Providing discounts may sound counterintuitive, but it can make the customer spend more as people are often willing to pay for a bargain. Then they are likely to spend more time hunting for further deals.
It will also create an urgency to buy, which can temporarily reduce shopping cart abandonment. Used in conjunction with cross-selling, discounts can significantly ramp up your AOV!
Example: Prime Day
Amazon has turned discounts into an annual event with Prime Day. Every year they push their customers to visit the behemoth eCommerce store and pick up discounted products.
Prime Day in 2022 was very successful for Amazon. Over 2-days, their customers were responsible for purchasing over 300 million items! Although little information is available on how many items are sold on average daily, we know that Prime Day in 2021 sold around 50 million less items.
A loyalty scheme allows customers to work towards a free or discounted purchase. Customers who enjoy your products will make multiple purchases for a future free gift or discounted purchase. There are various ways to build a loyalty scheme. Here are some popular examples:
A points-based loyalty scheme is popular with high-street retailers. Simply spend money, collect points, and redeem them at a time that suits the customer. An example of an effective points programme is Nectar points. Nectar points are effectively a cashback scheme that gives Sainsbury’s customers 0.5% cashback on any purchases from their store or partnered brands.
The best thing about this type of points programme is that the cashback still has to be used on the same business. A customer has to be spending on your platform and not on your competitors to get the biggest benefits.
With a tier programme, you give your consumers a period in which they can earn points. The more points they get, the better rewards they will receive. However, getting to these high tiers involves a significant amount of spending before the rewards are available. With an eCommerce brand, they can get new customers invested in them and incentivise larger transactions by making customers aware that the more they spend, the more they will be rewarded.
Virgin Atlantic has been using a tier programme for many years with their Flying Club. The rewards refresh every year which leads their customers to make larger transactions when the refresh is due, so they can get the best tier reward possible.
A paid programme won’t necessarily increase your AOV, but it will increase your revenue. A Prime membership allows Amazon to take £7.99 monthly from customers that want to be members. They give their members free next-day delivery on millions of products, as well as Prime Video, Prime Music, and other benefits.
The advantage of this type of scheme is that you can use it in tandem with other methods that will increase AOV. This could include a membership that gives customers more frequent discounts or better-packaged deals.