Conversion is typically the driving metric for most sales strategies, but increasing profit is about more than just customer volume. To maintain healthy profits, businesses should also focus on how much those customers spend when they shop. This allows businesses to thrive even in times when customer volume stagnates.
The metric in question here is average order value (AOV) and is just as important as conversion. While one tracks the number of customers and the other tracks the amount they purchase, the end goal is the same—higher overall purchase volume. The difference is that spending on higher AOV tends to be more efficient than trying to acquire new customers constantly.
With that being said, we will cover the following in order to teach businesses how to increase AOV:
- What AOV is
- The benefits of higher AOV
- How to increase AOV
What is AOV?
AOV is the average value of each purchase made by consumers. This is affected not only by the quantity at which they purchase but also the value of each individual product. Ideally, businesses will try to optimize their model to keep consumers buying more, or more frequently reaching for premium products with better margins.
The Benefits of Higher AOV
Simply put, the benefit of higher AOV is its direct impact on revenues. That much is clear to see. The more important point, though, is that AOV carries unique benefits relative to other profit drivers.
These benefits include:
- More revenue over a shorter time period
- Better ROI on customer acquisition
- Higher lifetime customer value
More Revenue Over a Shorter Time Period
While conversion can theoretically provide the same revenue bump that higher AOV can, it often takes more time and money to do so. By increasing consumer spending per order, it takes fewer orders from each consumer to make the same amount of money. This is compounded by the fact that increasing AOV often leads to selling premium products with better margins, increasing profit-per-order in a way that no other metric can.
Better ROI on Customer Acquisition
Customer acquisition is expensive, and businesses are always looking for ways to increase their ROI to get the most out of their marketing budgets. Increasing AOV is the best way to accomplish this since it increases the amount of revenue gained for each converted lead.
Higher Lifetime Customer Value
One of the ways that AOV provides the previous benefit is by increasing the lifetime value of each customer. Higher AOV usually goes hand-in-hand with consumers that purchase more often or purchase higher-cost products and services. By incentivizing this behavior and optimizing for consumers that exhibit it, businesses reliably increase the value of each customer.
How to Increase AOV
There are many ways to incentivize bigger and more frequent purchases, but focusing on those that can serve any business, regardless of their size, is essential.
The strategies that work for any sales-driven business are:
- Offer free shipping on large orders
- Upsell and cross-sell products that work well together
- Create product bundles with modest discounts
- Offer installment loan financing to consumers
The most effective of these options is installment loan financing. By offering consumer financing, businesses don’t need to be so heavy-handed in trying to change what consumers want to purchase. Instead, they can empower them to make bigger purchases by ensuring they have the financial capacity to do so.
This works best because it simply gives consumers the freedom to increase AOV without making it seem as though they are being pushed into a larger purchase. It is the only option on the list that doesn’t disincentivize smaller purchases while trying to boost larger ones. Luckily, offering installment financing can be a simple process that only takes a week or two with the right partner.
Increase AOV by Offering Installment Loan Financing With Skeps
Skeps offers a comprehensive, end-to-end consumer financing program that helps businesses modernize their entire payment process. We go above and beyond one-click payment, also offering a one-click application process for several different types of consumer financing, including:
- Installment loan financing
- Consumer loans and leases
- Branded credit cards
If you’re looking to partner with a forward-thinking fintech company that will keep consumers' eyes on the purchase while offering best-in-class financing, Skeps is the perfect fit.