How does one identify the right metric to track if a B2B e-commerce shop is growing? The Average Order Value (“AOV”) is an important indicator and a good starting point for many businesses. AOV simply tracks the average amount spent each time a customer places an order on a website or mobile app. In order to calculate the firm’s average order value, divide total revenue by the number of orders.
For example, for a company with an average order value of £600 and a thousand business customers, increasing this by only 1% (£6) can make a huge impact on the business. Just do the math; for every 500 orders, this is an additional £3,000 in your revenue. For every 5,000 orders, this is an extra £30,000!
Let’s take a look at three tools that will help you grow AOV:
1. Free Shipping Thresholds
It is common practice for B2C e-commerce vendors to offer free shipping starting at a certain order value. Customers are usually willing to spend a few pounds extra just to get free shipping. Obviously, it will depend on the type of product you sell and sector you operate in, but every business can definitely set a minimum order value for free shipping to their customers. Here is an easy way to work out what the minimum threshold should be:
If your AOV is £600 you probably already offer free shipping for orders over £660 (10% increase in your AOV). Knowing your shipping costs, you could resolve what decreasing the costs of order like that would look like. The costs of shipping an additional £60 worth of products shouldn’t have a big impact on your total profit and usually, you will end up with bigger orders as a result.
2. Suggesting Complementary Products
Every Amazon’s customer is familiar with this concept. It usually involves a simple algorithm that shows: “Customer who bought product X also bought product Y”, where the products offered are complementary to the products a customer has bought.
These suggestions are usually offered to customers either on product pages or at the checkout or in both places. For instance, a customer who bought tennis racket will typically need tennis balls. Offering special deals on tennis balls especially at the checkout will most likely entice a customer to purchase them.
3. Offering Finance
Offering finance at point-of-sale or online checkout is an option that retailers have employed to give their customers more purchasing power, encouraging them to spend more, which simultaneously increased the retailer’s average order value.
Typically, average order value increases by 15% among businesses that offer consumer credit and, more importantly, 93% of first-time consumer credit users report that they would use finance again. So how does this work in practice? A customer tends to spend significantly more when they see that there is a finance option is available. Instead of spending £5,000 on office furniture why not upgrade and spend £700 extra?
For large ticket items, especially in B2B sales, consumer credit can be the difference between a conversion or an abandoned cart. After all, 30% of customers using finance said they wouldn’t have been able to make a purchase at all if it weren’t for the six-month financing offered.
These are only 3 suggestions on how to increase AOV. Would you like to find out more how to increase your average order value thanks to financing options? Get in touch and CreditDigital can work with you to find other ways to grow your business.