosting your business (Cost-per-Click costs around $0.97, Cost-per-Thousand impressions costs around $7.19, and more).
In return, these efforts will help increase your AOV.
1. Increase your audience size through proper targeting.
2. Build your sales funnel and optimize.
3. Optimize your Facebook budget through an optimized ‘Learning phase’.
4. Optimize ads for different sales funnels.
Final Thoughts
If you’ve made it this far, then congratulations. You now have some important insights on how to increase your average order value. Just make sure of one thing.
Do your research thoroughly before jumping into anything. Once you do your research, you can easily use the above-mentioned strategies for your particular WooCommerce business.
Good luck!
