One key ecommerce metric that all merchants should be measuring is average order value, or AOV. There are all kinds of ways to boost AOV, many of which we’ve covered on our blog in the past. One crucial mode is by focusing on customer loyalty—which is what we’ll talk about in this post.
Customer loyalty and AOV go hand in hand. The more your customer loves and trusts your brand, the more they’ll spend with each order. Especially in this current ecommerce landscape—where customer acquisition costs (CAC) for subscription merchants are rising—there’s nothing more important than cultivating strong customer relationships.
In our 2023 State of Subscription Ecommerce report, we found that subscription merchants’ AOV increased year over year by an average of 11% in 2022. This means that subscription brands are finding ways to grow their average order value, despite the economy and rising costs due to inflation.
In this post, we’ll cover how customer loyalty can improve average order value and lead to greater success for ecommerce merchants.
Key takeaways
- Knowledgeable ecommerce professionals understand the importance of creating strong customer loyalty.
- Boosting customer loyalty—through great customer service, rewards programs, and other tactics—can help boost AOV by strengthening trust in your brand.
The connection between customer loyalty & average order value
When your ecommerce business has loyal customers, who already love your products or services, they’re more likely to spend more money with you in each transaction. How do they spend more money than other customers? They might upgrade their orders to a more premium version (like when upsell offers are shown to them) or they could add products to their order (when given the option for cross-selling). Thanks to these loyal customers, your average order value goes up.
And while we’re focusing on AOV with this post, improving your customer loyalty can actually impact many different key performance indicators (KPIs) for your business—like customer lifetime value (LTV), retention, and more.
How to effectively build customer loyalty
There are a number of ways that ecommerce brands can build a loyal customer base. The first task is to understand what motivates your specific customers to become loyal to your brand. Once you’ve understood this, you can tailor your efforts accordingly.
A few tactics for building strong customer loyalty, and therefore naturally motivating customers to spend more with your store, include:
- Personalization across all communication channels
- Responsive and helpful customer service
- A customer loyalty program
- Easy subscription management
- An online community space
- A strong brand mission
With a combination of these strategies and more, ecommerce businesses can achieve stronger customer relationships and expect loyalty among their customer base.
The importance of measuring customer loyalty
Is your ecommerce business already measuring customer loyalty? If not, you should be.
Without knowing how loyal your customers are, you won’t be able to make adjustments in marketing and product strategy to better suit your shoppers. By measuring customer loyalty, you can gain a baseline for your business and track patterns in customer behavior. With this information, you can hone your approach to product development and other aspects of your business.
How to measure loyalty
Measuring customer loyalty might seem like a vague idea, but in reality there are a lot of different methods for measuring this important metric. Ecommerce businesses can utilize the following tactics to measure brand loyalty:
- Customer surveys
- Customer lifetime value
- Customer retention
- Net Promoter Score (NPS)
- Participation in loyalty programs
You can also regularly calculate average order value and other key metrics for your business and track them over time to identify patterns in customer behavior, highly successful campaigns, and more.
To get the full picture of loyalty, it’s best to look at a combination of metrics and different modes of feedback. Consider these metrics together, in context with each other, to see how your brand loyalty compares. It’s also crucial to continuously measure loyalty so you can continue making improvements.
3 strategies for improving recurring customer AOV through loyalty
Increasing AOV—and with it, profit margins—through loyalty can be done in a variety of ways. In this post, we’re going to focus on three strategies. The bottom line across all of these strategies, however, is to understand customer behavior and shopping preferences so that you can improve average order value through prioritizing brand loyalty.
1. Upselling & cross-selling
As we mentioned in an example above, loyal customers will spend more with your brand often by purchasing more premium products or adding additional products to their usual order. These two strategies are known as upselling and cross-selling, and are effective strategies for online businesses looking to increase AOV through loyalty.
When customers spend more by adding something to their cart or upgrading what they’re purchasing, the average dollar amount per order goes up thanks to the customers’ trust in your brand. If they didn’t trust your brand or have good experiences prior, chances are they wouldn’t be willing to spend those extra dollars.
One Recharge merchant who does a great job of naturally offering cross-selling options is Love Wellness. Whenever customers add an item to their cart, they’re showing additional products that they might be interested in, or that have been popular recently. With just a simple “add to cart” button, they encourage customers to spend a little more.
2. Product bundles
Online stores that offer product bundles can also increase the average value of their orders. Customers who trust your brand and love your products will be willing to purchase products bundled together. It also makes shopping easier for your customers—placing complementary products together makes it simple to shop for the products they want, and a successful product bundling program will boost AOV.
Blume does an amazing job of utilizing product bundles to increase order values. And they can offer these at such a high success rate because they have a strong customer base that trusts their product recommendations. Customers buy their bundles knowing their skincare products are top-notch and because they trust Blume as a brand.
3. Exclusive offers
The final strategy we’ll focus on in this blog is offering exclusive offers to your customers to increase the average amount they spend. Giving the opportunity to receive special offers can create loyalty to your brand by giving the air of exclusivity. Here are a few ideas for your eccomerce store of offers that will increase average order value:
- Offer free shipping always or set a free shipping threshold
- Reduced shipping costs for loyalty program members
- Discounts on repeat purchases or when customers hit a certain order minimum
- Items offered at a discounted price for loyal customers
One Recharge merchant that is utilizing these marketing and pricing strategies is Dae Hair. Customers who subscribe automatically save 10%, plus they qualify for free shipping if they spend more than $70. This encourages shoppers to add more to their cart so they reach the free shipping threshold.
Encouraging repeat customers to spend more
By understanding the connection between customer loyalty and average order value, ecommerce merchants can drive success and retain valuable customers.
Online stores can continuously improve and optimize their tactics to gain higher average order value thanks to continuously measuring brand loyalty. Implementing these strategies will help you develop a loyal customer base and in turn, increase revenue.
Sources
[1] AOV (Recharge ecommerce glossary)
[2] State of Subscription Commerce 2023 (Recharge)
[3] The art of retention: How to keep customers coming back (Recharge)
[4] Gain lifelong customers with these cross-selling tactics (Recharge)
[5] Measuring the success of your product bundling program (Recharge)
