For obvious reasons you will want to increase the AOV of your Shopify store. If you increase the AOV, while keeping other variables the same (notably your costs), you increase the profitability of your store, the average revenue per customer, the average ROAS across your marketing channels etc. In short, it's a great boost to your store performance.
At the end of this article, you should be able to add a green arrow to the AOV metric on your analytics dashboard! The more steps you stack the higher that percentage will be. Let’s go.
Overview:
As you probably know that there are actually several components that make up your final revenue per order:
Your actual product price
Your shipping revenue per order
The price of additional products you up/cross-sell on top of your main product
Your tip
If relevant, any local tax that you might add on (or include within the product cost)
Minus any discount codes you might offer (coupon codes, bulk or bundle discounts etc.)
Also don’t forget that you have a compare price option that you can effectively use to anchor your audience towards a higher price.
By optimising each one of those components we can greatly improve the store’s AOV. So let’s how we can do that!
Add Tipping Option in your Checkout Settings:
Ok not what you expected but let’s start with something easy but effective.
Many store’s miss this low hanging fruit. Let customers who want to, leave you a tip at checkout. The surprising part? Even for a mediocre store 3 - 5% of customers will leave a tip at checkout. That’s pure margin for you at no extra cost.
Especially in countries outside of the US, where the tipping culture is less prevalent, this option is often missed.
If customers love your store, they will leave even more of a percentage. It’s also valuable feedback for you to identify your biggest fans, not only increase your AOV.
Ok this should take you less than 10 seconds to tick off at no extra cost. Nice, let’s move on.
Add Post-Purchase & Up-sell Email flows
Below are the most important flows for any Shopify store (my examples are on Klaviyo but this applies for any email platform you use):
The up-sell & cross-sell flow is the most effective specifically to increase your AOV. The other flows help with conversion rates and retention more (see separate posts on that).
This flow is synonymous with the ‘post-purchase’ flow. The idea is simple, once a customer purchases something from your store, you don’t only send them an order confirmation email (happens automatically with Shopify) but also an email upselling them something to what they just bought.
You can already send this email straight after a purchase or wait a few hours (I would A/B test both for every new store). Then I would set-up 1-2 follow-up emails for later that week.
If you upsell the right product (the match is good) and offer a good incentive (perhaps a separate upsell discount) this flow can be extremely effective. Remember all of this should work automatically. Once you set-up the flow once it sends out all the emails based on the preset rules & triggers that you enabled.
Add the same flows above to SMS & Push notifications
Post-purchase flows also apply to SMS and push notification flows. Remember, any information that potential customers leave should be leveraged to the max. Beyond emails, that's phone numbers but also their cookie browser settings.
Here’s an example of some SMS flows:
For push notification flows the app PushOwl is quite popular but there are several alternatives as well.
Add Up & Cross-sell options across your funnel
Ok an important distinction to make. Above we talked about up & cross-sell flows for emails, SMS and push notifications. For instance, a customer makes a purchase on your website and then gets an email (or SMS or push notification) with an upsell offer.
However, one can also have the up-sell offer directly on the thank you page. That’s the difference of having an up-sell email flow vs. an upsell offer directly on your page.
Ultimately, you should use both and experiment to find the most effective combination for your store. Like with anything they both have their pros and cons.
For the flows you obviously require some sort of contact information. Anything from a welcome series to a post-purchase flow will be dependant on the website visitor leaving their contact information at different stages of the funnel.
For the up & cross-sell offers, you can show them directly on your pages. No contact details required. Once a website visitor arrives at the checkout or thank you page, the offer will be right in front of them.
Here’s one of many Shopify apps that allows you to set this up:
They simply divide the funnel as ‘pre-purchase’ and ‘post-purchase’. Below is how some of the post-purchase settings look like.
Importantly, all of this only makes sense once you have some significant traffic. Before that don’t focus on this at all. Secondly, don’t overdo it with too many up or cross-sell offers. Customers may get exhausted by those, so test them out and then just keep 2-3 of the most effective ones.
Optimize Shipping Fees (your Average Shipping Revenue / order)
Remember, your shipping fees are revenue for your store. In fact, many stores just see those fees covering their shipping costs. However this of course doesn’t have to be the case. If for instance you charge your customers $9.99 for shipping and it costs you only $5 to ship the item out, then you will be making an extra $5 in profit per order. Depending on your business model this number can be much higher or lower, but this just shows how important it is to optimize this area.
There is a classic tradeoff between increasing AOV and decreasing your conversion rate. So you need to test and find the sweet spot.
For every dollar that you add to your shipping fees, so does your AOV but of course this might also hurt your conversion rate. Stores that charge very high shipping fees tend to have a big dropoff from their checkout page, like here:
That being said, many stores would be surprised to find out how much more they could charge for shipping, without materially affecting their conversion rate.
The trick here is what in economics is called price discrimination. Offer several different shipping rates, so that your audience can self-select into their preferred option.
One such example is to have a free option, a standard shipping option and then some sort of premium option. Yes, in this case 7-10% of the customers go for the premium option even though the difference in the shipping service is not that big. They however are price insensitive and don’t mind paying the extra money to get their order a bit faster and with better tracking etc. So taking advantage of that will simply increase your AOV and not limit your conversion rate. In fact it might even increase your conversion rate since a store with multiple shipping options looks more sophisticated to some customers.
Ultimately each store needs to test those rates for themselves. Above is just one example. Your store will probably end up with completely different rates and thresholds. The main point however still remains: testing your shipping rates and finding that sweet spot will increase your AOV and profitability over time.
A/B Testing Price
As laid out in the beginning, there are multiple components that make up your final revenue per order:
Your actual product price
Your shipping revenue per order
The price of additional products you up/cross-sell on top of your main product
Your tip (don’t forget step number 1 above)
If relevant, any local tax that you might add on (or include within the product cost)
Minus any discount codes you might offer (coupon codes, bulk or bundle discounts etc.)
We already discussed in the points above how to improve most of those. Now we need to test the actual product price itself. This will most likely give you the highest ROI on your time spent, since for most stores their product price will still be their biggest component.
There are several apps available for this purpose:
For instance, a split test on a projector priced at $69.95 versus $79.95 showed the lower price generated significantly more revenue per 100 visitors, despite all other factors on the page remaining constant.
Interestingly, a subsequent test comparing $69.95 with $74.95 found that the higher price point actually performed better. This resulted in an average increase of $5 per projector sold, boosting profits without affecting the conversion rate or return on ad spend (ROAS).
Consistently applying this strategy to all products can significantly maximize returns on your investment.
Dynamic Pricing
Finally, I want to touch on dynamic pricing for your main products. There are apps that allow you automatically adjust your product price based on remaining inventory, time of the week or other variables.
Price discrimination is a classic concept in economics that can also be applied to any Ecommerce store, to maximise your AOV and profitability.
Especially if you hold stock, this becomes even more relevant. Say you are running out of stock and only have 5% remaining. You know you will run out in 2 weeks time, and the reorder will still take a month. Increasing the prices in such a situation can solve several problems. You will slow down the time until you run out of stock completely. In the meantime you will be selling at a higher price, to the customers who are willing to pay extra. This results in a higher profit margin, while better managing your stock-out.
It takes time to calibrate this tool but it can definitely be a powerful one. Check it out.
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A few more points: since discounts and transaction costs are ultimately factored into your AOV it is of course good to optimise those too.
If for instance one of your customers uses a 10% coupon code on your website, this will be reflected in your AOV (it will be 10% lower all else equal). Of course here there is a tradeoff between higher conversion rates due to the coupon incentives and lower AOV & profit margin. I discuss finding that sweet spot in other posts. But for now it is good to be thoughtful of your discounts and only provide them when they really influence your customer behaviour.
Similarly, transaction fees will be deducted from every order before they hit your bank account. There’s a few ways you can improve that:
Check the various Shopify plans, switching from Basic to Advanced will lower your fees per transaction, in exchange for a higher monthly subscription. This is a simple calculation you can make based on your volume.
Check different payment processors, especially based on your local currency & country. There are many different payment processors to choose from. Shopify payments is good but based on your specific store location there could be better local options.
Consider bank accounts that focus on reducing your FX & transfer fees. Online banks like Revolut or Wise are some examples, but many other options exist as well.
Why is your AOV actually so important? Ultimately, AOV * the number of sales you make equals your revenue. Most people tend to focus more on the number of sales they make rather than how each sale looks like (the AOV). Both are important. But this post is dedicated to improving AOV, since after you maxed out on your sale volume this is the only other metric to improve to max out your revenues. Hopefully, this article helped you accomplish that.
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