Hi there, it’s Matthew Larsen from Ultra Growth Marketing. Today we are going to go over how to increase the average order value for an eCommerce Store. This is one of the best ways to make more money, but it is often overlooked. There are several ways to increase average order value other than just “increase prices.” Here is how to do just that.
How to Increase Average Order Value For an eCommerce Store
The first thing we need to go over is the reason that we should do this. Of course, it would seem obvious that the larger the average order value, the better, but it isn’t that simple. It’s actually better than that.
When we are growing an eCommerce Store, we first have to consider the product margins of our products. If we are selling products a $50 product with a 50% profit margin, that would mean that we make a $25 profit every time we sell this product, but that is not necessarily true, is it? We still have to pay for the advertising costs to acquire a customer. We still have to pay shipping and packaging costs. We still have to pay labor costs if we are big enough to have employees.
We can quickly find that this supposed $25 profit quickly gets eaten up by all of these costs, and that is very disheartening.
So, what should we do about it?
We should increase the average order value of our eCommerce Store by adding in two different upsells; a one-click post-purchase upsell, and an in-cart upsell.
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Creating Our Upsells
Offering these two upsells is usually as simple as downloading an app, setting it up, and then turning it on, so I am not going to go over that here. I am instead going to go over what “rules” you should follow when creating these upsells.
1. Make sure both of these upsells have at least 50% profit margin, with a minimum threshold of $25 profit per upsell. This is very important. Not everybody will buy your upsell. A good benchmark is 10%. That means on average, if 10% of people buy your upsell with $25 profit, you are adding $2.50 in profit to every order. Since you will have two of them, you will add an average of $5 in profit per order if 10% of people end up buying. You should look for high-margin products that are cheaper than your main product but have huge profit margins in excess of 70%. It doesn’t matter what price you sell it for, just make sure it has a $25 profit or more.
2. Make sure both of these upsells are unique, and cannot be purchased on your normal store. If you let people purchase them normally like any other product, they will lose a large part of their appeal. You want them to be a “one-time-only offer” where people have to buy it now, or it will be gone forever.
3. If you can, try and price these upsells higher than normal, and then offer a 50% discount so it seems like a great deal. If you wanted to sell the upsell for $40, put the price up to $80, and then give 50% off.
4. Try and create a bundle of different products for your upsells. If you do this, it won’t be as clear to people what these products are “worth” individually, and they will be willing to pay more.
5. If you can, include bonuses in your upsells. Let’s say you sold healthy snacks or something like that. You could include three free guides; one on other healthy eating and healthy living habits, a fitness tracker where they can track their weight, and then entry into a Facebook Group or something like that. These bonuses can increase your upsell conversion rate by 2-3x if done right, and they don’t cost you anything extra.
The Math (With Upsells)
When you add upsells, you can massively increase your profit per order, even if you only get a 10% conversion rate.
Let’s go back to the first example without upsells:
The product had a 50% profit margin which translated to $25 profit, but let’s say the store had to pay $18 in ads to get a customer, $4 in shipping, and $2 in labor. That would mean they were only making a $1 profit on first-time orders (but they would make a lot more on repeat customers because they wouldn’t have to pay for advertising there). $1 profit is nothing to get excited about. However, with these two upsells, we will average another $5 profit per order, even taking into account advertising costs. That means we literally increased our average profit by 600%, just by including these upsells.
When you use upsells, you can make a lot more profit, because your shipping and advertising costs don’t change. They are fixed. You are paying those whether they buy your upsells or not. That is why they are so necessary and can help you grow your store like crazy if you can hit that magic combination of price and value.
Upsells are one of the most important parts of any eCommerce Store. In general, you should have two upsells; a one-click post-purchase upsell and an in-cart upsell. Make sure you choose upsell products that are highly profitable, and if you can, bundle items together and create bonuses to increase the perceived value of your upsells tenfold. This will lead to a much higher conversion rate and exponentially more profit for you as the store owner.
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