BVAccel is focused on all things eCommerce, which is why we’re taking a full-service approach to helping you prepare this holiday season.

We’ve gathered insights across all of our teams, and are about to uncover what we consider to be the best and top tactics from a perspective that combines storefront strategy, marketing, creative, user experience (UX) design, Amazon, and more.

Welcome to Part Three of our six-part content offer, The Holidays in 20/20: How to Increase Average Order Value (AOV) and Profit Margin.

Introduction:

With the holidays quickly approaching, merchants are eagerly preparing for hefty shopping carts and big profits. Online cart totals have the potential to be larger than any other time of the year, and consumers will be hurriedly swiping those credit cards in order to get those last-minute gifts in time.

In 2018, retail sales during the holidays nearly hit the $1 trillion mark, and in 2019 that number is forecasted to be even higher. As an eCommerce merchant, we know you’ll want to get a piece of this very large holiday pie.

Knowing the fast-paced holiday season, there are a few tricks of the trade that can help you increase both AOV and Profit Margin as the opportunity for sales goes up.

After all, and when it comes to Profit Margin, it’s important to be mindful of the balancing act between promotions and maintaining a healthy level of profit. Prioritizing conversion rate and AOV, while avoiding the urge to become too heavy-handed with discounts is crucial.

Here are our top 5 recommendations when it comes to increasing AOV & Profit Margin during the holiday season:

  1. Adapting Buyer Personas to Include Holiday Shoppers
  2. Personalizing the Journey to Checkout
  3. Bundling, The BFF You Never Knew You Needed
  4. Winning with Tiered Pricing
  5. Easy Returns, Happy Customers, Better Margins

1. Adapting Buyer Personas to Include Holiday Shoppers

Just as you adjust your brand messaging in light of the holidays, you should also adjust your target audience. During the holidays, new segments of consumers may be attracted to your brand while they are on the hunt for gifts.

What does this mean for you? First and foremost, a huge opportunity.

By targeting year-round customers AND seasonal gift-shopping customers, not only will you grow your pool of potential customers, but you will also stand to increase conversions and average cart value. On average American shoppers spent $846 during last year’s holiday season, a 14% increase from 2017.

So how do you get to know those gift-givers and create (or fine-tune) your personas? Glad you asked!

Understanding gift-givers: Creating personas starts with putting yourself in your customer’s shoes so that you can understand their needs and pain points before you can deliver value, all while reducing friction. One way to go about it would be to offer a 10% discount in exchange for filling out a quick survey. This way, you can start gathering insights on shoppers who are buying or researching gifts specifically for someone else.

Dig into last year’s data: As a DTC brand with an online shop, you have access to a large amount of data on your customers; everything from their first interaction to their last purchase has been recorded. You can pull all the information you will need to create personas from a combination of Google Analytics and Shopify or Shopify Plus. Looking at last year’s data you will be able to identify trends and draw more detailed profiles of gift-givers using age, gender, shopping preferences, budget, and who they are most likely buying for.

Segment by cart value: When creating your seasonal gift-shopper personas, you will want to segment your data based on the shoppers that buy the most from you. If your average order value (AOV) is $300 it can be helpful to isolate shoppers who spent more than your average order value to understand who they are and explore how they behave (see image below to segment big spenders in Google Analytics).

Google Analytics custom segment

Creating custom segment based on revenue in Google Analytics

Survey your sales and customer service teams: Since they communicate with your clients and prospects on a daily basis, your sales and customer service teams are going to have the most insight into the conversations being had and the questions being asked.

Find the source of gift-givers: Google Analytics is a powerful tool, it will allow you to segment your data by cart value, provide insight on the demographic of gift-givers, but most importantly it will tell you how gift-givers found your website and what made them convert.

The more you know about holiday shoppers, the better you will be able to target them around the end of the year. Once you have created (or adjusted) your personas you can start using them to craft your holiday landing pages, messaging, gift guides, product bundling, as well as help you offer the right up-sells and cross-sells.

2. Personalizing the Journey to Checkout

The holidays can be a stressful time. Being bombarded by offers and discounts doesn’t always help shoppers in their journey to finding the perfect gift, and therefore may not increase your bottom line.

One way you can ease shoppers’ anxiety and create a positive experience with your brand is through personalization. Armed with your newly created holiday personas, you should have all the information you need to create a simple, intuitive, and engaging experience for both you and your customers.

Studies show that 80% of customers are more likely to buy something if they are offered a personalized experience, and that 68% of customers will pay more for this type of experience.

We see three main opportunities for personalization: pre-checkout, during checkout, and post-checkout.

Pre-checkout: The opportunity for personalization starts when shoppers arrive on your website. You want to make sure your home page reflects the promotion currently available and that your messaging is fine-tuned to your personas, as well as clear on the promotion’s nitty-gritty details (dates of the promotion and discounts or offers shoppers will get access to).

Additionally, your customer’s journey should be consistent across your storefront, which means referencing the same messaging and promotions consistently so as not to confuse your audience and potentially lose their interest.

Another way to leverage personas to personalize your offering is by creating holiday gift guides. As we highlighted in Part One: Increasing Conversion Rate they are a great way to guide the path to purchase (pun intended).

During checkout: Now that you have your customers excited about your promotion and products, you want to make sure you maximize their cart value to increase AOV.

Oscar Pan, Lead Developer at BVAccel, recommends using Shopify’s custom script; small pieces of code that let you create personalized experiences for your customers in their cart and at checkout to add an extra layer of personalization.

“You can use scripts to create discounts that are applied to a cart based on the items in that cart as well as other cart properties. You can also use scripts to customize the shipping and payment options that are available to your customers.” (as explained here)

Mya Gupta, eCommerce Strategist at BVAccel, also recommends using personalized messages in the cart to easily communicate information on shipping and delivery that will allow shoppers to make a more informed decision and reduce cart abandonment.

Keeping all of these tools in mind, perhaps the most efficient way to implement a personalization strategy during checkout is through customized cross-sells. Cross-sells should follow a normal thought process instead of showing shoppers similar products. By looking at historical data, you can see what products people usually pair together and use this information to make relevant and useful recommendations.

Additionally, you want to make adding items to the cart as easy as possible. Grace Anello, UX Designer at BVAccel, recommends using checkboxes to make cross-selling flawless and frictionless.

Augustine Bader cross-sell checkboxes on product page

Augustine Bader using checkboxes to cross-sell on product page

Post checkout: So your customer submitted their order and the cart value isn’t as high as it could have been… well, there is one last thing you can try: a customized up-sell!

Shopify offers a variety of post-checkout upsell add-ons to give you one last chance at those additional dollars. For example, one of the features of this add-on will have a pop-up appear after customers submit their order, prompting them to choose a higher-end version of the item already in their cart for only a small amount more.

Alternatively, you can also promote limited time offers, available only to customers who submitted a purchase (see example below). This tactic allows customers to instantly add new items to their order without having to re-enter their shipping and payment information and for you to bump each cart value up a few additional dollars.

Limited Time Offer Pop-up

Limited Time Offer Pop-up Post Check-Out. Source to cross-sell on product page

3. Bundling, The BFF You Never Knew You Needed

The holidays and the discounts that go with them can put a lot of stress on profit margins. So, how do you reconcile metrics such as conversion rate and profit margins?

Bundling. Bundling will be your best friend during the holidays. It’s a great way to provide value to your customers, sell more products, and increase AOV.

The most common mistake when bundling products is pairing inexpensive items with premium products. The problem with this bundling strategy is that instead of encouraging customers to buy more things, a poor product grouping can confuse the customer’s purchase intention and decrease the bundle’s perceived value.

A study conducted by Harvard Business School on this paradox highlights that a cheap add-on paired with a premium product makes the whole bundle less appealing and therefore makes purchase less likely. This noted, the study did not conclude that low-priced items devalue the expensive ones, but rather that these types of bundles are generally not as effective.

Now that you know the science behind bundle, here are our 4 tips to get bundling right:

Emphasis on savings: Whether it’s by demonstrating that the cost of the bundle would be less than buying the items individually, or by offering a discount to make the product bundle more appealing, showcasing the dollar amount customers save by buying the bundle will highlight the offering as a deal they shouldn’t pass on.

Commonly paired items: Going back to our previous section on cross-selling by presenting items your customers usually pair together, creating bundles using historical data on purchase behaviors can help you pair the right items together and create a very appealing offer to your customers.

Singles vs Bundles: Sometimes making a bundle appealing is as simple as showing the product by itself and then the bundle next to it on a category page. If you see that the product you were going to buy is included in a bundle with other complementary items, the decision becomes a no-brainer!

Personalized bundles: Last but not least, build your own bundle is our absolute favorite way to allow customizability and make the customer feel in control of their buying experience. Best Buy is a great example of this tactic because they strategically place the “Build A Bundle” button below “Add-to-Cart” that sends customers to a list of Best-Selling items that are complementary with their current product.

Best Buy build a bundle feature on product page” style=

Best Buy “Build A Bundle” feature on product page followed by a selection of “Best-Selling items to go with it”

If you’re interested in adding product bundles or custom bundles to your store, Shopify offers a great selection of add-ons.

4. Winning with Tiered Pricing 

Another way to increase conversion rate without hurting profit margin is through tiered pricing. This powerful tool is often overlooked by merchants, but it can be an easy way to add excitement and give the customer the feeling of “winning” as a shopper. Tiered pricing is like a security blanket for your brand; it gives customers good deals while also making sure the discounts you offer aren’t eating away at your profit.

Tiered discounts work by highlighting discounts a customer will make as they add more items to their carts and get closer to more savings (as we have seen previously, this was also an important aspect of bundling). Shopify can help you set-up tiered pricing very easily with pre-approved scripts.

There are several tiered pricing options; among them are tiered pricing bulk purchases (buying a lot of the same item, similar to “buy two, get one free”) and tiered pricing by spending thresholds (the discount becomes activated after a minimum cart value).

You can use tiered pricing to entice shoppers to reach the next tier with messages like “You are only $10 away from saving 20%!” or “Add one more item to your cart to get 20% off!”

In the words of Dax Young, Associate Director, Strategy, BVAccel, “Tiered pricing is an incredibly valuable strategy because it allows customers to pay you more money. If you're not offering multiple price points, you're almost certainly leaving money on the table. If more than 20% of customers are purchasing the most expensive product, chances are you could introduce a new tier. Lean into purchase behavior and eCommerce data to determine the right price point and the effectiveness of any new tier.”

Some of the most important considerations when it comes to Tiered Pricing are:

  1. AOV Goals: Offering discounts only after the user has reached your AOV goal number can be the most viable strategy in order to keep your profit margin looking pretty.
  2. Average Product Price: It’s important to consider how many items need to be bought to hit the AOV target. This is done by looking at your average product price and understanding how many products typically need to be purchased to reach your AOV goals.
  3. Profit Margin Goals: In other words, how much of a discount can you actually afford to offer?

As an example, here’s how Brooklinen structured their tiered pricing during 2017 Cyber Monday:

  • Spend $150 amount get a free $35 candle
  • Spend $250 amount and get $50 off
  • Spend $500 amount and get $100 off
  • Spend $800 amount and get $200 off

Brooklinen tiered pricing by spending thresholds” style=

Example of Brooklinen to cross-sell on product page

5. Easy Returns, Happy Customers, Better Margins

Maintaining a healthy profit margin isn’t always about selling more, it can also be about excellent customer service. In the U.S. alone, Statista estimates return deliveries will cost $550 billion by 2020, 75.2% more than four years prior.

There are many reasons why customers would return products during the year, but during the holidays since most people aren't buying for themselves the number of returns can skyrocket. The 2017 holiday season saw 28% of the gifts people purchased returned, at a value of $90 billion.

So how can you prevent returns from eating away at your bottom line?

Beware of serial returners: There are two types of serial returners, the ones who will wear or use an item once before returning it, and the ones who will replicate the brick-and-mortar experience at home by purchasing different sizes and colors of the same item, pick their favorite, and return the rest.

So how can you protect yourself from serial returners? What’s important is to separate serial returners from the rest of your customers by tracking them. To do that you will want to use a customer relationship management platform like Shopify Flow that will allow you to identify and segment serial returners and exclude them from free shipping and/or full-refund offers by using an onsite personalization tool or by creating a shopping script.

Find a partner to lighten your load: By collaborating with the right partner you can make returns less painful for you and your customers.

As of July 2019, Amazon and Kohl's have partnered to allow Amazon customers to drop off their returns at their closest Kohl's location, for free. With more than a thousand Kohl's locations nationwide this new partnership is sure to delight Amazon’s customers and boost in-store foot traffic for the retail giant.

But for the retailers of this world that aren’t Amazon or Kohl’s and still want to reduce the friction of returns, there are still options. Happy Returns, Loop Returns and Returnley (just to name a few) will act as the middleman between merchants and their customers to truly automate returns for the brand.

Conclusion:

So now that you’ve learned everything you need to know about increasing your AOV and Profit Margin this holiday season, what should you do next? START PLANNING!!! Our team strongly recommends that you plan for the holidays at least two months in advance, especially if you’re going to test any optimizations or changes to your storefront.

We’re hopeful that some of the ideas we’ve shared in this article, Part Three of The Holidays in 20/20, will help you maximize the performance of your storefront this holiday season in ways that benefit you and your brand for years to come.

Stay tuned for parts four and five of The Holidays in 20/20. Up next, “How to Increase Lifetime Value.” The most wonderful time of the year is coming FAST, and it’s time to get ready. Happy holidays, and happy planning!

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Chelsey Debalsi Chelsey DeBalsi is the Director, Marketing for BVAccel, responsible for managing the agency's digital marketing initiatives, inbound marketing strategy, and branding.