The conversion funnel is about increasing the number of orders, average order value is about increasing profit.
We will engage with constant commitment towards increasing your average order value. This is the single most important metric any e-commerce business must work at. Every order has fixed costs and once these are covered every extra euro charged to a customer provides you with your full profit margin on the product sold.
Example. A €10 widget has a €3 margin. Let’s ignore postage. You will have packaging and fulfilment costs, storage costs, transaction fees, stock wastage, and overheads. It is likely that the cost of fulfilling the €10 widget is in the region of €12 (€7 for the widget and €5 for the costs). If you sell 2 widgets in one order the cost is probably €19 (2 x €7 and 1 x €5) for a €20 sale. It’s a modest profit but better than a loss. If you can get the average order value up to €100 you are making almost your full profit margin again.
After increasing orders, increasing average order value is most of our work on any website we engage with. We have the know-how, and the results are easy to measure and justify. Best of all the work we do is incremental and sticky – every euro you spend with us this month is working for you every month after that.
When we looked at the costs of fulfilling an order to a customer under Average Order Value, we ignored the cost of finding the actual customer. Whether it is search engine optimisation, Google Adwords, social media, or word of mouth there is a cost associated with every customer acquisition. The cost can be quantified for your business but on average it seems to be around €30 - €40 for an SME selling online.
Most new customers will order small and cautiously to test the waters. They are also more likely to phone or email you looking for reassurance or asking questions about the product. This means that your first order with a new customer is a perfect storm of hidden costs.
So, what can you do about it? Simple. Make sure they order again. The second order costs you nothing in customer acquisition costs.
Like average order value, customer retention is where we spend a lot of time. We will automate email flows, understand buying triggers, build mailing lists, seek reviews, offer subscriptions, and send automated reminders. And like average order value all the work we do is incremental and sticky – every euro you spend with us this month is working for you every month after that.