Increasing AOV for Ecommerce

Diving straight to the bottom of your funnel, these AOV tactics are meant to add Incremental Revenue.

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I’m particularly excited about this edition. It’s crisp and highly tactical. I’ve been on to this for a while now and have finally started to put together some interesting experiences on ‘Increasing Average Order Value’ for your e-commerce store.

Let's dive into it.

First, what is AOV and how do you increase it. You may THINK you know the answer, but just stay with me out here.

AOV = (Total Revenue for X Period of Time) / (Total Number of Transactions for X Period of Time)

Increasing AOV Means:

Once your customer has made up his mind to purchase and finally pay, it is when you try to upsell or cross sell ‘value driven’ products to him. The 4 tenets of a great upsell / cross-sell are:

• the offer is cheap
• Discounted
• has no variants, and
• applies to your entire customer base

This is what forms the basis of a high take rate on your AOV. And this is what is called ‘Incremental Revenue’

(Disclaimer: There’s a fine line between bumping your AOV and recommending complementary products. If your customer is keen to buy protein shake and you give him protein bars (which he would’ve anyway gone to the shop page and bought), it’s not an up sell)

The Trap: Blended AOV

While you should just be aware of this, it’s not a deal breaker. If you are an e-commerce store and have different categories of products, it’s best to calculate AOV individually for each category, rather than blended AOV for your business. The seasonality of products, nature of purchase, etc are all what differ between categories and it’s best to keep your churches & temples separated. This also means that you devise AOV upsell strategies independently for each category.

Increasing AOV has been a perennial goal for e-commerce businesses. While some say you should let AI driven apps do the job, I’d say that’s not enough. While for stores at scale, that’s imperative, there’s also a painstaking / time consuming, but effective way to try and solve for this.

Why You Shouldn't Just Rely on apps that give dynamic recommendations?

AI or this-party integrations are what we’d ideally resort to something like this.

There are a bunch of tools offering some version of smart product recommendations. They look at your order history and try to recommend a product that other people who ordered similar things have added to their cart.

This proposition isn’t wired to add incremental value to your revenue. These sorts of recommendations are great while someone is actively shopping but once you’ve got them on the hook (in the cart, ready to checkout) we’re trying to increase AOV not just get people to equilibrium.

So if your customer is shopping using just your cart, it’s not ideal.

There are downsides to dynamic recommendations too:

• A lot of products on your store probably have variants
• Most recommended products probably aren’t cheap
• It’s really hard to properly discount a dynamically recommended product
• All of these products are available in the regular shopping experience

Great offers are crafted, not found.

I mean that in a very literal sense because the best offers have a few traits that none of your products might have:

• No variants
• Cheap
• Valuable to customer regardless of what they’re buying
• Can be heavily discounted
• Not available in the regular shopping experience

Here are some ways to add more Incremental Revenue to your AOV:

I) Out of Stock:

A lot of brands showcase ‘Out of Stock’ for items that aren't in stock. With customers, it’s wiser to tap into mindsets rather than push products. Based on the category, you could change your strategy of ‘out of stock’ to ‘Add me to Waitlist / Notify once in stock’ 

Add: Deep-link a discount code (10% or so) if people click on ‘notify once in stock’ and use the same email link to purchase the product. This incentivised behaviour and also gives you a rationale for building more mindful discounts with your core audiences moving forward.

Or for fast moving categories, try ‘Drops’ for a  limited time. This gives you some meat for your social media strategy that also builds some level of hype for your products.

II) Discount Thresholds

The simplest way to increase incremental revenue with AOV is to add discount tiers. This is based on your category or even target demographic. But everyone loves a gamified discount.

• Spend INR 500 to get free shipping
• Spend INR 800 to get 3% off
• Spend INR 1200 to get free express shipping
• Spend INR 2000 to get 10% off

As a brand, you wouldn’t mind a INR 200 off on a purchase of INR 2000. Look at it this way: you’ve already spent on acquiring this customer. If you can push him to spend substantially higher, your returns on CAC are much higher. 

III) Free Express Shipping Threshold:

While most brands strive to deliver products to customers within 1-3 days, express shipping gives a sense of loyalty. In most cases, the cost for express shipping is 10% to 20% higher than normal shipping. For a purchase that’s an easy 50% higher than what the customer originally intended to make, the extra cost is so worth the price.

For both the above cases, UX of the page plays an important role in increasing AOV. Here’s a great example:

IV) Social Proof on Cart Page:

Most brands add products straight to the cart, from product pages. Adding in a page in between, increases a step for your customer, but definitely adds value to give them all the information and just push the purchase. 

On this add-on section between the product page & cart page, is where you ‘also’ add more social proof to increase validation.

Just when you’re about to buy, add the upsell on ‘25 people bought this yesterday’ or something similar. Here’s a screen-shot of an impressive pre-checkout page that focuses on:

1. Social Proof
2. Product Images in various forms (once again, even though you’ve already seen it in the product page)
3. Product Images in various forms (once again, even though you’ve already seen it in the product page)
4. Subscribe vs Buy
5. Free Shipping ‘threshold’

V) Samplers:

A classic way to add a new product for trial / testing with your new customers, is to send testers. Based on your categories, you can send upto 2-3 testers to incentivise trial for new variants. 

Testing products for a brand gives a whole new meaning to customer affinity. They feel belonged. But follow it up with a QR code on the sampler / tester and ask for concrete feedback.

VI) Buy vs Subscribe: 

On to the classic buy vs subscribe model. Subscriptions are considered for brands you trust. In a first time purchase, you could incentivise subscriptions by giving out all the information on your pre-checkout page.

This can be done by placing some ‘hovers’ on the product information, to give out all the information about subscriptions. Check this one:

VII) Surprise Boxes:

On an additional purchase of INR 250 or 500, give away surprise boxes to your customers. These could be anything related to tangential to the product. Something as simple as a discount scratch card or a brand merchandise.

Everyone loves a surprise and it’s always worth a UGC shot in case of merchandise. 

VIII) Loyalty Programs with Spend Thresholds

Intangible LTV would soar through the roof, if you tie in a customer to become a lifelong member of your ‘VIP Club or Superfan or Power User’. After spending an adequate amount (say INR 2500 to INR 5000 based on your category), let the customer into an exclusive club.

When you incentivise people to spend (read: show-off) as a by-product of their spending power, their chances of spending will increase, just to experience what it’s like to be part of that exclusive clan. Imaging CRED’s access to the club, based on your credit score.

And yes, make this experience incredibly worthwhile. Right from onboarding them to your exclusive channel to giving them a lifelong access to exclusive discounts, offers AND giving them access to other power-users of your brand. You know the drill, I’ve spoken about community building enough and more.

And voila, you have a customer who would stay loyal to your brand and would also evangelise it.

Well, I hope some of these strike a chord with scaling your store and adding more to your topline. I’d love to hear from you in case you have a topic that I should focus on. Let me know out here and I’d love to get your inputs.

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Have a great week ahead. Until next time,

Gratitude,

Sak.