Methods of Increasing Customer Average Order Value

by | Jun 1, 2017 | Customer Service | 0 comments

“We got a 25% increase in conversion and an increase in average order value when we sent (customers) to a page that included more products,” – Catherine Paschkewitz

E-commerce businesses thrive on customers’ online shopping habits. The near ubiquity of the Internet in the modern world has been leveraged by businesses worldwide to operate online shop fronts through which they conduct business. An increasing number of customers now shop online from the comfort and convenience of their homes and from mobile Internet-connected platforms, such as smartphones and tablets. These practices have wrought far reaching changes in customer behaviour, shopping trends, and buying patterns. The extent of such changes is so significant that e-commerce retailers and businesses are posing a challenge to the traditional brick and mortar shopping model.

Customer average order value is one of the metrics used by an e-commerce business to judge its business profitability. This metric is calculated by dividing total sales revenue by total number of sales. It helps enterprises to determine sales per order, but not the number of sales per customer. Customer average order value can help an enterprise to gain multiple insights into customer behaviour. This metric can also inform a business whether customers order more expensive or less expensive products when they are shopping in e-commerce websites, or browsing through an app. In addition, the metric helps businesses to decode how many products customers tend to order during a typical business day. Analyzing the average order value can also help a business to understand the relationship between transaction costs to transactions. Higher average order values mean that the Internet-based enterprise can spread its transaction and administrative costs.

The above analysis indicates that an e-commerce business or the electronic shop front of a traditional brick and mortar business should work to expand its customer average order value at all times. One method to boost this metric lies in offering free shipping to customer orders that exceed the current average order value of an enterprise. We must bear in mind that free shipping is a very powerful incentive to online shoppers. Data and information from customer shopping trends indicate that free shipping encourages online customers to place significantly higher orders with business enterprises. This tactic can significantly boost customer engagement during an online shopping expedition. Free shipping is also known to significantly depress the rate at which customers abandon their shopping carts. We must note that every shopping cart that reaches the transaction level effectively boosts online sales, and therefore, online businesses must use the incentive of free shipping to increase customer average order value.

Cross selling to online customers is another method to increase customer average order value. For instance, a customer that is perusing domestic appliances such as a juicer blender can be offered mason jars and extra blender blades during a shopping session. This is an intelligent approach on the part of the business because the said items of merchandise are all connected to blending and juicing activities. An individual discount may be attached to the items being sought to be cross sold in an attempt to induce the customer. This tactic can help to increase the amount of customer dollars that will be spent during a buying session. Similarly, a customer shopping for a laptop may be offered a spot incentive to invest in a range of laptop bags (or carrying devices) that suit the primary purchase item. The logic of such an approach hinges on the obvious connection between the primary purchase and the accessory items. We could therefore infer that this tactic can boost customer average order value.

E-commerce businesses can offer coupons to online shoppers in a bid to gain customer loyalty and achieve higher sales traction during customer’s next visit to the shopping portal. For instance, a customer that selected a range of sporting goods can be offered a set of coupons when his or her current shopping bill exceeds a certain limit. In doing so, the business operator is creating an active incentive for the customer to re-visit the shopping portal and use the coupons to lower his or her next shopping bill. The coupons are also a means to encourage the customer to browse more items on the website; this automatically increases the chances of higher sale values in the shopping cart of the said customer. The coupons represent one active tactic to boost customer average order value.

The purchase history and buying frequency of online customers can be analysed in depth when the business wants to boost its average order value. The business managers can use the said information to categorise shoppers’ attributes into low, medium, and high spending power. This segmentation is useful because it helps the business to develop and refine marketing strategies aimed at different categories of shoppers. Heavy spenders can be invited to join loyalty programs that offer special discounts to the privileged customers around the year. The other categories of online shoppers can be offered various levels of discounted products, online coupons, and other incentives designed to help them spend more dollars on each visit. We note that this segmentation approach can help an online business enterprise to grow its customer average order value.

The modern online enterprise can help customers gain cash savings when they opt for bulk purchases. This can be said to be a variation of up-selling tactics and finds distinct echoes in the business practices endorsed by traditional brick and mortar businesses. For instance, a customer that intends to buy a set of home furnishings can be offered a lower unit price for other (similar) sets of merchandise. The condition for the offer lies in the customer availing the said offer during a single shopping session. Interested customers can be offered different colours and different brands of the said merchandise at a lower cost should they opt for the said offer. This is another means by which an enterprise can boost customer average order value. In a similar vein, the said customer can be requested to refer a friend to certain items and products displayed for sale. This approach can help the business to find new customers, widen its customer based beyond the immediate numbers, and offer a cash discount to the original customer. This tactic can lead to desired business outcomes and has the potential to craft a positive customer experience.

In the preceding paragraphs, we have surveyed the various means to increase customer average order value. This metric can ensure the long term viability of a business enterprise because it helps to measure business performance in real time. The numbers generated by this metric can also be cited in order to gain fresh investments from angel investors and venture capital investors. That said, we must note that an online business must take the initiative to strike a balance between the various discounts being offered to customers and the envisaged profit margin of the business. This balance should be a prime motivator for management personnel because they have the benefit of a long view of business operations. The customer average order value of an enterprise should be a guiding light among e-commerce businesses, because it helps the wider enterprise to arrive at important marketing and sales decisions. However, management personnel should never lose sight of the fact that a business is operated to generate a profit and increasing customer average order value is a sure shot way to generate and increase profits.


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