There are only two ways to increase your sales. Yes…only two. This concept often gets lost in the jumble of all the other tasks retailers have to manage, but it’s true.
To increase your sales, focus on one or both of the following:
- Increase the amount people spend (average order value)
- Increase the number of people (traffic)
And, these typically do go hand-in-hand. Now, there are many strategic approaches one can take to accomplish these goals. Today, let’s focus on the first goal: let’s work on increasing your average order value (AOV)!
How to get started….
I don’t know about you, but when I start any new project, I like to ask myself a ton of questions. It helps me get in the right mindset and consider every angle!
In this scenario, I would begin with a very simple, but important one. What is my current AOV? I want to know how much my customers are currently spending. I also want to know how it fluctuates over the fiscal year. What does it look like during my busy seasons? My slow seasons? The holiday season?
Once I have a pretty clear picture of what those numbers look like, I then want to consider how I compare with my competitors. Am I measuring higher? Lower? What about between my stores (if I have multiple locations)?
Now that I’ve looked at my current situation, I want to structure my final round of questions around my goals. This is really where I want to focus a lot of my brain power!
Yes, I want to increase my AOV, but how? Does my strategy fit with my company culture? Is it sustainable? I can up-sell and cross-sell my customers with marketing ideas, of course. But, how can I empower my customers to up-sell themselves? How can I help them get what they really want versus how much they can spend in the moment? How can I make the purchasing process seamless and easy for my customers? And, most importantly, how can I differentiate myself from my competitors?
Once you can answer all of these questions…you’re ready for the execution phase and soon enough you will reap your rewards.
Don’t worry…I’ve got a great idea to share with you that takes a different approach to increasing your AOV and fulfill a growing need amongst consumers!
But first, let’s backtrack a moment and talk AOV.
What is AOV?
Average order value (AOV) is the average amount of money each customer spends per transaction in your store or on your ecommerce website.
The formula is simple: Total Revenue / Number of Orders = Average Order Value.
Also, it is important to understand that your business’s AOV may measure differently depending on the season. So, be sure to measure your AOV over specifically defined periods of time over the whole fiscal year to understand the flow of your business.
For example, if you sold $100,000 from October through December and had 1,000 orders, you would know that your AOV for the holiday season was $100 per purchase. However, from June through August, let’s say you sold $80,000 and had 500 orders. It would tell you that your summer season was less busy, but the average order was $160.
People were spending more during the summer, but you had less traffic than during the holiday season. Perhaps people were making purchases that they wanted or needed, so they were able to spend more. Sometimes during the holidays, because everyone is buying a ton of gifts for everyone else, the amount they typically spend per order trends downward. Or maybe the ticket items they purchased during the season were running on a special discount that was not available during the summer months.
Either way, now you know that you need to create your next promotional plan to raise your traffic during these summer months and your AOV during the holidays. (Like I said, these two typically go hand-in-hand.)
Side note…Do keep in mind, there will sometimes be outliers. For example, when a customer comes and spends an extraordinary amount that is way above what the typical consumer spends in your store. It’s a good idea to remove their purchase total from your calculations in order to get a more accurate number that reflects reality.
Why is it important?
AOV is a crucial key performance indicator (KPI) for retailers both online and in-store. It is central to 1. understanding consumer purchasing behavior, 2. optimizing your business, and 3. growing revenue. It is also an indicator in how well you are doing compared to competitors, as well as between your individual stores if you have multiple locations.
If you don’t know or don’t use your AOV as a key metric in your business, you are potentially missing out on a real opportunity for growth!
How can you increase your AOV?
So, let’s get to some ideas as to how to increase your AOV.
What’s the ultimate goal in regards to your AOV metric? The bigger the better right? The answer is most definitely YES!
Fundamentally, increasing your AOV draws a straight line to growing your revenue, which grows your business. To increase your AOV, you need your customers to buy more items and buy items that are more expensive. There are numerous ways to achieve this goal. A few examples, include:
- You can create urgency with up-sell and cross-sell promotions.
- Bundle products or create packages.
- Create a customer loyalty program.
- And (what I want to really dive into here) offer alternative payment options to help them access more of their purchasing power.
The first 3 options are very industry and product specific. It requires knowledge about your specific product and consumers, but it basically boils down to…“Get this item instead. It’s more expensive, but it is better quality.” Or… “Add these other items to your order and save.” “Become a member today for free shipping/a coupon/discounted prices.” And so on…
However, the last option listed is one that not many retailers have thought of or maybe even know about. Alternative payment solutions, such as installment payments, is a standard service available by companies like Splitit. It has proven to increase AOV for retailers, and customers are starting to expect (sometimes even demand) this kind of alternative payment option more and more when shopping online and in-store.
“How does providing an installment payment option increase my AOV? I already offer financing.”
I’m so glad you asked!
Increase your AOV with Installment Payments
First off all, interest-free installment payment options are different from traditional financing in that there is no application involved, because it works directly with the customer’s credit card. It is completely free for your customers, approval is instantaneous (syncing with their credit card information that they are already inputting), it integrates with almost any payment platform in any country around the world.
Splitit is the only global installment payment solution available in the market, with patented technology that is safe and secure for the merchant and the customer. It has the quickest checkout and the highest approval rating as well.
Why would this matter? Let’s look at your customers.
Customers desire immediate access to the things they want. Providing them with interest free installment payment solutions gives them the ability to tap into their own purchasing power, while maintaining control over their own spending and budgeting, which is empowering for the customer. And, they will appreciate that you make the process simple and seamless for them. That will also help decrease your cart abandonment rate, which you can read more about here.
Your customers will be a click away from being able to pay 4 installments of $50 each month, instead of having to pay $200 upfront. Perhaps if they didn’t have that option, they would have opted for the $160 item instead, because they felt they couldn’t afford that more expensive item, even though it’s what they really wanted and it’s better quality. It’s a simple concept, but it makes such a difference to your shoppers!
Splitit’s installment payment option is instantly accessible through their credit card and will not charge any additional fees or interest. It’s easy, it’s fast, and it’s been proven over and over again to increase AOV. Just ask a Splitit Merchant!
Next time you shop online, take a look at different eCommerce sites payment options and you will see how this is becoming the new norm. Don’t get left behind. It’s an easy solution to growing your business. You add a simple integration to your payment process, et voilá! Your AOV goes up, which means your revenue goes up!