Turbo-charge your business: How to Increase Your Average Order Value (AOV)
Every sale counts as a small business, but very few businesses spend the time to focus on their average order value and how to improve it.
If I could gift you one secret of business growth, how to work less and earn more, then improving your average order value would be it!
Simply put, if we sell more to a customer during a transaction we don’t need to serve as many clients to make more profit.
Take a pizza delivery service, for example. The base costs of a pizza include a proportion of the business overheads, marketing costs, delivery costs and the owner’s business margin.
If they deliver a second pizza at the same time, the delivery costs and some of those overheads disappear when delivered with the original product. The business’s profit margin increase and the number of clients the business needs to serve to give the business owner his profit target decreases.
It’s smart business thinking whether you run a service business or sell products, selling more to your customers can help grow your business and quickly.
There are lots of time-tested ways to increase your Average Order Value or AOV, let’s look at a few.:
• Bundle products or create packages. This is a great way to offer your customers a variety of products that complement each other. For example, you could bundle a book with a related audiobook or a set of kitchen knives with a sharpening stone. Businesses often give away profit here by discounting, but you can add value by varying product sizes or simply bundling for convenience.
• Cross-sell complementary products. When a customer is checking out, offering them the opportunity to purchase additional products that would be complementary to their purchase is a great example of cross-selling. For example, if a customer is buying a new laptop, you could offer them a case, a mouse, or a carrying bag.
• Upsell. Understanding your products and your customer needs gives us a great opportunity to upsell. This is where we suggest an improved product for the client based on their selection, you’ve selected this, but perhaps you’d find this a better fit. Upselling is a great opportunity to move clients to a more profitable product. Great examples of upselling include when Mc Donalds’ suggest you go large with your meal, the additional production cost is minimal, and the additional profit is a greater % than the original product margin. Straight to the bottom line.
• Offer free shipping on orders over a certain amount. When working with a business coach, you’ll start to understand your costs of doing business and the point at which you start to make a profit. Offering free delivery is a great way to encourage customers to spend more money and there is a huge psychology behind it. The Journal of Retailing conducted research into the effect of offering free shipping, it removed barriers to purchase and customers viewed it as a discount and even creates brand loyalty. Take a look at Zappos for more inspiration.
• Create a customer loyalty program. This is a great way to reward your customers for their repeat business. For example, you could offer them points for every pound they spend, which they can then redeem for discounts or free products. Tesco Clubcard is a great example of this.
• Provide excellent customer service. This is important for any business, but it’s especially important for small businesses. When customers have a positive experience with your business, they’re more likely to spend more money with you. Do we put as much effort into customer support as we do attracting customers?
Here are a few examples of how small businesses have used these techniques to increase their Average Order Value:
• The coffee shop down the street offers free coffee refills. This encourages customers to stay longer and spend more money on food and drinks.
• The clothing store offers a 10% discount for students. This attracts more students to the store, who are often willing to spend more money on fashion.
• The online retailer offers a free gift with every purchase over £50. This encourages customers to spend more money in order to receive the free gift.
The business of sales really is a game, and as a business owner or manager, this is a great way to focus your 90 minutes a day on how to move the needle in your business.
What do you need to add to your product or service offering to grow your average order value?
As with any marketing, it’s important to set some ground rules:
• Set clear goals. What do you want to achieve by increasing your AOV? Do you want to increase it by 10%? 20%? 50%? Once you know what you want to achieve, you can start to develop a plan to make it happen.
• Track your progress. It’s important to track your progress so that you can see what’s working and what’s not. This will help you make adjustments to your plan as needed. Remember, what’s measured can be improved.
• Be patient. It takes time to increase your AOV. Don’t get discouraged if you don’t see results immediately. Just keep working at it and you will eventually see the results you want.
Increasing your average order value is a great way to grow your small business. By following these tips, you can start to see results quickly.