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Thursday, Nov. 25, 2010 at 9:11 am

Conversion Rate is Great But AOV Can Be Better

By Brendan Regan
November 25th, 2010

Today’s post may sound odd coming from a bunch of conversion rate optimization experts, but it’s a reminder that there are other KPIs that deserve our attention as marketers. We tend to have laser focus on conversion rate, and that’s for good reason. It’s a crucial metric for any online business, and it has gained wide acceptance in “The Board Room.”

There’s no reason not to be laser-focused on your website’s conversion rate. But, it’s wise to keep your eyes on other key metrics while you optimize. Like most things in life, if your viewpoint is myopic, you’ll at best miss opportunities, or at worst ruin your business.

For example, we worked with a client this summer to make a series of changes to their website in order to overcome the business challenge of “not selling enough accessories.” To give some context, the client’s site sold core products, it sold supporting accessories, AND it had the potential to bundle core products with accessories.

The problem was that the website made it too hard for customers to “bundle” products together, and didn’t provide enough incentive to do so. The result was decent product sales (at low margin) and poor accessory sales (at higher margin).

Had we narrowed our focus to just conversion rate optimization, we might have optimized the site for selling low-margin products, and what fun is that? When we widened our view of the site experience to start thinking about selling more accessories, it gave us analysts a powerful new perspective.

We had the client create an initial set of “packages” that bundled a core product with several useful accessories. By bundling in higher-margin accessories, the client could offer an attractive discount which provided an incentive, in addition to the added convenience.

These product bundles were placed as up-sells on single-product pages, and the client very quickly noted an uptick in their sales of accessories, attributed largely to the sales of bundles.

We continued to refine the presentation and persuasiveness of the product bundles via three smaller site changes over time. Net result? Their Average Order Value is up 34.94% year-over-year! That’s a nice lift heading into the Holiday shopping season, don’t you think?

Another point of interest is that Conversion Rate stayed relatively flat during this period of time, so again if we’d been too tightly focused on our core metric, we might have missed the fact that something great was happening to the client’s online business.

We estimated the monthly increase in revenue (due to the increase in AOV) to be over $36,000! Imagine making 4 changes to your website and then enjoying an extra $36k a month in perpetuity!

So, to businesses, marketers, and optimizers out there: Yes, it’s good to pick a KPI and focus on it, but make sure when you’re looking at your data that you don’t “miss the forest for the trees.”

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Comments (13)

  1. Obvious really, but so easy to miss an up-sell opportunity like this in the online environment.

    If it works offline, then it’s going to work online too.

    Sometimes clients just need that guidance from the experts!

    Great post, thanks Brendan.

  2. Interesting that the conversion rate didn’t change and yet you’ve been able to bring the client all that revenue they were missing out on.

  3. Great ideas. I just recently started watching my AOVs and realized that some of my highest grossing keywords, weren’t the ones with the most sales or leads, but rather, the highest AOV. Thanks. :)

  4. As an earlier commenter stated, it’s obvious really. The only problem I see with regards to not concentrating on just one KPI (which as you quite rightly state is usually the conversion rate) is that in order to do the correct analysis, or at least accrue the information for a worthwhile analysis, takes too much time for ‘one man bands’ like myself!
    For that reason I have concentrated on conversions and tweeked until I see a response and then analyze the changes that I made. Much more effective from my point of view but if resources are not an issue and are within budget then I would say that following your lead would be a much quicker way to increase site profitabality.

  5. Great Advice! Thanks for sharing Brendon.

    I personally feel that both are important:) And most of the time they’re co-related..that’s my personal experience, other might think differently.

    Eric Carlson
    Publisher

  6. Measuring conversions or website’s performance(CTR etc..)are crucial to know the success rate of your business. While conversion rate is the first step, AOV is the final output. So webmasters should leverage both.

  7. How can the author assume that the approach he used will work for all others….

  8. For eCommerce sites, Google AdWords reporting can illustrate the sometimes imbalanced relationship between conversion rate and revenue contribution. Under the ‘columns’ option ensure you tick the boxes for ‘Conv. rate (1-per-click)’ and ‘Value / conv. (1-per-click)’ and you should see what I mean. That latter figure is a useful additional pointer when deciding which of 2 ad creatives to retire; it’s not always the highest converting.

  9. I just recently started watching my AOVs and realized that some of my highest grossing keywords, weren’t the ones with the most sales or leads, but rather, the highest AOV. Thanks.

  10. nice share, brendan.
    I wondering when can i achieve $36k/month…lol
    but your advice it worth to try,thx again.

  11. I’ve tried to focus my current website on a single value proposition based under the assumption that the more options someone has then the less likely they are to take action.

    Would the focus on average order value work best with physical product based websites rather than information product based websites?

  12. Conversion is very important, because typically it is very low, and any very small improvement to conversion often results into a comparitivley larger change in turnover.

  13. [...] Regan, Conversion Rate is Great But AOV Can Be Better, FutureNow, 25 Nov 2010. Discusses the importance of the Average Order Value (AOV) metric, rather [...]

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