EXCLUSIVE RESOURCE: Want the AOV mindmap Drew mentions in the episode? Click here download it! Also includes the full transcribe from this episode.
A 25% increase to your AOV is a 25% increase to your business’s revenue. It’s as simple as that.
So how do you do that?
Considering you probably don’t have the next 12 hours to listen to Drew cover all the potential ways to build up your AOV, let’s hone in on just one method – the premium service upsell.
Listen in to hear more on AOV as a key multiplier in your business, and how to use a service-based upsell to influence AOV and identify your whales.
0:52 – Drew’s recap of the Digital Marketer Content & Commerce Conference
2:30 – AOV – Average Order Value. What it is, why it’s a key multiplier to increase the revenue of your company
3:25 – No spending on acquisition, just optimize what you’ve already got
3:40 – Case study: How Drew’s friend on Shopify would implement a quick upsell to increase her AOV
6:12 – Example of a premium, service-based upsell
7:40 – Upsells can come from partnerships with third parties
9:41 – Some tricky math involved in measuring AOV
10:50 – Upsells as a great way to identify your whales
Prefer to read rather than listen to the podcast episode? No problem, you’ll find a text transcribe below, and you can also download it for later.
Hey everybody, welcome to the Nerd Marketing podcast. This is Drew Sanocki.
We’re back in school here in New York City, which means I’ve got the sinus infection back that will be here until the Spring. My son goes off to preschool and he comes back with a different strain of flu everyday.
He, of course, gets over it within a day, takes me weeks, and when I recover, he hits me with another one. This is the next nine months of podcasting for you. I hope you enjoy the sound of my nasal cavity.
What else is going on? I just got back from the Digital Marketer Content and Commerce Conference in Florida. It was a great conference. If you went there and I met you, hi again I guess. The odds would be low, because I kind of spoke in like a broom closet. I was going up against James Altucher, who had like a million people in his conference room.
I had five or six listening to me talk about retention and exciting things like that, but, you know, it’s their loss. I put out some good material. I got asked a question that caused me to rethink some of these podcasts. Really, it was about getting away … This guy asked “Hey, how can I implement this stuff? I get it, I get the database marketing stuff, but how can I implement it in my own retailer? It’s just me and like two other people. We don’t have time to do everything and if you could focus on making your tips a little more practical …” Not his exact words, but … “I would appreciate it.”
I started thinking, let’s do a couple podcasts here about bringing these things really down to earth, some of the concepts recency, latency, tripwire marketing, and make them easy to digest and implement for the standard e-commerce, smaller company.
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Today, I want to talk about AOV, average order value, the average size of a typical order through your e-commerce site. AOV is what I call the three multipliers. Three ways to increase the revenue of your company.
The other two, of course, being frequency of purchase, which is a retention metric or the average number of times somebody orders from you. The last one being the total number of customers you have, acquisition, traffic. Most retailers go immediately to number three, they just think growth means more traffic, when I argue more or less convincingly on this podcast that AOV and retention are great places to focus if you’ve got some customers coming in.
Today, I wanted to talk about AOV. It’s a really powerful lever. If you increase your AOV 30%, you’ve grown your business 30%. It’s as easy as that. I like it because you don’t have to spend a dime on acquisition. You’re just sort of optimizing the current traffic and customers you have already within your funnel. All you want to do is increase their average order size.
I’m reminded of one of my friends here in New York, Chrissy, who runs a store called artstar.com. She sells premium art products, prints, framed prints from contemporary artists. It’s really cool stuff. I’ve known Chrissy for a long time. Decorated a lot of my apartment with Chrissy’s work. I’m thinking trying to put myself in Chrissy’s shoes, how would she do an up-sell? She, like most of those people listening to the podcast is on Shopify.
On Shopify you can’t, it’s not the most straightforward thing to go right into your shopping cart and start tweaking it to do more cross-selling and up-selling. Certainly, if you’re on a more advanced cart, you can do that. For someone like Chrissy, running on Shopify, what are some ways for her to do a very quick up-sell and increase the AOV? Up-sell, of course, is a way to take a customer who’s looking at product A and convince them to spend more. Maybe they go to product B, which is more expensive than product A.
In Chrissy’s case, her average order size, we’ll say is $300, just sort of pulling this out of thin air, for a standard print. If I were in her shoes, I’d start to think about what I call a premium service up-sell. This is basically an up-sell that is service based.
I like them because she doesn’t have to go source new product that’s more expensive. She doesn’t have to rejigger her checkout or anything. She just got to come up with a service offering that her customers might pay for in addition to the cost of a standard art print. The way you come up with a premium service up-sell is you put yourself in the mind of your customer. What are there needs and how could I better satisfy those needs? What would they pay for?
Chrissy sells a lot of art to bachelors in new apartments.
These are probably the New York hedge fund guy who got his bonus and he wants the phat pad to pick up the chicks and he wants the bar in the corner and the black leather sofa and the flat screen TV, but part of this is that dude also wants art on the wall that says that that dude knows art, right? Because he wants to be more sophisticated. How would I up-sell that guy? I think in Chrissy’s case, her premium service up-sell could be two or three personal Skype calls with her or one of her two assistants at ArtStar.
Really it’s, let’s call them, art advisory, ArtStar advisory calls where the client gets on the phone with Chrissy and maybe if you do a video Skype, she can look around the apartment. She can make recommendations. Get to know the client better like what does he want to be about, what’s his brand, what kind of art does he like. Then she could do really personalized pics for every room in his apartment. You could have some cool art in the kitchen. You could do something different in the entertainment room. Really get personalized with the offering.
Of course she would be pulling mostly from ArtStar’s inventory, but for a premium service like that I would expect to pay $1,000 to $2,000 if it included the price of say one or two free prints. Let’s say that’s a $2,000 up-sell. It’s really easy for her to fulfill, right? Someone goes through checkout, if they take the up-sell, maybe she emails out a little [Inaudible 00:07:30] appointment scheduler and the customer just chooses a couple dates for the Skype call. Very easy to fulfill that product.
Too long? Finish this transcribe at your own pace – click here to download.
If you’re thinking about this now for your own retail, you can’t come up with something logical like that, I would encourage you to partner with a third-party to deliver that or to fulfill that product. In Chrissy’s case, she could partner with an interior designer.
Maybe two calls are with her, two calls might be with an interior designer who picks some furniture and makes some advice on how to decorate an apartment. Of course, she would get a commission on that. A great way to structure a premium service up-sell. It’s not an original idea. I was on Amazon the other day looking for some auto parts and Amazon has a premium service up-sell for installation. You buy the car part and if you are a lazy ass or don’t know what the hell you’re doing, as is the case with me, you can hire somebody in your local area to come by and install the part. Pretty typical as an up-sell technique. Very quick and easy to implement.
Think about the tech challenge for implementing something like that. Whereas to do a sophisticated up-sell/down-sell funnel of the kind that are hyped in a lot of the information product marketing blogs, you would need to customize your checkout experience to provision different products in front of the customer and really market them.
In this case, you log into Shopify, log into Big Commerce, just create a whole new product, but it’s a service product, but, you know, treat it like a regular product. Build out your product page. Maybe put some Skype shots in there, some screen captures of your pretty face on Skype, slap a price on it $2,000, and then boom. That’s your product that you want to up-sell, just display it throughout your site. Maybe display that other product with some language at checkout. Easy, quick, great way to increase your AOV.
One thing I like to think about when I’m considering AOV. The natural inclination is to think about “Okay, if I want to increase my AOV say 30%, then I need 30% of my customers to take the bait and to up-sell.” That math is actually wrong and you probably already know this, but I got caught up on this a little bit. I had to think through it a couple times. You don’t need 30% of your customers to take the bait. You only need a small percentage of the customers to take that bait if the dollar cost of that up-sell is pretty big.
In Chrissy’s case, if we came up with a $2,000 up-sell, she only needs 5% of her customers to take that bait, 5% x $2,000 is $100. That $100 is 30% of her AOV of $300 and so boom, she’s got her 30+% up-sell right there, only getting 5% of the customers to take the bait.
If a $2,000 up-sell sounds like too much to you, I don’t know that I would take that myself, but that doesn’t mean that the rest of your customers don’t, you only need 5% to take it. Remember the 80/20 rule. You’ve always got 20% of your customers at any one time are whales. They really will spend 100 times more than they’re spending with you if they had the right thing to buy. This is a great way to sort of identify those whales and give them something to buy.
That’s it. It’s called a premium service up-sell. It’s one of the many ways to increase your AOV. AOV is one of the three multipliers you have to grow your business, to grow your revenue. If you would like to know more about the AOV and the other two ways, I’ve got a great free course on doubling your e-commerce business in one year. That course is located at nerdmarketing.com/double. You can also text “nerdme,” that’s one word, “nerdme,” hard to hear because of the sinus infection, but text “nerdme,” to the number 44222, that’s 44222, just text “nerdme” to that number.
My wife will get the text on her cell phone and send you the free course. Also, I got a content upgrade for this blog post. I put a number of my favorite AOV enhancing techniques into a MindMap. If you want to get a look at that MindMap, just go to my blog, nerdmarketing.com/26, which is this episode, and download that MindMap for yourself. Hope it helps. Again, you’re listening to Nerd Marketing podcast, this is Drew Sanocki. I will talk to you next week. Thanks.