If you’re a Magento 2 store owner, your primary responsibility is to grow your store’s revenue. In reality, there has been a paradigm shift in the eCommerce landscape fuelled by the aftereffects of the pandemic. This has brought revenue generation into the spotlight for the merchants. The global lockdown restrictions forced most brick-and-mortar stores to go digital in the past two years. As a result, these online stores are now standing amidst acute competition, a direct resultant of the increased number of options available to the consumers.
On the other hand, online shoppers make well-thought choices while purchasing online. Nowadays, they consider a plethora of factors before placing their orders.
But, when it comes to increasing the store’s revenue, the majority of Magento 2 merchants believe that the best way to do so is by attracting new customers. Unfortunately, acquiring new customers is quite tedious and expensive than retaining existing customers.
Truth be told, research shows that customer acquisition costs up to 7x more than retaining existing customers. Furthermore, the chances of selling to a new customer are only between 5-20%, while selling to an existing customer is between 60-70%. So, if you’re looking for the best approach to grow your store’s revenue, it’s recommended that you focus on retaining existing customers & increasing the average order value.
The Average order value is a concept largely understood by the digital commerce fraternity. Yet, we will skim through it for greater clarity.
What is Average Order Value?
Average order value is a metric used to measure the average dollar amount spent every time a customer places an order on an eCommerce store. It is an essential key performance indicator in an eCommerce business as it helps to understand customers’ purchasing habits.
Although the average order value can be measured for any period, most eCommerce companies measure it monthly.
To calculate the AOV of your store, divide the total revenue of your store by the number of orders received.
For instance, let’s say your total revenue for one month is $10,000, and you have received a total of 240 orders. Then, the average order value will be $10,000 divided by 240 orders, which equals $41.66 AOV for that particular month.
Now that we have seen how to calculate the AOV let’s explore the significance of increasing the AOV in your Magento 2 store.
Why Do You Need to Increase your Average Order Value?
As a digital commerce business owner, keeping track of your Magento 2 store’s AOV is crucial as it helps evaluate your overall marketing effectiveness & product pricing strategy. Furthermore, it helps the store owners set strategies and track their efficacies.
While most Magento 2 store owners focus on increasing website traffic to grow their revenue, it has been proven that raising your AOV is much more impactful than just attracting new customers for increasing the revenue of an eCommerce store.
Now, if you’re not sure how to increase the AOV in your Magento 2 store, don’t worry. We have compiled a list of 6 proven strategies to help you increase the AOV in your Magento 2 store.
How to Increase Average Order Value in Magento 2? – Top 6 Strategies
There are numerous strategies in practice that you can leverage to increase the AOV in your Magento 2 store. For starters, you can offer free shipping on a minimum order amount, give bundled products discount, promote cross-selling & up-selling, to name a few. Let’s dive in.
1 – Display Product Recommendations
Often your customers might be so focused on purchasing a selected product that they end up neglecting to browse the other ones, which might be even more relevant to their needs. This, as a result, leads to low cart value, which turns into low average order values.
To address this issue, you can consider displaying personalized product recommendations on your product pages and the checkout page to promote the up-selling & cross-selling of the products in your Magento 2 store, which will ultimately increase the AOV.
Another proven method is to display a range of different products in your product recommendations, which could be either popular products on your Magento 2 store or simply the slow-selling products that you might want to gain traction on.
Zaful, for example, is a popular fashion online store, and they always display what other customers have viewed on their product pages.
While this is just one use case of product recommendations, you can always modify it based on your specific business goals.
2 – Create & Offer Discount on Product Bundles
Another great and successful strategy to boost your AOV is by creating product bundles while offering a special discount on them. As a matter of fact, product bundles are extremely popular in the eCommerce industry as they’ve proven to increase AOV and the overall revenue for most eCommerce stores.
A product bundle is basically a package of two or more products sold together at discounted prices compared to the same products when purchased individually.
For example, let’s say that you’re selling laptops and their accessories like wireless mouses, headphones, etc. Now, make a product bundle selling them together. It will make it easier for your customers to get everything they need in one shot, eliminating the need to search for each accessory separately. Also, you will be selling multiple products in a single order.
You can quickly implement product bundle functionality with the Magento 2 Product Bundled Discount Extension.
3 – Provide Product Subscriptions
Suppose you sell consumables like dog food, grocery items, or something that your customers need to repurchase regularly. In that case, you should consider providing a product subscription option.
Product subscriptions allow your customers to subscribe to specific products to receive regularly automatically. This, in turn, helps to develop a fixed recurring income and increases the overall average order value and the total revenue of your Magento 2 store.
You can easily implement the product subscription feature via Advance Subscriptions & Recurring Payments for Magento 2 if applicable. The extension is easy to set up and lets you provide subscription options on multiple products in your Magento 2 store.
And in case you need help configuring the extension, you can always refer to the step-by-step tutorial on how to configure Magento 2 Subscribe Now Pro Extension in your store.
4 – Offer Minimum Order Incentives
Offering minimum order incentives is one of the widely-used and most popular strategies to boost the AOV in Magento 2 stores.
Minimum order incentive is basically about incentivizing your customers to spend a minimum amount on your Magento 2 store. This incentive could be free shipping on the minimum order amount spent by a customer. This technique is even used by Amazon when an order is $25 or above.
Another way to leverage minimum order incentives is by offering a special discount on the minimum amount spent on your Magento 2 store. For example, you can offer a FLAT 10% discount on orders above $50 or free merchandise on orders above $75.
If you’re planning to implement this strategy, make sure to promote it on your Magento 2 store to inform your customers about the incentives.
5 – Sell Gift Cards
According to research, the worldwide gift card market was valued at $619.25 billion US dollars in 2019, and the same is forecasted to reach $2,067 billion US dollars by 2027.
The point is, if you’ve been neglecting to sell gift cards on your Magento 2 store till now, then it’s time you reconsider it. Gift cards can contribute significantly to an eCommerce store’s revenue.
A study has also discovered that 59% of shoppers would like to receive gift cards from friends and family. More importantly, 65% of gift card recipients spend over 38% higher than the actual value of their gift cards.
These statistics clearly show the effectiveness of gift cards in increasing the AOV.
And if you’re a Magento 2 store owner, you can start offering gift cards by integrating Magento 2 Gift Card Extension. This extension will allow you to create & sell different types of gift cards on your Magento 2 store. You can also refer to the step-by-step guide on creating a gift card in Magento 2.
6 – Introduce a Customer Loyalty Program
Last but not least, you can further nurture your existing customers by introducing a customer loyalty program in your Magento 2 store.
A customer loyalty program is a popular marketing approach that recognizes and rewards customers who engage & purchase from a brand regularly. The rewards generally involve giving away free products, coupon codes, early access to the latest products, and so on to the brand’s loyal customers.
According to a Harvard Business Review, businesses with customer loyalty programs grow their business revenue 2.5 times faster than their competitors. Another study revealed that introducing a customer loyalty program can increase the AOV by up to a whopping 319%.
Uber Rewards is a perfect example of a successful customer loyalty program. Through Uber Rewards, the company allows its customers to earn reward points that can be redeemed anytime for various rewards. For instance, some of the rewards that Uber offers to its loyal customers include price protection, priority pickup, flexible cancellations, and more.
While this is just one example of the customer loyalty program, you can design it uniquely as per your specific business needs & leverage this excellent marketing approach to encourage your existing customers to spend more.
Final Words
With the technological face of eCommerce changing so rapidly, to keep with the pace while facilitating revenue growth is the need of the hour for digital commerce business owners. Increasing the average order value in Magento 2 stores is one of the most effective methods. Hence, we bring you these top 6 successful strategies to boost average order value to stay ahead of the curve in the competitive realm.
We hope that you found this post helpful. If you have any comments, feel free to post them below.
And if you need our professional assistance with Magento 2 Development, do reach out to us, and our team of Magento professionals will be happy to help.
