There are a number of metrics a B2B e-commerce merchant should be tracking, but most certainly Average Order Value (AOV) is among the most important ones. In a nutshell, this metric tells you how much your customers are spending in each order. And by focusing on growing this number, even incrementally, you can grow your top-line revenue (generally speaking).
For example, let’s say your average order value is $500. For a large B2B merchant with several thousands of customers, even increasing this by one percent ($5) can have a big impact on the business. Just do the math; for every 1,000 orders, this is an additional $5,000 in revenue. For every 10,000 orders, this is an extra $50,000 in revenue. You get the picture.
Luckily, there are many tools at your disposal to help you grow AOV. Let’s take a look at a couple of them.
Free Shipping Thresholds
In the B2C world, offering free shipping on certain sized orders is a common practice. The majority of the time, customers are willing to spend a little more just to get free shipping, especially if it saves them $5.
Of course, in the B2B world it will depend on the type of product you sell, but there’s little reason you can’t set an order threshold for free or discounted shipping. In fact, you can start at your AOV and work backwards from there. For example, if your AOV is $500, perhaps you offer free or discounted shipping on orders over $550, a 10 percent increase in AOV. You’ll need to know what your shipping costs are, and determine what eating the costs on orders of that size will look like. Ideally, the cost for shipping an extra $50 of product won’t have a negative impact on your overall profitability, and you’ll end up with bigger orders as a result.
Offering Complementary Products
If you’ve ever shopped Amazon, you’re probably very familiar with this concept. It usually falls into the “Customers who ordered X also ordered Y” formula, where the products offered are complementary to the products the customer is purchasing. These can be offered both on product pages as well as during key stages of the checkout process. For example, if you sell printers, then customers will obviously need ink or toner. Offering a special deal on ink, particularly at checkout, will likely entice the buyer to plunk down an extra few dollars in exchange for a small discount (or even free shipping) and the convenience of having supplies on hand.
Offering Instant Lines of Credit
Our own tried-and-true contribution to increasing AOV, offering instant lines of credit can have an immediate positive impact without costing a merchant anything extra (such as eating shipping costs). How does it work? Simple: a buyer applies for and is instantly approved for a line of credit (provided they meet a set of predetermined criteria). If they are granted a $25,000 credit line and their typical order is only $500, the buyer is far more likely to spend more and use up that line of credit. This is true for replenishable goods, such as office supplies, but it could likely also apply to firms selling more durable goods where the price difference between two versions of a product means getting more features. When a buyer gets approved for a credit line beyond what they immediately need, they are more likely to choose a product that comes with some extra bells and whistles once they realize they can buy it on credit with flexible payment terms.
These are just a few tips and tricks for growing your AOV, and just one benefit of offering instant creditand flexible payment terms. Want more? We can show you. Contact us to discuss how Credit Key can help you grow your AOV.