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What is Average Order Value, and Why Should Your Small Business Care?

Any small business knows that it can’t really compete with big name brands and companies in their industry. However, that doesn’t mean you can’t make the most of your limited resources to make sure your business is earning much more than you think.

In this post, we want to show you the missing ingredient many local business owners might need to make more sales even without a huge customer base.

Enter average order value, or AOV. In case you’re a little foggy about what it is or if you’ve never heard about it before, don’t worry.

Because this is our complete guide to understanding what average order value is, why it’s important even for small businesses with limited reach, and how to grow your business sales using this concept.

What is Average Order Value (AOV)?

Let’s first jump in and talk about what average order value (AOV) is.

Simply put, average order value (AOV) in ecommerce is the average amount of money a customer spent when checking out an order from your business.

This is different from the total amount a customer might have spent when placing an order, as it takes into account the number of orders you received in a certain period—say, a day or a month.

There are a few reasons why tracking average order value as a small business is a good idea, and we’ll go through them all later.

But first, let’s see how to calculate average order value for your own ecommerce store.

How to calculate Average Order Value

Here’s the simple formula to compute for average order value (AOV):

The formula for average order value couldn’t be simpler. Take your total revenue then divide it by the total number of orders you received.

Make sure the period of each is the same, i.e. if you’re measuring AOV for the month, then you want to take your month’s total revenue divided by that same month’s total number of unique orders.

Here’s the AOV formula in action.

Say you wanted to see how much your audience spends per order during the holiday season. If your shop made $5,000 that month and received 200 orders total, then your average order value is $25.

This means your customers are buying an average of $25 from your store per order.

If you’re only keeping track of orders in the Instagram DMs or with something like Google Forms, then you’re going to have to manually compute for AOV.

But with Cococart, AOV is available right from your Analytics dashboard, under the graph called “What is the average order size?”

This makes it simple to track just what your average order value is, and how you can boost that number over time.

You might like: Cococart’s Analytics Dashboard Walkthrough: Grow Your Business Using Easy Data

Why should small businesses care about Average Order Value?

You might now be wondering: just why is it important to know your average order value?

The biggest reason you have to track AOV is that, as a small business, you’re competing for customers with big brands and businesses.

So while a small business won’t be able to compete in terms of advertising or geography, by focusing on growing your AOV, you can boost the amount of revenue you make with the customers you already have.

It’s also easier and more cost effective to focus on getting customers to repurchase than it is to acquire new customers. Multiple studies through the years have shown that on average, it could take up to 5 times more money and resources to acquire new customers.

As a small business, you might not be working with a huge marketing or advertising budget. So why not make the most of the customers you do have while trying to get new ones?

That’s where understanding your AOV comes in. And now that you know why it’s beneficial to focus on making more sales from your existing customers, it’s time to check out some of the most effective strategies to increase your average order value.

How to Increase Average Order Value (AOV) in X Easy Steps

Here we have a list of 8 different strategies you can use to increase average order value for your ecommerce store.

1. Introduce more complementary products

Cross-selling, or marketing complementary products based on what customers might like, is one of the best ways to increase AOV.

Try to think of the last time you might have visited an online coffee shop.

You probably only wanted to buy an iced latte, but then maybe you saw that they carry some croissants in their shop too.

You figure croissants and lattes would hit the spot, so you proceed to check out both.

Complementary products are new additions to your product list that round out customers’ needs.

To make sure you can increase the average amount people are ordering from your ecommerce store, include different products in your shop that go well when bought together.

Milk and…cookie butter, anyone? (MLKD on Cococart)

2. Upsell customers with some product upgrades

Aside from cross-selling customers with complementing products, you might be able to upsell them with the products they already want.

You know how fast food restaurants always have meal size options? That’s an example of one way to upsell customers.

Giving customers the opportunity to add to their orders with customizations can go a long way.

On Cococart, you can easily add this to your ecommerce store products using the Customizations and Variants options.

Add Variants if you want customers to choose between different options of a product, or give Customization options for an added price.

Variants let you add options of a product.

Customizations let customers add to their chosen product.

3. Create minimum spend discounts and coupons

We’ve covered cross-selling and upselling. So why not try increasing your average order size by giving special discounts and coupons when customers hit a minimum order amount?

For example, you might offer a 10% discount if a customer can make an order worth $55 or more. Or perhaps a special coupon might get a customer a free surprise gift with their order for a minimum order of $75.

This can help increase average order value by giving customers a small goal: reach this minimum order, get a reward like a discount or a free gift.

Upwards of 90% of customers love getting discounts and gifts because it makes them feel like they’re getting more out of the deal, so try to incorporate this strategy into your regular marketing plan.

On Cococart, creating a coupon code for customers is as easy as 1-2-3. Simply add a new Promotion, key in the conditions of your coupon, then send the code for customers to use.

Related: Promo or No Promo? Increase Your Sales with Coupon Codes for Customers

4. Give free shipping with minimum spend orders

Another cool way to use promotions to increase average order value is creating a free shipping mechanic.

If customers hit a specific order amount, you can offer them free shipping that’s automatically applied at checkout.

To this day, free delivery is one of the most compelling reasons for customers to shop—so it makes sense that some customers will be more than willing to add items to their cart for free shipping rather than pay for it separately.

Automatically provide free shipping to customers who reach your minimum spend requirement. Free to use when you sign up for Cococart.

5. Offer bulk or volume discounts

If your ecommerce store sells products that customers might want to buy multiples of, then here’s a tip that’s just for you.

Give customers an incentive to purchase multiples of an item by offering volume discounts or bulk discounts.

Here’s an example. Say your ecommerce store carries pet food in cans. You might want to encourage customers to purchase more than one or two cans at a time by giving them a bulk discount starting at 7 cans.

This can encourage loyal customers to add more of the same product to their cart in order to make the most of this special bulk discount. On Cococart, you can easily create this kind of promotion per product from your admin dashboard.

You might like: Amazing Cococart Features that Elevate Your Home Business

6. Reward loyal customers with exclusive deals

Why not reserve some exclusive and secret deals for your most loyal customers? If you have a pool of repeat customers that always purchase from your store, it never hurts to show your appreciation with a little more oomph.

Make secret coupon codes that you issue just for them to use on their next order, and send it to them privately, either via private message or through a secret newsletter.

This strategy is a great way to combine our previous tips, while also leveraging your relationships with existing customers who’ve been loyal to your brand.

7. Make some limited edition products

Here’s another cool strategy to try when you want to increase your average order value: create limited edition products or collections.

Limited edition products might just help customers purchase more from your ecommerce store when they realize that they won’t be able to get them anytime they want.

This strategy plays into feelings of urgency or missing out, which can be a helpful feeling to invoke when trying to boost your sales.

When you market these limited edition products, be sure to include a note about when this product is going away, e.g. after the first 150 buyers, after a specific date, or the like.

Don’t know where to start? Try creating some limited edition products tied in with special holidays in your local community. (DB Bakers on Cococart)

8. Don’t be afraid to get personal

Small businesses thrive on deep relationships with their customers, so don’t be afraid to get personal.

You can reach out personally to some of your customers, see how they’re doing, or check in on their latest order from your store.

Or go on social media and post about some behind the scenes in your business. Customers who see that they’ll be supporting a small business with a lot of heart might be more likely to want to keep supporting you, even after the holidays.

Even small businesses can make bigger profits

How are you planning to increase your average order value for your small business? We hope this guide gave you the ideas you needed to start making more sales even from a more limited customer base.

And if you’re ready to start tracking your average order size without overly complicated tools, then we know you’re going to love using Cococart.

Your Success is Our Success

Cococart is proud to be a company that puts local businesses first. After all, you’re the reason we’re here. We're on a mission to transform independent businesses to accept online orders. If you are ready to  sign up for a free trial simply register your store here, it only takes a couple of minutes. 

Learn more:

The Ultimate Guide to Grow Your Small Business Using Instagram

Avoid the Post-Holiday Sales Slump Forever: Easy 7-Step Guide for Small Businesses

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