While your store's Average Order Value (AOV) is important, much of that depends on your store and unique product mix. Even with industry averages for AOV, it can vary a lot from store-to-store even in the same industry.
AOV can also be very difficult to improve overall because of effort required touches almost everything your store does.
An alternative, more surgical metric is finding and optimizing your AOV drop-offs.
An AOV drop-off is where there's a significant drop in your Average Order Value based on a clear behavior.
It's easier to explain in an example:
If you find your AOV drops by 35% between customers' 3rd and 4th orders, there's something going on after the 3rd order that is causing a significant behavior change. It could be a sign that your customers aren't re-ordering at the same levels as they were early on, that your marketing is missing the mark, or anything else.
There are two places where AOV drop-offs occur frequently:
- It's very common for first-time customers to place smaller orders while repeat and returning customers place larger orders. If you notice your order-to-order AOV for repeat customers is lower than your first-time orders, there's one type of AOV drop-off.
(The exception is if you are selling equipment plus supplies. This is where you sell a piece of equipment in the first order and then repeat orders are for supplies and replenishment. A coffee maker followed by coffee beans is a classic example. For these, skip the first order with the equipment and evaluate the repeat replenishment orders alone)
- Also what's more important than the absolute AOV is how that number changes over time (year-to-year). Seasonality can be part of this that you should ignore but having regular sales could be having a negative impact on AOV and your customers behavior.
Focusing on your AOV drop-off points is a very effective way to work without having to boil the ocean.
How to improve
To remove your drop-offs, you need to look one or two steps before the drop-off. Typically there are trust issues that are impacting performance. These are all great solutions to try out:
- Regular email marketing that provides them value (e.g tips, entertainment)
- Mentioning customer success stories and products throughout your marketing (soft sell)
- Loyalty and rewards programs
- Including freebies or bonuses with their past orders
Additionally, if you can give repeat customers exclusive discounts then you might be able to upsell and cross-sell additional products which will increase your order values.
- Giving discounts with a threshold (e.g. 15% off $100 or more), where the total after the discount is more than your AOV
- Upselling your best-selling products and related, accessory products during checkout
- Offer a volume discount on products so they buy more at once
- Bundle related products
Also check any automation or campaigns you use to make sure there isn't a bug that's messing up the customer. e.g. sending a new customer campaign to a long-term VIP customer.
You may always have drop-offs at specific points:
- Order #1 to Order #2, as some customers defect and never come back
- Your last Order step, because there will be a limited number of customers who are getting to the end.