A little while back I had a post talking about the 3 ways to grow any business. And the very wise Jay Abraham broke it down. They are to increase the number of clients, increase the average order or transaction value, and increase the frequency of purchase. If you haven’t, it’s worth a pause and popping on back to that post now.
Average order value
Average order value is your total revenue divided by the number of transactions. That’s the easiest way to calculate AOV, an important metric to track in your business.
AOV = total revenue / number of transactions
Let me ask you a question. What if you could increase the value of every sale in your business?
What would the impact be if you increase it by 50%, or even doubled it?
As your average order value increases, so does your profit. You see, you’ve already paid to acquire that client, the more you earn per order, the more your profit increases. Not only does your business become more profitable, but so does your marketing.
There are so many ways you can increase the order value, it takes far less effort and time, and in some cases, it won’t cost you a thing to implement. Aside from raising your prices, let’s look at ways you can increase your average order value.
For e-commerce and product-based businesses, the ideas to increase average order value are abundant. You can create a ‘free shipping’ threshold, offer money off if you spend a certain amount, and so on. Let’s take a look at increasing your average order value for service-based businesses, consultants, digital or online businesses.
Before I start, I want to caveat that, as a business, your purpose is to provide great benefit to help someone get closer to the result they are looking for. Put your customer first, this isn’t an exercise to ‘milk them' for all you can. Be an advocate for your clients and provide a high-quality service over profits first. That is the best long-term strategy you could possibly implement.
11 Ways to Increase Your Average Order Value in Your Service or Digital Business
1. Offering Bundles
I’m not necessarily talking about ‘buy two get one free’ as that doesn’t usually apply to service businesses. You can, however, bundle or package some of your services or digital products.
If you’re an agency and provide logo design, for example, you could provide a logo bundle that includes designed social media profiles and email signature design. If a client is having a new logo, think about all the ways that new logo will be used, or the things that you most commonly get asked for.
2. “Small, Medium and Large” options
It might be small, medium, large, or good, better and best options for your service levels, but it’s been my experience that when you provide options to your clients and show value, they more than often go with the more expensive option.
We can see the G-B-B model in nearly every industry. Think about buying a car, insurance or petrol. What about your cable TV package, or your credit card with the gold and platinum options. It’s nothing new, but many service-based businesses haven’t adopted the tiered pricing approach but it can dramatically increase revenue by attracting higher spending clients.
Here in England at Alton Towers, a theme park famous for the world’s first 14 loop rollercoaster which I highly recommend, you can access the park and their ‘best’ option is a ‘Fast Track’ ticket. It’s a priority pass so you don’t have to join the queues. And, of course, there’s a gold, silver, platinum level depending on your choices.
I’ve helped many clients use this strategy successfully to go from a “buy or don’t buy” option to their clients feeling empowered by having a choice. With an unexpected upside of improving sales velocity in some instances.
3. Upsells and Cross-Sells
Amazon is an absolute pro at this strategy. On just about every product page, there’s a display of similar products or related products. A cross-sell is something that’s different from the product you’re buying, an up-sell encourages you to buy more expensive items or more of the item. It’s pretty cut and dry when it comes to e-commerce but there’s a golden opportunity for a service-based business here.
And it doesn’t always have to be from a sale, it could be an upsell after offering a freebie!
Let me give you an example, I created a free webinar called ‘Get More Sales’ and when someone registered for the webinar before the ‘thank you’ or success page displayed, they were offered a little “bump” to purchase a copy of my ‘Get Sales’ book. Not only did it help me spot some serious potential clients, but that little bump helped to cover the ad spend or cost of lead acquisition on that particular campaign.
The upsell or the cross-sell doesn’t need to be huge. Sometimes it’s the micro offers that have a massive impact!
4. Show More Value than Anyone Else
Your offer is your proposition, it’s without a doubt the most important element in your entire sales message. I have a whole section of my coaching program dedicated to crafting offers and what I can’t stress enough is that it’s your job to show value.
You want to give your clients a way to have greater convenience, faster or better support, better service, a better experience, superior result, or more protection. There are ample examples of this in the real world and by some of the most successful businesses on earth. Think about buying more legroom when you fly, Amazon Prime, Apple Care, and so on. There are so many ways you can increase the perceived value of your service and package it in a way that makes it utterly irresistible.
All too often whether I’m working with web agencies or consultants, they have become professional order takers. Instead, find a way to stack value so that your clients can see what they’re getting and they are completely blown away, or it’s a no-brainer to do business with you.
5. Provide Power Guarantees
I love a good guarantee. Creating power guarantees can help you position your service differently and help you increase the value of your offering. This goes hand-in-hand with irresistible offers which is a skill to master.
You have to make offers detailed and specific with a clear benefit that’s aligned with what your audience wants. Let’s say you want to buy a mattress online, you want delivery to be fast and free. We’ve come to expect that. But if you buy a mattress with a 120-night risk-free trial, you might be happy to pay a little more. This strategy is how Casper, a start-up business went from nothing to $600 million in their first four years in business.
How about a home-builder who will guarantee to build your home on time, or give you $5,000 cash. There is no shortage of guarantee examples, and in this post-covid world, I’m seeing many more examples of guarantees that reverse the risk for customers. I think we’d all pay a little more for some certainty.
There are a number of other ideas to increase average order value including :
• Leveraging premium positioning
• Adding one-time offers
• Limited time offers
• Adding bonuses
• Liquidation offers
• Loyalty programs
And with countless strategies available to you geometric business growth is closer than you think. What if you had a plan to increase the number of new clients by 10%, increase the average order value by 10%, and the frequency of purchase by 10%? I’ll tell you that the compound effect means that would be a significant total increase in revenue and profit.
Curious to know what your growth potential is?
Grab the Geometric Growth Worksheet here and calculate your 10/10/10 or 20/20/20 plan.
By the way, if your service is a one-time sale instead of the order frequency, you can focus on a referral strategy.
PS. If you'd like help with strategies to grow your revenue and profits, there are several ways we can work together. Check out my four-week 'coaching experience' so you can trial what it's like to work with a coach and get some quick results at the same time!