As an e-commerce store, boosting revenue is the way to move forward. Here’s a little secret: selling more in the future does not always require new customers. Often, it is more effective to get your existing customers to spend more.
That is when AOV or Average Order Value, comes into play. In this guide, we will explore different methods to increase average order value with discounts. This is an easy, effective strategy you can implement.
What Is the Average Order Value?
Let’s start with the basics. What exactly is the average order value? AOV measures how much customers typically spend per transaction. It’s easy to calculate, and it plays a crucial role in assessing your store’s performance.
Average Order Value Formula
Calculating your AOV isn’t complicated. It’s straightforward and can give you valuable insight into customer spending. Here’s the formula:
AOV = Total Revenue ÷ Number of Orders
Let’s break it down with an example:
Your store made $50,000 in revenue last month. That came from 2,000 orders. To find your average order value (AOV), you need to divide the total revenue by the number of orders.
AOV = $50,000 ÷ 2,000 = $25 per purchase
So, on average, customers spend $25 per transaction.
Why Does This Formula Matter?
The average order value formula is your go-to tool for:
- Tracking Progress: Measure how well your strategies (discounts or free shipping thresholds) boost sales.
- Setting Targets: Use it to determine the proper thresholds for discounts or promotions. Setting these targets will keep you focused on your AOV goals.
- Optimizing Ad Spend: If your customer acquisition cost exceeds your AOV, you should rethink your approach.
Pro Tip: Calculate your AOV regularly. It’s the easiest way to see how pricing, promotions, or product changes impact your revenue.
What Is a Good Average Order Value?
Asking, “What is a good average order value?” is like asking, “What’s the perfect pizza size?” It depends on what you’re serving. Your industry, pricing strategy, and customer behavior all play a role.
Here are some benchmarks for common e-commerce industries:
- Fashion & Apparel: $120
- Beauty & Personal Care: $75
- Electronics: $300
- Home & Furniture: $400
For example, a store selling high-end furniture will almost always have a higher AOV than one selling skincare products. AOV should be in harmony with your pricing model and the offering value in your products.
Tip: Benchmark your AOV against industry standards to uncover growth opportunities. If your AOV isn’t lining your pockets, bundling, upselling, or tiered discounts can help increase average order value Shopify stores and others.
What Is the Ideal AOV for Your Store?
Finding the ideal Shopify average order value for your store is not a matter of rug-pulling but balancing. Here’s how to find that sweet spot:
- Check Your Margins: Your AOV has to work harder than you think. Ensure it is enough to account for basics such as shipping, marketing, and operational costs and leave sufficient margins to reinvest into growth.
- Secrets Revealed: Look at what the competition is doing. If their AOV is a double cheeseburger and yours is a small fry, it’s time to reassess.
- Tentative Deals: The “Spend $50, Get Free Shipping” tests. These strategies also increase spending and customer satisfaction.
Did you know? Stores that use bundles or volume discounts see an AOV 15–20% higher than those that don’t. So, maybe it’s time to offer a bundle deal—your customers and bank account will thank you.
Why Is Average Order Value Important?
Consider AOV the MVP (Most Valuable Player) of your business metrics. Why is average order value important? Here’s how it helps:
Stretch Revenue Without Stretching Your Budget: Selling more to existing customers is less expensive than acquiring new customers. A higher AOV means more per transaction without adding more ad dollars.
Speed Up Your Profits: Higher AOV means faster ROI. Picture this: you spend $10 to acquire a customer. If their average purchase is $50, you’re ahead. But if it’s $100? That’s growth on fast forward.
Boost Customer Lifetime Value (CLV): AOV and CLV are a dream team. When customers regularly spend more, their lifetime value increases, making them even more valuable to your business.
Smarter Scaling: A healthy AOV gives you the confidence to reinvest in marketing and product innovation.
Example: Say you run a campaign offering 15% off orders over $100. If your usual AOV is $70, you’re nudging customers to spend more without hurting your profit margins.
Setting effective targets for your discount campaigns can drive significant results. Learn about the key metrics you need to track and how discounting can impact your profitability.
How to Boost Average Order Value (AOV) in E-Commerce
Need customers to spend more without eating into your profit margins? That’s the secret of strategic discounts—offers encouraging shoppers to fill their carts without straying from your business goals.
Here are five tested strategies for how to increase AOV ecommerce:
1. Tiered Discounts: Bigger Spends, Bigger Rewards
This classic strategy incentivizes customers to reach higher spending thresholds by making better offers as the value increases.
Example: “Spend $50, get 10% off; spend $100, get 20% off.”
Why It Works: It taps into shoppers’ love of chasing savings, and the lure of larger discounts encourages them to spend more.
Pro Tip: Automate your tiered discounts with Discounty. This tool simplifies the creation of seamless integrated campaigns, allowing you to focus on growing your business.
2. Free Shipping Thresholds: Turn a "No Thanks" into a "Why Not?"
Nobody loves paying for shipping—that additional line item makes people rethink their cart. Take advantage of free shipping thresholds.
Example: “Free shipping on orders over $75.”
Why It Works: Shoppers will gladly add an item or two just to avoid the cost of shipping.
Pro Tip: Highlight the free shipping threshold at every touchpoint (product pages, in the cart, even at checkout) so shoppers can see how close they are to qualifying.
3. Gift with Purchase (GWP): The Power of "Free"
One of the easiest ways to add value is to offer a gift on orders over a specified amount.
Example: “Free travel-size lotion with $100 purchase.”
Why It Works: Who doesn’t love free stuff? The extra incentive helps customers justify spending more.
4. Bundling Discounts: More Bang for Their Buck
Bundles are a win-win. Your customers feel like they’re getting a bargain, and you move more products in one go.
Example: “Buy a complete skincare kit for $99 (originally $130).”
Why It Works: Bundles help customers see the added value while simplifying their shopping decisions.
Pro Tip: Use bundles to highlight complementary products your customers might not want to pair.
5. Limited-Time Discounts: Act Now, or Miss Out
Creating a sense of urgency with time-limited offers can drive quick (and more significant) purchases.
Example: “Get 15% off your entire order today only!”
Why It Works: Shoppers don’t want to risk missing a great deal, so they’re more likely to act fast—and spend more.
Time-sensitive offers, like flash discounts, are excellent for creating urgency and boosting sales
How Discounty Simplifies AOV Growth
Managing discount campaigns can feel overwhelming, but that’s where Discounty shines. This Shopify app simplifies creating and running discount strategies, allowing you to focus on what matters most—growing your business.
Key Features of Discounty:
- Automated Tiered Discounts: Set spending thresholds and let Discounty apply the discounts automatically.
- Customizable Bundles: Offer personalized product bundles with ease.
- Campaign Scheduling: Plan and automate promotions for specific times or events.
- Performance Tracking: Monitor the success of your discount strategies in real-time.
Pro Tip: Use Discounty’s free plan to experiment with these strategies without a significant upfront investment.
Real-life Examples: Increasing AOV with Discounts
Businesses often wonder how to increase average order value (AOV) with discount free strategies that don’t harm profit margins. Here’s what worked:
1. Tiered Discounts: Encouraging Bigger Carts
An e-commerce company introduced a widget offering discounts as customers added more items to their carts. For example:
- Spend $50, save 10%.
- Spend $100, save 20%.
- Spend $150, save 30%.
Results: This approach increased AOV by over 15%, with high-value carts rising by 20%. Shoppers were motivated to reach the next tier for better savings, proving that small nudges can lead to significant results.
2. Product Bundling: Adding Value Through Packages
Take Coconut, an intimacy lubricant brand, as an example. It offers discounted product bundles, encouraging customers to try multiple items.
- Regular Price: $120
- Bundle Price: $99
Results: The strategy worked wonders, leading to a 20% increase in AOV. Bundles simplify customers' decisions while giving them a sense of added value.
Explore how bundle pricing and volume discounts can drive larger cart sizes.
3. Convert Shipping Costs into a Sales Booster: Free Shipping Thresholds
Free shipping is a big motivator, particularly if the trigger is above the current AOV. For example, if your store’s AOV is $70, set the threshold for free shipping at $85.
Results: Customers are more likely to fill their carts with extra products to avoid shipping charges, which increases total sales and AOV.
4. Rewards Programs: Encouraging Repeat Business
Loyalty programs are a surefire way to get people who are already spending money at a store to spend more.
Costco’s top executive-tier members account for less than half of the membership base but represent more than 73% of gross sales globally.
Members of Starbucks Rewards contribute 60% of the company’s revenue.
The takeaway: Loyalty programs motivate larger purchases and foster repeat business, driving up AOV over time.
5. Limited-Time Offers: Creating Urgency
Time-sensitive discounts are a proven tactic to drive quick, larger purchases. For instance:
- “Get 15% off your entire order—today only!”
Results: The sense of urgency prompts customers to act fast, often adding more to their carts to maximize savings before the deal expires.
Practical Tips for Success
To make the most of your discount strategies, keep these tips in mind:
- Monitor Performance: Regularly track metrics like AOV, conversion, and discount redemption rates.
- Segment and Tailor: Test different thresholds, discount types, and messaging to identify what excites and resonates most with your audience.
- Market Effectively: Spread the word about your discounts using email campaigns, social media posts, and pop-ups.
- Find Balance: Ensure your margins remain healthy by avoiding excessive discounting.
Overcoming Challenges with AOV Discount Strategies
Discounts are potent tools for boosting Average Order Value but come with challenges. The silver lining? Each hurdle has a solution that ensures your strategies remain profitable and effective.
Challenge 1: Discounts Reducing Profit Margins
Discounts can quickly eat into your profits if not carefully planned.
Solution: Set spending thresholds that ensure profitability. If your average profit margin is 30%, structure your discounts so that customers spend enough to cover costs and still leave room for profit.
Challenge 2: Attracting Bargain Hunters Only
Over-discounting can attract customers who shop solely for deals and may not return.
Solution: Design campaigns that reward loyal, high-value customers rather than focusing on deep discounts. Use tiered discounts or loyalty points to encourage repeat purchases.
Challenge 3: Complexity in Managing Discount Campaigns
Juggling multiple campaigns, tiers, and products can become overwhelming.
Solution: Automation tools simplify the process. With features like campaign scheduling and real-time tracking, you can manage even the most complex strategies effortlessly.
Post-Implementation Optimization
Launching a discount strategy is just the beginning. You must monitor, measure, and adjust based on performance to succeed.
1. Track Key Metrics
Evaluate the success of your discount campaigns using these key performance indicators (KPIs):
- AOV Before and After Campaigns: Did your strategy increase the average spend?
- Discount Redemption Rates: How many customers used the discount?
- Customer Retention Rates: Are the customers coming back?
2. A/B Test Campaigns
Test different discount types, thresholds, and messaging to see what works best for your audience. For example:
- One group sees “Spend $50, get free shipping.”
- Another group says, “Spend $50, save 10%.”
Compare results to refine future strategies.
3. Adjust Based on Feedback
Pay attention to customer behaviour and feedback. If customers abandon their carts despite discounts, consider tweaking your offer or improving communication about the discount's value.
Understand how pricing psychology, like the anchoring effect, can further enhance your campaigns.
Conclusion
Knowing how to increase average order value with discounts is essential for growing your store sustainably. You can encourage customers to spend more while remaining profitable with strategic discount campaigns, using techniques like tiered discounts, free shipping thresholds, and product bundles. The best part? You don’t need to go it alone. Discounty allows you to manage & optimize your discount strategies without headache & thus focus on scaling your Shopify store.
