Episode 016: Increasing Average Order Value (and how to get one)   Episode Summary:  A high average order value can make it easier to run your online business. In this episode, Julie walks you through the benefits of a high AOV and specific strategies for increasing your website's AOV.   Episode Links: https://savvybusinessmethod.com/  https://www.youtube.com/channel/UCAHt2LynOZylOjlIz878okg https://fb.me/savvybusinessmethod    Episode Transcript:     Announcer: Are you looking to take your online business to the next level? Well you're in the right place. Welcome to The Savvy Business Method with your host Julie Feickert.   Julie Feickert: Hello and welcome to episode 16 of The Savvy Business Method Podcast where we talk about how to plan, start and grow your small business online. I'm Julie Feickert and my goal is to help you build practical business skills so you can provide a better life for your family.   Today's topic is how to increase the average order value on your website this is such an important topic we all need to be working towards an increasingly higher average order value right? Because having a high AOV has a couple of advantages. You know one is that we have to self view our products to pay for our fixed expenses for our business right? Because every month you have to pay for your marketing systems and your website maintenance and maybe you have to have staff on hand for customer service or for shipping orders and all those expenses have to be paid whether you ship a 100 orders or whether you ship 10 thousand orders. And so having a higher average order value means more money is coming in with every order which means there is more money available to pay those expenses.   There's also more money available to spend on advertising cost, or budget for those customer acquisition costs and so the money it costs us to go out and bring customers to our website and get them to purchase something. Having more revenue coming in also can lead to the ability to pay better wages right? Which means we can pay benefits and so we can possibly attract better people who can help us continue to grow our business and of course in the end higher average order value generally means that our business will be more profitable right and more stable and have more cash available to grow which is so important.   Now if you're listening to this podcast and you're trying to figure out how to first start your business and may not have picked your products yet let me go ahead and just put it out there that it is really worth considering targeting higher priced products where you're going to have a higher average order value because honestly your path to successful Ecommerce is going to be smoother if you have to sell less things in order to pay your expenses and to generate a profit. Okay but that being said most of you listening and you know myself included already have our products right? We already have things we're trying to sell and now this becomes about trying to get the highest average order value we can with the products and the websites that we have. So let's start talking about ways that we can increase the AOV on our websites.   All right first up a fairly reliable way to increase the average order value on your website is to actively recommend best-selling products, trending products or complementary products. Okay so what we're doing here is we're trying to convince customers that there are other products they should also put in their shopping cart. Okay so there's a couple of ways to do this one is to really dive in and work on your product recommendations. Okay so depending on the Ecommerce platform you're using, depending on the plugins maybe especially if you're working with something like Shopify that tends to have a lot of apps and plugins, or if you're working with a more custom built site having good product recommendations might be built into your system but most likely you're going to need to go out and find a plugin or potentially have some development work done to get those product recommendations working properly.   Now product recommendations can work two different ways. The simple way, the inexpensive way that you can generally get a good plugin for or some fairly simple development work is to do manual product recommendations and so this is where let's say you have product A and you know from experience as the website owner that product A generally sells well with products D and E, okay or maybe you have a report or something but you know that if you recommend products D and E with product A that those are complementary products and the customer will recognize that and are more likely to buy those additional products.   Okay so that's one way to do it, another way to do it is to use a system that works on an algorithm and this is so powerful. The systems that work on an algorithm tend to be much more costly and involved but generally you set up basically recipes and you say I want the product recommendations being shown to be based on what the computer knows people also buy when they buy this product, or that people who also look at this product also buy these other products. So a good example of this in action is Amazon so if you go to any Amazon's sales page and you scroll down there's always that section about people who bought this also bought that, right? And so having those dynamic product recommendations can be really powerful for getting people to add more items to their cart which that means a value of their order is larger.   Okay so couple things about product recommendations to keep in mind, you generally want to put them on the product pages right where people are shopping just like Amazon does, you can also think about putting them on the cart page okay? The shopping cart itself and this is something that you can test to kind of see how that works. Now go back to episode six if you haven't listened to episode six yet where I talk about the goals of each of the major pages that any Ecommerce site has and one of the things I talked about in that episode is that we don't want to put things on the checkout page that might distract people. The cart page we can do a little distraction we can try to get the top sell them a little bit but we don't want to put like products recommendation on the checkout page because once someone gets to the checkout page the only goal is for that to hit that place order button and nothing should be distracting them, okay?   Now product recommendations can also be shown in the form of up sells so you can have like a pop-up on the way to the cart page or on the way potentially to checkout where it says do you want to add this additional item, possibly do you want to add this additional item for a discount is even a way to do that, and there are generally plugins for the major Ecommerce platforms out there that will allow you to do that.   Another way to actively recommend your best selling products, trending products, complementary products is to use a live chat system. So if you have a chat system set up on your website check and see if it allows you to see what's in people's carts or what people are browsing on currently, this is going to be generally the higher end of chat systems just tell you it's not going to be the free chat systems but your staff if you have a customer service team when they have time available they can see what people are looking at or have in their carts and then they can pop-up with the chat box and make active suggestions and engage that customer in conversation.   So on one hand this seems kind of creepy right? Because we're used to browsing anonymously online but in reality this isn't much different than standing in a cell phone store and looking at a particular cell phone and having the sales person come up and talk to you about that phones features and how okay well now if you want to buy that phone you need to get a case, you need to get a screen protector all that sort of thing, okay so it's the same general concept. This will work great for some Ecommerce sites who have a certain type of customer and this will be disastrous for other Ecommerce sites with another type of customers so this is just something to think about if this sounds like something that your customers would find helpful it might be worth looking into.   All right but if you're going to do it two things you need to check out okay. So one is like I mentioned not all live chat systems are going to be able to do this so check that out first, there are higher end systems out there and there are lower end systems with less functionality. Also you might want to look at automating this if you're checking out functionality see how much of this can be automated because it can be really time consuming and yeah it's one thing if your customer service people have timed like in between calls or emails or chats to do this but you're not going to catch every customer that way so if there's any automation or kind of a bot system built into any of these chat systems that might be something to think about as well.   All right so as much as it can work well to make recommendations for customers and try to get them to put more items in their cart in the end we're dependent on them putting more items in their cart right? So the other way we can tackle this is to increase the value of the items that they do put in their cart okay so what do I mean by that? Now one thing that companies can use really strategically is to create product bundles so instead of having say a small product that cost $10 or $15 you could that product together with all the accessories and all of a sudden buying that product is a $50 purchase.   Okay so you think about you can have a kit to make something instead of just buying an ingredient you can have the kit to make something I've done that myself, or if you're offering cell phones or cameras or a piece of electronics equipment you could bundle that product together with the accessories and that would increase the size of that order without having to depend on the customer to see the product recommendations and make the decision to put those additional items in their cart, okay? So that could be a really good strategy.   Another strategy is to use deals to increase the average order value. Okay so this is where we give customers a very clear incentive to buy more. Now one way to do this is to use either shipping costs like some sort of shipping cost incentive or some sort of discount incentive are the two that I see most often. Okay so let's do some examples. You could for example offer free or discounted shipping for orders over a certain amount this is really popular on the internet right now with the Ecommerce company so for example you could say we have free shipping for orders over $50, or we have you get 20% off the shipping with orders over a certain amount something like that or flat rate shipping with orders over a certain amount.   You can also look at doing free gifts I have tried this on one of the sites that I had we had a free gift for orders over a certain amount and so we figured out what our normal average order value was and then we said I think you know let's say your average order value is $50 and you offer a free gift then for any order maybe over $60 or $55. So when I'm saying free gift I'm talking about something that's very inexpensive to you but it's meaningful to your customer so you can get them maybe to put just a little bit more in their cart to get their free gift.   I've also seen a lot of Ecommerce sites do discounts for a higher order value so you can advertise $20 off an order of $100 or more something like that that could really incentivize people to get to that higher mark and these types of deals tend to work even better if you make them time sensitive so if there's a limited time only. Some websites can even get away with putting like a countdown timer on their website that is not going to work for every brand or for every website but for websites whose customers are incentivized by that countdown timer that could be really really powerful.   All right now let's just launch into some random ideas if none of those or if you've done all the things that I've already talked about here are a few extra ideas for you as well. Some companies have really good luck getting their average order value up when they put a loyalty program in place and so if your customers know that they're going to be earning points for buying with you they might be tempted to buy more right? Because they know they're going to get points towards a future purchase or a discount or something like that, those loyalty programs can be really powerful and they're common enough now that not only does the software exist at an affordable price to get one put in place customers know what they are so I mean I feel bad for the people who first did loyalty programs way back when and had to explain to every customer what it is, we're in a much better position now as companies we can put a program in place and have the basic details and customers get it, right, they know what they're doing.   Another system that is available now just in the last couple of years is to offer payment options. Okay so payment options sound really scary as a website owner don't they? You don't really want to be taking the risk as a website owner about whether someone’s going to pay you or not but there are some systems out there PayPal Credit is one of them where you get your money upfront and the risk is actually taken by PayPal or at least that's how it worked the last time I checked into it. Those systems tend to work really well if you have higher end items, okay of you can nudge your average order value up over their minimum and I think PayPal's minimum is like $100 or right around there. So if you're sitting at like an $80 $75 or $80 average order value now and you're trying to nudge that up closer to $100 having that systems available might be what you need to help get customers to purchase just a little bit more from you.   Okay now remember in the last episode when I talked about how important it is to choose an email service provider who had the functionality that your specific business needed? Okay well here's an example of where you can use this to your advantage. If you look at your average order value across your customers and you start actually making a list of all of your orders and all the value you may find that they fall into very distinct buckets. So let me give you an example. Let's say your average order value is $40 you may find out if you line up all your orders into like a statistics table right? That 75% of your orders are actually $25 an average order value $25 and 25% of your values are actually an average order value of $100 you may have that kind of really deep spread which then gives you you know maybe an average order value of something like $40, okay?   If you know that information then you can go into your email system if your email system is properly hooked up to your Ecommerce platform it should be able in theory to segment out the people who had the larger orders and then you can start directly marketing to them and in that email campaigns that directly look to bring them back to the site right? Instead of marketing the same sale to everyone you can start to segment your list. It is also potentially possible to do this with Facebook and it's going to depend a lot on technology and what Facebook decides to change next week about what they allow and don't allow but it is something to look into, so if you find that you have very clear spreads in terms of order value buckets I'd really encourage you to start breaking out those higher end customers and start designing campaigns specifically for them so that you can bring in those larger orders. Pretty cool ha? This is why you want to go to email marketing system and know how to use your other marketing systems really well because you can get this segmentation going on and it can be really powerful.   Okay so I've given you a lot of ideas to mull over but before you run out and start trying different ways of getting your average order value up here are two things I want you to think about, all right? First, before you do anything you need to make sure you know what your average order value really is. So like I just talked about in the example of targeting your higher end customers it could be that you have very distinct groups within your customers and you actually have several or average order values out there depending on the different groups. You'll be far more likely to have success with getting that average order value up if you are marketing to individual groups rather than trying to come up with a one size fits all approach.   Okay second, if you do know for sure that you have a single average order value out there across the board so let's say it's $35 then you need to be reasonable about your goals. So it's unlikely to do you a ton of good to say offer free shipping for orders over $60 when your average order value is $35. The difference between $35 and $60 is pretty big right? Most customers aren't going to suddenly start spending that much more even for the promise of free shipping but if you do free shipping maybe over $40 you might even be able to try free shipping over $45 you're more likely to nudge that AOV up you'll get more customers taking advantage of that offer you know and then once you've got customers doing that successfully maybe a few months later you can try to nudge it up just a little bit again. So just be thoughtful about this think about it from the customers perspective, don't get greedy right? Don't do too much too fast we're really talking about nudging up that average order value not making really drastic changes so that might turn our customers off.   All right so getting your average order value up can make a huge different for your small business right? So it gives you significantly more wiggle room so you can invest and grow your company and so for all of us regardless of what it is we're selling in our Ecommerce websites this needs to be something we continually work on.   Okay so that's it for today if you have feedback or ideas for future shows you can find me at savvybusinessmethod.com as well as on Facebook and YouTube, also please be sure to hit that little subscribe button in iTunes and Stitches so you don't miss an episode and of course I would greatly appreciate if you can rate and review this podcast in iTunes. I love reading your reviews, I really appreciate the feedback. I will be back in your feed in a few days and until then, bye for now.   Announcer: Thanks so much for listening to this episode of The Savvy Business Method with Julie Feickert. If you enjoyed today's episode please leave a review and subscribe and for more great content and to stay up to date visit savvybusinessmethod.com and Savvy Business Method on Facebook. We'll catch you next time.       Episode 016: Increasing Average Order Value