How to calculate your average basket?

The ultimate objective of any e-commerce business is to drive revenue, and e-commerce merchants come up with new strategies and ideas every now and then to scale-up their revenue graph.

One of the finest & most fruitful ways to increase the profit margin of your e-commerce store is to induce customers to spend more than what they usually spend. In e-commerce terms, it would mean to increase the average order value.

What is Average Order Value?

Average order value/cart value is the average amount spent by a customer per transaction on your store. To calculate your average basket, you simply divide your total revenue by the total number of orders placed.

The average order value speaks about the performance of your store. A drop in the average order value is a sign to worry. Increasing this ratio would lead you to increased revenue. 

How to Increase the Average Order Value?

An increase in average order value means more profit and more sales, however, the increment requires the right tactics and the right approach. In this article, I have put forward the six best ways to increase your average order value.

1. Free shipping above a certain amount

One of the easiest ways to increase the average order value is by providing free shipping over a certain amount of purchase.

For example, you can provide free shipping on the orders above $50. Now, let's say a consumer comes to store and looks to purchase a product worth $45, you can persuade him/her to shop for an extra $5 to avail the free delivery facility.

Whatever your average order value is, currently, provide free shipping on the orders slightly above it. If the average order value is $80, free shipping can be provided on orders above $90 or $100. It is one of the smartest ways to increase average order value. 

2. Offer discounts on a minimum cart amount 

You might be wondering how providing discounts can increase the average order value as it is something that will lessen the order value.

Well, you can set a minimum amount that a user must spend to get a discount on his/her purchase. Just make sure the minimum amount that you set is higher than the average order value and also the total doesn't drop below the average order value after the discount is applied.

Suppose your average order value is $80, you can provide a discount of $10 on the orders above $100 so that the total cart value remains more than the average order value.

3. Encourage cross-selling and up-selling

Cross-selling is a sales strategy where you encourage customers to purchase related products. For example, if a user is purchasing a mobile phone, you can recommend him a screen protector along with a mobile case.

Up-selling is a sales strategy where you encourage customers to purchase an expensive or better version of the product that they are about to purchase. For example, if a customer is purchasing a Smart TV, you can use the upsell strategy by recommending him/her the TV that has slightly better features than the one they are ordering.

Both cross-selling and up-selling help to increase your average order value.

4. Offer discounts on packages

Provide discounts when a customer buys more than a single product or say a package. For example, you can set up an offer like shop for 2 and get 10% off or buy 4 and get a gift card.

Providing a package at a slightly lesser value than what would have cost in case of individual purchase, would certainly help in increasing your average order value.

For example, if a customer is looking for a pair of shoes, you can provide him with a package of 2 or 4 pair of shoes at a slightly lesser price than the total price of the 4 individual pairs.

5. Set up a loyalty program

Provide loyalty points each time a customer shops from your store. Loyalty points to a new customer would help you turn him/her into a potential buyer in a short span. For an existing customer, loyalty points would portray that you still value and appreciate them for being a regular customer. 

To increase your average order value using loyalty points, you can set up the terms and conditions of your loyalty program accordingly. For example, you can set a value higher than the average order value for a customer to make use of his/her loyalty points on their purchase. Loyalty programs are a great way to ensure repeat purchases.

6. Provide limited time offers

Create urgency with time-sensitive deals to attract customers and encourage them for an instant purchase. Make customers feel that it is an opportunity which they shouldn't miss.

You can set up a timer based sale on some of the expensive products on your store and display it on the front end of your website. It will help you grab more conversions and eventually increase your average order value.

Wrap Up

You need to play smart if you want to increase your average cart value. Think upon the above-mentioned 6 factors and see how things change for you, but don't compromise on your profit. It won't make any sense if you are able to bring up the average order value but faced a reduction in the profit margin.

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