The best way to keep track of your business's health is to regularly check some basic metrics. Average order value is one that may be overlooked by some retailers but is just as important as measures like profit margins and return on investment for marketing efforts.
Average order value is calculated by dividing the revenue generated by the number of orders placed during a specific time period. For example, at a store that brings in $1,000 on a day when four orders were placed, the AOV would be $250. Had only two orders been placed that day, the AOV would be $500, a more ideal statistic.
A lower AOV typically means that customers are purchasing a small number of items or services at one time or aren't springing for the pricier options available, according to BigCommerce. Generally, a business owner would like to increase the AOV by encouraging multiple purchases at one time, as well as enticing customers to make a more expensive purchase.
There are certain sales strategies that can help increase AOV. One of the most effective is offering financing options, according to Floor Covering News.
"A lower AOV might mean customers aren't springing for the pricier options available."
"On average, a finance transaction is eight times the size of an order paid in cash and four times the size when paid with a credit card," Aaron John, director of flooring network and retail programs at Shaw Floors, told Floor Covering News.
But simply having these programs available isn't enough to boost AOV. Consumers today conduct thorough product and purchasing research prior to going to a store to make any major buying decisions. They know before even opening the store's front door what they want and how much they're willing to pay. Many of them have already decided what payment method they will use.
Because of this, it's crucial that in their research, customers not only discover your product and service offerings, but also your financing programs.
"Consumer financing should be part of your consistent messaging in all advertising mediums, whether traditional or digital," Keith Spano, the president of Flooring America/ Flooring Canada of New Hampshire, explained to Floor Covering News.
Most people don't pursue a major purchase, like a home remodel, a water filtration system or even a boat, without doing research first. They need to know how much they can expect to pay and which stores have the best prices and the best reviews for customer service, quality and more.
According to Nielsen, customers also scour the web looking for discounts, deals and promotions. No matter the product category, seeking out coupons and the like is the third-most popular pre-purchase research activity, right after reviewing product information and comparing prices.
However, Nielsen also noted that most consumers ignore the online ads and email campaigns they often encounter while browsing the web - the very advertising media many companies turn to when crafting a digital marketing strategy.
This isn't to say that investing in these methods isn't money well spent. A carefully crafted email campaign can be highly successful, after all. But this trend also shows that pricing and financing information should be easily accessible to customers, regardless of whether they opened their email inbox that day. Maintaining an up-to-date website is often the best thing a company can do to properly inform potential customers on the benefits of making their purchases with you.