Increase average order value: Three traps ecommerce stores fall into when increasing AOV

For so many ecommerce retailers, acquisition is top of the agenda. But before you get stuck into your next Facebook ad campaign, consider the fact that only 9% of digital ads are viewed for more than one second.

As ecommerce gets more competitive by the day, acquiring customers just gets harder, and a lot more expensive. It costs five times less to retain a customer than to acquire a new one. Shifting your focus towards the lifetime value of your existing customer base can be a far more effective way of driving up revenue. However, there are some common traps that stores fall into when it comes to trying to increase average order value. Let’s explore these traps further:

  • Trap #1 – you’re using incentives that cost your business money
  • Trap #2 – you’re failing to link rewards to the next purchase
  • Trap #3 – you’re not offering interesting enough incentives
  • Trap #4 – Offering your customer irrelevant experiences

Stress Free Guide To Getting Started In Customer Loyalty

Trap #1 – you’re using incentives that cost your business money

One of the most common ways to encourage customers to add to their baskets before hitting the cart is to offer them instant incentives such as “buy one, get one half price” or “spend $50 and get a free item on us”. These are certainly enticing incentives and they are likely to secure that particular purchase. The problem is, they’re costing your business at the same time as making you money.

A better approach is to look for incentives that still encourage your customers to add more to their baskets, but at a lower cost to your store. For example, offering them double points on their purchase if they complete a transaction.

Trap #2 – you’re failing to link rewards to the next purchase

Another common mistake merchants make, is to try and drive up basket size by offering customers rewards that can be claimed before they reach the checkout. This is great to ensure they make it to the post-purchase stages, however, it does little to encourage them to return to shop with you again.

Think instead about how to link increasing your average order value and securing the next purchase together. For example, if a customer adds a certain amount to their basket before transacting make sure they access a reward that can be redeemed on their next purchase. You might also consider moving customers up a tier if they increase their order value by a certain amount, ensuring that they’ll return to your store to access the benefits of a higher-tier membership.

Trap #3 – you’re not offering interesting enough incentives

The third and final trap that many ecommerce stores fall into, is trying to increase average order values with incentives that suit you rather than your customers. With 81% of customers stating that they would like businesses to understand them better, this is a risky strategy!

Before you make plans to shift that unwanted stock as part of your strategy to increase average order values remember why you’re putting them there. If those products weren’t popular with customers when they were on sale, they’re unlikely to motivate them to add more to their baskets. Similarly, if customers have not been engaging with particular rewards, such as free next-day delivery, then it is unlikely to encourage them to purchase more. Use the data you have to ensure that the incentives you’re offering to encourage customers to add to their baskets are the incentives that they really want to receive.

Trap #4 – Offering your customers irrelevant experiences

Next, we’re going to hear from Jake Chatt, Head of Brand Marketing at Nosto, on the fourth and final trap you can fall into: 

Jake Chatt Head Of Brand Marketing At Nosto

As mentioned in trap #3, it’s essential to the majority of your customers that you understand them better. They want and demand personalized shopping experiences!

Most ecommerce platforms have specific integrations and strategies to help retailers increase average order value and conversions. But how do you increase conversion rate on Shopify, Magento, Bigcommerce or other major platforms? According to Nosto, the key to understanding your customers better is data and ensuring you have the necessary tools to glean insights from that data.

There are two types of data your store can capture and utilize: transactional and behavioral, which account respectively for 1.6% and 98.4% of data available to your store.

Using this data and the power of an artificial intelligence engine, you can create automated segments based on a variety of attributes, from their stage in the sales funnel to their brand & product affinities, to their price sensitivity.

Leveraging these segments, you can provide the sort of personalized experiences to customers that make them feel understood and valued. Returning shoppers can be greeted with home pages featuring their favorite products and brands. New customers can find shopping inspiration in recommendation carousels full of your shop’s best-selling products. You can show discount codes to those shoppers likely to need them to convert; while not offering additional discounts to customers likely to convert at full-price.

What’s next?

Interested to find out more about how to increase average order value of customers? Head to the LoyaltyLion Academy where we have several tutorials around understanding, measuring and increasing AOV.

Join The Loyaltylion Academy

About the author

Mollie Woolnough-Rai

Mollie is a Senior Content Marketing Executive at LoyaltyLion. After graduating from UCL in 2016, she has worked both in-house and at marketing agencies providing expertise in content for both B2B and B2C clients. At LoyaltyLion, Mollie manages our content, making sure our readers get the best quality resources about customer loyalty and retention.

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