If you are looking to strategically grow your business, have you considered maximizing your average order value through e-commerce bundle deals and packages?
It is no secret, businesses can acquire growth through conversion rate optimization and emphasizing their existing product lines. These strategies lead to maximizing your average order value.
Are you currently looking at this metric? If not, this article will help you identify what your average order value is and how bundles and packages can help you achieve revenue growth.
How to calculate your Average Order Value (AOV)
If you want to go all old-school, you can calculate average order value (AOV) by dividing your total revenue by the number of orders you receive.
Or you can simply pull the number from your Shopify analytics dashboard.
For example, in the month of March, your store may have experienced $50,000 in sales and had a total of 1,000 orders. $50,000 divided by 1,000 is an AOV of $50.
In order to see your AOV increase, you will need to encourage your current customers to spend more with each order. This is easier said than done, but below we break down how to accomplish this with strategic bundle deals and packages.
What are E-Commerce Bundles and Packages?
E-commerce bundles and packages are a combination of upsells and cross-sells that help companies market their products with an increased focus on their pricing strategy.
Bundles, when strategically priced, entice customers to spend more money per transaction by grouping together complementary products and emphasizing the price advantage of buying the bundle than each item separately. This psychological product presentation encourages users to buy more things at once and leads to an AOV increase.
How to Strategically Build Product Bundles
Avoid Pairing Premium Items with Inexpensive Add-Ons
It is easy to assume if a customer is willing to purchase a premium item, they will likely be willing to add a small accessory to their purchase. This is far from the truth. Take a step back and really think if that offer will entice your customer.
For example, if you sell an $800 car seat and you offer a car mirror for a discounted $20, would that really entice the customer to pull the trigger and purchase the car seat? Probably not.
In a study from the Journal of Consumer Research, they presented research on product bundling called The Presenter’s Paradox. They offered consumers two bundle options, the first was an iPod Touch bundled with a cover and the second was an iPod Touch bundled with a cover and a free song download. Approximately 92% chose the second offer but indicated they would pay more for the first bundle without the song download because the perceived value of one song was not enough to tip the scales.
This study highlights a critical component of successful bundling, you want to avoid adding products that lower your bundles’ perceived value.
Highlight Cost Savings
When two items are typically purchased together, offering a discount bundle is a great way to increase your AOV.
It is critical to price these items so customers can clearly compute the discount they will receive when purchasing the items as a pair vs. individually. Make the savings obvious and promote it all over your website.
Here is an example of a mattress company that offers a significant discount when bundling their mattress and base.
One mistake that we see from businesses is using bundles, but not providing cost-savings. This happens when a small e-commerce business bundles two or three products together, but the total price of the bundle equals the price of all products if they purchased each separately — meaning the customer has saved absolutely no money. Customers are willing to shop around and are savvy enough to know when they find a good deal and when they don’t. Be upfront and honest about your cost-savings and it will benefit your business.
Pair Within Product Families
You understand your products better than anyone else. You can identify what products are best sold together to make the best product experience for your customer.
Returning back to the first example we shared, customers that are looking to purchase a car seat are likely looking for a car seat base or stroller adaptors. These products live within the same product family and make logical sense to pair together.
Reviewing your product list and identifying products that go hand in hand will prove to be the most effective when bundling.
Here’s an example of pairing an athletic bra with a pair of leggings.
Strategic Product Placement
Have you ever used anchor pricing? It is an old marketing tactic that can help drive purchases of your selected products. For example, let’s say you are trying to push a brand-new pillowcase line where each sham is going for $50. What is the best way to get someone to buy it? Put it next to a $100 sham, and your desired product now seems like a deal.
This methodology can be highly effective with bundles. Let’s say you have a bundle that you really want to promote, you can pair it next to higher-priced packages that act as anchors to make your ideal package seem like a slam dunk deal.
Here’s an example that does just that.
Offer Bulk or Volume Discounts
Packages and bundles do not always have to be different products. You can offer discounts when customers purchase multiples of the same item. Amazon offers bulk discounts with their Subscribe & Save feature. It shows customers the discount they can receive when they sign up for repeat purchases.
A simple way to increase your average order value is to focus on your current product offerings. You don’t have to worry about attracting new customers or offering new products to see revenue growth.
Through strategic bundling and deals, your e-commerce store can encourage your current customers to purchase more each time they shop.