Increase Your Shopify Average Order Value October 14, 2015 03:00
There are a few ways to improve the bottom line of your Shopify store, but each requires a different approach or resources.
While starting up a store, people typically spend most of their resources (time, money, energy) to get new customers through some form of marketing. While acquiring new customers can drive more revenue, it also increases costs. As the operations of a store mature, the complexity of running all the backend processes also increases. This includes fulfilling orders, managing logistics, providing customer support, doing inventory management, maintaining supply chain, and more.
With these added areas of focus, marketing to acquire new customers can become increasingly expensive. When that happens, increasing sales from new customers can start to slow. This is where focusing on driving sales from existing customers can help increase your sales and the average order value on your store with much lower effective costs to you.
The average order value is the average value of a single order on your store. You can calculate your average order value by picking a period, and dividing your total revenue by the number of orders you received.
Here are several strategies you can implement to increase the order value from existing customers.
1. Free shipping thresholds
You can set your store shipping rates so that customers receive free shipping over a certain order value. If your average order value is $70, you can offer free shipping at a higher order value, such as over $80.
The free shipping threshold should be close enough to the average order value that customers will spend a little more to reach it. If you put the threshold at $150 in this example, chances are that customers won’t double their orders to meet the free shipping requirement.
According to a Deloitte Holiday Survey, 71% of respondents said that they are more likely to purchase from a store that offers free shipping. In addition, shoppers also buy more items to qualify for free shipping.
40% of shoppers say they will buy more items to qualify for free shipping.
Shopify allows you to set free shipping thresholds right out of the box. You can also set free shipping threshold for a specific zone or region.
To set a free shipping threshold:
- Click on ‘Settings’ in your Shopify admin.
- Select ‘Shipping’ and scroll down to ‘Shipping zones’.
- For the zone you want to create the threshold for, click on ‘Add shipping rate’.
- Choose ‘Free shipping’ in the dropdown, select the price for the threshold, and Save.
You can keep adjusting the free shipping threshold as your average order value increases.
2. Discount thresholds
Another threshold strategy that incentivizes customers to purchase more items is to set a discount. You can give shoppers a discount if they spend over a certain dollar value. Again, if your average order value is $70, keep the discount threshold close to that but high enough that it drives more sales.
According to a Marketing Sherpa case study, discounts on minimum order values increased sales by 25%.
To set a discount threshold and the discount percentage in Shopify, click on ‘Discounts’ in the admin sidebar and select ‘Add discount code’.
One thing to keep in mind when creating discount codes to increase order values is to manage the discount percentage. You don’t want the discount to lower or maintain the same average order value. For example, if your average order value is $70, then a 10% discount on orders over $75 may actually reduce your average order value.
Once you create the discount code, make sure your customers can easily get it or know of it. Learn more about different strategies for showcasing discounts in our post on tips to improve Shopify coupons.
3. Volume discounts
Depending on the type of items you sell, you can set discounts based on higher order quantity. If people buy more of the same product, or product group, the price of each item is reduced. As an example, click on different pack sizes to see how prices change for Harry’s blades.
You can accomplish the same thing on your Shopify store through the Quantity Breaks – Tiered Pricing & Bulk Discounts app. The app allows you to set volume based pricing for a product, or products in the same group. For instance, if you are selling outerwear, like jackets, you can provide a lower price if customers buy two jackets, even if one is men’s and the other is women’s.
Here’s a quick walkthrough of the app by Bold.
4. Bundle Products
You can bundle related products to highlight other items that a customer may not have otherwise thought about. Think of the Amazon related products and the frequently bought together sections. These can give people an idea about other items they can add to their current selection.
Bundling products can also help shift the perceived value of a product. If you offer a single product for $70, but a bundle that costs $80 with a few extra items, the bundle has a higher perceived value as it becomes a one-stop-shop related to a single product. This reframes how the customer gets value – value for all the products together versus valuing individual products separately.
The Directed Edge Product Recommender app for Shopify allows you to display related products on your products page.
You can also use Bold’s Product Bundles app to give discounts on bundle purchases. Here’s a short video about the app.
5. Upsell and cross-sell
You can feature related products to encourage customers to either buy a better version of your product, or a complementary product. Shopify has a good introduction to upselling and cross-selling on their blog.
Upselling means introducing or recommending a better version of a product to your customers. For example, if you sell external hard drives and a customer clicks on a 500GB one, by showing the 1TB one on the same page allows the customer to compare prices. Even though the disk space doubles, the price typically doesn’t. This gets the customer thinking about the better version as there is more value for money.
Cross-selling, on the other hand, is suggesting related or complementary products. For example, if you sell external hard drives, you can also suggest hard drive cases or backup software as cross-sells.
Typically, upsells are far more effective than cross-sells, according to research by Predictive Intent.
Upsells are 20 times more effective than cross-sells on product pages.
6. Loyalty program
Loyalty programs are a big part of increasing customer loyalty towards your store.
You can use apps like Loyalty Program to set up different membership levels to provide tiered discounts, and to provide discounts based on customer status.
You can also use apps like Sweet Tooth Loyalty Reward Points to provide points that translate to discounts, based on customer actions like membership sign-ups, social sharing, placing first order, and more.
Membership discounts encourage repeat customers, and can increase sales as customers work towards the next level of membership or discount.
7. Add-ons and services
Include additional add-ons or services for your products at a small fees to increase your order values. These add-ons and services would typically have little cost to you in terms of both time and effort.
Add-ons and services can include:
- customized products (for example, you can use our Product Customizer app — we’ve written about using it for personalized products).
- digital products like PDFs, tutorial videos, guides, etc. (get some ideas in our post about digital products).
- rush shipping and handling.
- gift wrapping.
- discounted subscriptions to a related service or product (for example, magazines, online publications, etc.) — the ReCharge app is great for this.
- small sized sample of new products.
Including these options for customers not only shows the breadth of services you provide, but can also bump up order values as customers don’t have to look or pay elsewhere for these services.
8. Higher prices
One simple way to increase average order value is by increasing the price of products in your store. Although this is simple, it can be tricky to do while avoiding customer backlash. But there are a number of ways to minimize a bad customer experience, depending on the type of products you are selling.
If you sell seasonal products (like summer and winter clothes), you can increase the price for the next season rather than during the season. If you have inventory-clearing sales, you can increase the price during the sale so that customers still end up paying less than the original price. This way, they still get a discount but also get used to the higher price.
In Shopify, you can bulk edit the product prices in two ways. First, by using the Shopify’s built-in bulk editing tool. To edit products in bulk, go to the ‘Products’ page, select all the products you want to update, and click ‘Edit products’.
The second way to do it, is by going to the ‘Products’ page and clicking ‘Export’. This exports a CSV file that you can edit. Once you’ve updated all the prices, simply import the updated CSV file.
Increase average order value
There are a number of ways you can increase the average order value on your Shopify store. This post gives a quick overview of some strategies you can use. Over the next few months, we will cover some of these in more detail, and help get you prepared for the holiday season.
Is there a specific topic amongst these that you would like us to cover? Tell us in the comments below.