Average Order Value (AOV) is the easiest way to increase the revenue generated from each customer and their individual purchases. A higher AOV leads to better LTV, ROAS, and profit.
Read more below or listen to Ben walk through Low Average Order Value (AOV) and its treatments:
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Low AOV Symptoms
AOV is low (under $100 for ecommerce)
LTV:CAC is below 1:1 ratio
ROAS is low
CVR is very high (indicating “too good” of value)
Low profit margin on a unit economics model
Treating Low AOV
Pricing: sometimes the simplest answer is best, and you just need to increase pricing. There are tools that enable us to A/B test pricing and measure conversion rate impacts with different pricing. For example, increasing a product’s price by 20% might only decrease CVR by 10%; this is still a net revenue increase and an improvement to AOV overall.
Assortment optimization: are there enough products for customers to add to their basket? Do you have a wide enough assortment of skus? The order with which you showcase products and feature certain price points is very impactful as well. For example, maybe you only have three colors of a shirt when the customer would have likely bought five colors? Or, perhaps you’re featuring a $29 shirt when they would have bought the $100 version? Feature the assortments and products that are likeliest to drive larger AOVs.
Cross-sell and upsell: once a customer commits to buying a core item, it is much easier to convince them to buy accessories that complement that item. Similarly, there are secondary core items that “go together” and so can be easily cross-sold as part of the checkout flow. Ensure that an upsell and cross-sell checkout flow is incorporated to maximize AOV, but be careful it doesn't harm CVR.
Audience analysis and optimization: is your audience affluent enough to afford the high ticket items? Perhaps shifting acquisition efforts toward a higher income target increases CAC, but also significantly increases AOV and later LTV. Ideally understanding the AOV by customer cohort will help you optimize this, which can be done with tools internally at Power.
Bundle optimization: sometimes over-bundling can drive people away, causing them to just buy the one or two items that they need. For example, they might have bought three items that “go together” in a bundle, but they don’t need the ten piece package. Ensuring there are good bundles that provide increased value to the customer and increase AOV are an option. The “middle option” is likely the one that gets picked the most, so continue to experiment with that middle option’s pricepoint between the mega bundle and the a la carte item.
Basket analysis: what products drive the highest AOV? Which products are the most likely to be bought together? Completing a basket analysis (the Data Intel team can help you) will lead to some bundling and cross-sell opportunities.
Buy more save more: change promotional strategies to a buy more save more rather than a straight percentage off. For example having a get $50 off of $200 sale might cause people on average to buy the $210 package for $160, which is an increased AOV over the typical $130 package.