Optimized Ecommerce EP 070 – Average Order Value: Why is this type of metric Important?

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Matthew Stafford Sep 08, 2021

Welcome to Episode 070 of Optimized Ecommerce – Average Order Value: Why is this type of metric Important? I’m your host, Tanner Larsson, CEO of BGS.

BGS means Build Grow Scale! It is a community that we founded where eCommerce entrepreneurs and physical product sellers come to learn how to take their businesses to the next level.

Here’s just a taste of what we talked about today:

What is an upsell and what it does to your ecom store?

An upsell is the offering of additional products to the customer immediately following the initial checkout and before they reach the receipt page.

What upselling does is, it allows you to sell more products to your customers when they are in their most vulnerable state, it is when you want to take advantage of it. It also capitalizes on the “buyer’s high” at the time of purchase which encourages them to buy more, thereby increasing your Average Order Value (cart value).

When an upsell is set up properly, it can increase your Average Order Value by as much as 60%.

The tried and true upsell example is the front end product would be the burger, the upsell is fries and a coke. This example is also the reason why it’s a myth when people say that you can build a successful online business with only one product.

Reasons why front end only is a dead-end business.

A front end business is a business that only focuses on the front end acquisition of customers, which is 95% or more of all businesses.

This type of business is going to be constantly robbing Peter to pay Paul and trying to extract profit and everything else from the front of your business. You should not be making a profit on your front end, you should be breaking even and then reinvesting everything else into advertising. You should not be trying to extract your customer acquisition cost and your profit from the initial sale.

Seth Godin, a business writer says in his book The Purple Cow that smart businesses know that real businesses make their profit at the second or third sale and beyond.

The 3 ways to build a thriving ecom business.

The problem is that 95% of ecom businesses only focus on one of the ways and completely neglect the other two. This is the reason many businesses struggle because they are not only trying to acquire the customer but also trying to extract profit to live on or do whatever else out of that same sale.

3 ways to build a thriving ecom business:

  • Increase your number of customers
  • Increase the average order size
  • Increase the purchase frequency or increase the number of times people purchase from you

It takes all three of these to build a healthy business. It should be balanced like a triangle in all three of these areas. You can’t just have one of these things or you’ll sabotage your business.

We also discussed a few other fun topics, including:

  • The three default types of upsells.
  • 1 click purchase technology.
  • 1 click upsell/downsell infrastructure.
  • 4 most effective upsells that you can leverage in your business.
  • The theory behind pricing your upsells for maximum conversions.

But you’ll have to watch or listen to the episode to hear about those!

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Also, Tanner mentioned the following items on the show. You can find that on: