This Is The Right Way To Boost Average Order Value
- 0:03 A Little Story
- 0:28 Quick Order From Uline
- 0:40 As I Go To Check Out
- 1:00 Did I Need Those Boxes
- 1:15 What Did They Do Right There
- 1:45 Same Thing We Do When We Offer Free Shipping.
- 2:28 For A $15 Dollar Incentivized product
- 2:39 Average Cart Value Is Where You Make The Money On The Sale
- 2:58 In Niche Businesses We Do The Same Thing
- 3:17 Free Shipping
- 3:47 Studies Have Shown
- 4:19 Those Incentivizing tricks work
- 4:44 Anything you can do to get your customer to spend more
- 5:00 Closing Remarks
Hey guys. Tanner Larsson here from Build Grow Scale, and I want to tell you a little story about what happened to me yesterday, buying stuff online, and the lesson within it. Last week I had mentioned to you guys how we were all excited about these new boxes that we ordered, that were going to make us more money and speed up our packaging and all that. They worked out really well, and we’ve got another container coming in this next week and we need boxes. Yesterday I ordered, went to Uline to get a quick order. Usually we order from a packaging supply house, but we ordered from Uline this time to get a quick order. All you need is 6,000 boxes, so I ordered 6,000 boxes.
As I go to check out, a little thing pops up that says,
“Hey! If you spend three hundred and something dollars more, you can get this free zero-gravity chair.”
Apparently I’m a sucker for a zero-gravity chair, because I went back and I added three hundred and seventy some odd dollars worth of more boxes and then checked out. Did I need those boxes? No, but I wanted the gravity chair. It was an irrational decision. Now that chair, it’s a very nice chair, by the way. I got it yesterday, because Uline from California to here has less-than-24-hour delivery.
What did they do right there? They got me to spend three hundred and some odd dollars more money. The other interesting thing that happened, I noticed when I went back after I caught myself after buying this, and went back and got the chair, I looked at the receipts and everything from my previous order. They also charged me more in shipping. My shipping charge, after I accepted the free chair, went up by thirty some odd dollars. My shipping charge went up, I added a couple hundred more boxes, and I spent three hundred more dollars, all to get this free promotional chair. What they’re doing there is the same thing we do when we offer free shipping or incentivizing your customers to just basically spend more money. All we’re doing, all they’re doing, is trying to raise their average cart value or average order value. It worked.
Did I need that zero-gravity chair? No. Could I have bought a zero-gravity chair for less than the three hundred dollars that I spent? Oh, yeah. Did that chair cost them a bunch of money? No. I’m sure they bought it in bulk. It had their name on it. I’m sure it cost them maybe forty dollars, if that. I would probably bet it was … Looking at the chair, it was nice quality, but I bet if they bought it out of China, they could get it for fifteen dollars or so. For a fifteen-dollar incentivized item that also promotes their brand, they were able to get a significant increase on their cart value from me. Why is that important? Average cart value is where you make the profit on the sale. The larger the cart value, the more profit that’s in there. A company like Uline has very, very small margins on a lot of their products, because they’re commoditized, box prices, or commodities. They’re not unique products, so it’s very important to do that.
In niche businesses, we do the same thing. In our smaller businesses, or less commoditized mainstream business, we may incentivize them with get an extra product or get buy one, get one, or the most common ones that we use is the free shipping and you’ll see this all over the place. Free shipping on any order over a hundred and twenty-five dollars. Why is that? Technically, if they’re doing it correctly is there average order value, let’s say, is around a hundred dollars. Without any kind of incentive, their average order value is about a hundred bucks. What they do is say,
“Hey. If you spend a hundred and twenty-five,”
Which is a twenty-five percent increase in your order,
“we’re going to give you free shipping.”
Studies have shown, and I don’t have the … Obviously, I’m driving. I don’t have the exact stats on me, but studies have shown that when offered incentivized free shipping, customers are willing to spend more. It think it’s somewhere in the thirty-percent range that many of the customers are willing to spend more.
Okay. It works. Uline got me yesterday for extra three hundred dollars worth of more boxes, just so I could get a chair. Will I ever sit in it? Maybe. I’ll take it with us when we go camping, but that’s about it. Anyway, guys, those little incentivizing tricks to get your cart value up, it works really, really well. It works on me. It works in your market. It doesn’t have to be productized. It could be as simple as giving them free shipping or giving them an extra product or something. You don’t even have to have a different … Uline is giving away chairs when their main product is not chairs. It doesn’t have to be like that, but anything you can do to incentivize your customers to spend more, to bump up their average order value without also decreasing your profit margin significantly. Obviously, you want to keep your profits high, if you’re going to increase the cart value. Anyway guys, a little tip, a little trick. Pulling into the office right now. Give it a shot in your business. Let me know how it works.