The average abandoned order value on a Web site is a critical Key Performance Indicator (KPI) that helps companies understand the financial impact of shoppers leaving a Web site without completing their purchase.
By quantifying this metric, ecommerce platforms can measure the potential revenue left on the table and develop strategies to recapture that value, thereby improving their overall revenue stream.
Key Takeaways
- Definition: Average Abandonment Order Value is the average monetary value of products added to shopping carts, but not purchased on an ecommerce platform.
- Calculation: Average Abandonment Order Value is calculated by dividing the total value of abandoned orders by the number of abandoned orders.
- Strategic Importance: Understanding Average Abandonment Order Value helps companies assess the financial impact of shoppers leaving without completing their purchase and develop strategies to recapture that value.
- Optimization Strategies: Analyzing Average Abandonment Order Value can provide insights for revenue recovery, website optimization, pricing and promotion strategy, consumer behavior analysis, and marketing campaign effectiveness measurement.
- Limitations: Average Abandonment Order Value may not reflect overall customer shopping behavior, may be influenced by outliers, does not differentiate between new and returning customers, does not provide insight into purchase frequency, is subject to seasonal variations, and does not directly indicate profitability.
- Complementary metrics: Average abandoned order value should be considered alongside other metrics such as total abandoned sales, cart recovery rate, bounce rate, checkout abandonment rate, average order value (AOV), and product return rate for a complete understanding of ecommerce performance.
Why does Average Abandonment Order Value on Website matter for your business?
Understanding the Average Abandonment Order Value can provide various insights and benefits for an ecommerce enterprise:
- Revenue Recovery: Recognizing the average value of abandoned carts can help a business prioritize efforts to recover this potential lost revenue through targeted marketing campaigns or remarketing strategies.
- Website Optimization: A high Average Abandonment Order Value might indicate user experience issues, such as complicated checkout processes, lack of trust signals, or hidden fees that deter customers from completing their purchase.
- Pricing and Offers Strategy: If the abandoned cart value is high, businesses might need to reconsider their pricing strategy, discounts, or offer additional incentives to convert hesitant shoppers.
- Consumer Behavior Analysis: Assessing the products most commonly found in abandoned carts can shed light on specific items or categories that may be affecting the overall abandonment rate.
- Marketing Campaign Effectiveness: By analyzing the Average Abandonment Order Value, businesses can measure the effectiveness of their marketing campaigns. For instance, if a promotional campaign results in a lower average abandonment value, it might suggest a successful strategy.
How to calculate Average Abandonment Order Value on Website (AAOV)?
Explanation of the parts of the formula:
- “Average Abandonment Order Value” represents the average value of orders that were abandoned on the website. It is calculated by dividing the total value of abandoned orders by the number of abandoned orders.
- “Value of abandoned orders on the website” refers to the total monetary value of orders that were abandoned by customers during the checkout process.
- “Abandoned orders on Website” represents the total number of orders that were abandoned by customers on the website. These are orders that were not successfully completed and did not result in a payment.
Example Scenario
Let’s consider a certain month where:
- The total value of abandoned orders on the website is $5,000.
- The number of abandoned orders on the website is 100.
Inserting the numbers from the example scenario into the formula:
- Average Abandonment Order Value = $5,000 / 100
- Average Abandonment Order Value = $50
Therefore, the average value of each abandoned order on the website during this month is $50.
Tips and recommendations for reducing Average Abandonment Order Value on Website
Streamline the checkout process
Streamlining the checkout process is critical to improving the average order value on your website. By eliminating unnecessary steps or fields, you can reduce friction and make it easier for customers to complete their purchases. In addition, offering multiple payment options gives customers the flexibility they need, and implementing one-click checkout for returning customers can significantly speed up the process, increasing the likelihood of order completion.
Transparent pricing
Transparency is key to reducing shopping cart abandonment. Clearly stating all costs upfront, including taxes and shipping fees, helps to prevent any unexpected surprises at the final stage of checkout. By being upfront about pricing, you build trust with your customers and minimize the chances of them abandoning their orders due to hidden fees or charges.
Offer guest checkout
Forcing customers to create an account before making a purchase can be a major deterrent. By offering a guest checkout option, you remove this barrier and allow customers to complete their purchases without additional hassle. This can significantly reduce shopping cart abandonment rates and improve the average order value on your site.
Ensure security
Security concerns are a common reason for shopping cart abandonment. To address this, it is important to highlight the security measures in place for payment processes. Displaying trust signals such as SSL certificates or security badges can reassure customers that their personal and financial information is safe. By proactively addressing security concerns, you can increase customer confidence and encourage them to complete their orders.
Offer multiple payment options
Offering a variety of payment options can help prevent customers from abandoning carts due to payment restrictions. Some customers may prefer to pay with credit cards, while others may prefer digital wallets or alternative payment methods. By offering a variety of payment options, you can accommodate different customer preferences and increase the likelihood of completing a purchase.
Implement exit-intent pop-ups
Exit-intent pop-ups can be a powerful tool for capturing the attention of visitors who are about to leave your site. By offering a special discount or free shipping in these pop-ups, you can incentivize customers to reconsider abandoning their shopping carts and complete their purchases. This strategy can help improve average order value by converting potential abandoners into paying customers.
Examples of use
Retargeting with Personalized Discounts
- Scenario: An online electronics store identifies that high-ticket items like premium headphones, 4K monitors, and high-end laptops often have higher Average Abandonment Order Values.
- Use Case Application: The store could initiate a retargeting campaign specifically for visitors who abandoned carts containing these high-value products. A tailored email could be sent to these potential customers offering a limited-time discount or emphasizing unique selling points of the products, encouraging them to reconsider and complete their purchase. By strategically providing an incentive for high Average Abandonment Order Value items, the store stands to reclaim significant potential revenue.
Feedback Loop for Abandoned Carts
- Scenario: A DTC luxury fashion brand notes that their high-end designer dresses are often added to carts but not purchased, contributing to a higher Average Abandonment Order Value.
- Use Case Application: To understand the specific reasons behind the abandonment, the brand could send a feedback request email to those who abandoned their carts. This could include a short survey or open-ended questions about their reasons for not completing the purchase. Insights from this feedback can help the brand address specific issues, whether they’re related to price, product details, or website experience.
Flash Sales on High Abandonment Items
- Scenario: A DTC kitchen appliance brand discovers that their advanced blenders and mixers, which are on the pricier side, are consistently abandoned in carts.
- Use Case Application: Recognizing the high Average Abandonment Order Value of these products, the brand could host a limited-time flash sale, offering these items at a discounted rate. Promoting this flash sale through email marketing and social media can attract potential customers and encourage them to finalize their purchases, thereby reducing the Average Abandonment Order Value.
Introducing Financing Options
- Scenario: An online furniture store calculates a significant Average Abandonment Order Value for items like luxury sofas, beds, and dining sets.
- Use Case Application: Given the high price point of these products, the store might introduce financing options, allowing customers to pay in installments. This breaks down the barrier of a large upfront cost and might persuade customers to finalize their purchase, ultimately decreasing the Average Abandonment Order Value.
Exclusive Preview for Loyal Customers
- Scenario: A DTC jewelry brand finds that their exclusive gemstone collections often get abandoned in carts.
- Use Case Application: The brand could offer their loyal customers an exclusive preview of new gemstone collections before they’re released to the public. This creates a sense of exclusivity and urgency, prompting these customers to make a purchase before the general public can access the products. Offering special perks to loyal customers can help in reducing the Average Abandonment Order Value associated with premium items.
Average Abandonment Order Value on Website SMART goal example
Specific – Reduce the average abandoned order value on the site by 20% ($10 per order).
Measurable – Average abandoned order value is tracked before and after implementation of targeted strategies.
Achievable – Yes, by analyzing customer behavior, implementing personalized incentives, and improving the checkout process.
Relevant – Yes. This objective aligns with the goal of increasing sales and improving overall profitability.
Timed – Within three months of implementing the strategies.
Limitations of using Average Abandonment Order Value on Website
While the Average Abandonment Order Value on the website can provide insights in ecommerce analysis, it also has limitations to consider:
- Doesn’t Reflect the Full Customer Journey: Abandonment order value only captures a specific point in the customer journey and may not reflect the customer’s overall purchasing behavior or lifetime value.
- Can Be Influenced by Outliers: Unusual high or low abandonment order values can skew the metric and distort the perception of typical customer behavior.
- Doesn’t Differentiate Between New and Returning Customers: The metric does not differentiate between new and returning customers, which is important in understanding customer loyalty and lifetime value.
- No Insight into Purchase Frequency: Abandonment order value doesn’t provide information on how frequently customers make purchases, which can impact overall revenue.
- Subject to Seasonal Variations: Like other metrics, abandonment order value can fluctuate seasonally, making it necessary to compare values from similar periods.
- Not Indicative of Profitability: A high abandonment order value does not necessarily mean higher profits, as factors like discounts or costly items can impact profit margins.
- Overemphasis Can Lead to Neglecting Other Metrics: Focusing solely on abandonment order value might cause businesses to overlook other important metrics like conversion rate, acquisition cost, and retention rates.
- Lacks Context Without Additional Metrics: Abandonment order value should be considered alongside other metrics to gain a comprehensive understanding of business performance.
In summary, while abandoned order value is a useful metric, it should be used in conjunction with other metrics to provide a more complete assessment of a company’s performance.
KPIs and metrics relevant to Average Abandonment Order Value on Website
To gain a holistic understanding of your ecommerce performance in relation to the Average Abandonment Order Value, it’s essential to track several related KPIs:
- Total Abandoned Revenue: This metric sums up the total value of all abandoned carts on your platform. Tracking this alongside the Average Abandonment Order Value can help you quantify the overall potential revenue left on the table.
- Cart Recovery Rate: This measures the percentage of abandoned carts that were later recovered through retargeting efforts, remarketing campaigns, or other initiatives. A high cart recovery rate can help mitigate the impact of a high Average Abandonment Order Value.
- Bounce Rate: Bounce rate represents the percentage of visitors who navigate away from the site after viewing only one page. If you’re witnessing a high Average Abandonment Order Value, it’s crucial to see if users are also bouncing at a higher rate, indicating potential site experience issues.
- Checkout Drop-off Rate: This pinpoints the specific stage of the checkout process where most users abandon their carts. For instance, if many users drop off after seeing shipping fees, it might be time to revisit your shipping policy.
- Average Order Value (AOV): AOV represents the average amount spent each time a customer places an order. Comparing AOV with Average Abandonment Order Value can provide insights into the potential revenue discrepancy between successful purchases and abandoned carts.
- Product Return Rate: If customers are frequently returning products, it might influence their decision to abandon carts in the future. High returns could indicate product quality issues or misaligned customer expectations.
By evaluating the Average Abandonment Order Value in tandem with these related KPIs, businesses can develop a more nuanced understanding of their ecommerce landscape. This empowers them to create strategies that not only reduce abandoned carts but also elevate the overall shopping experience and boost revenue.
Final thoughts
Average abandoned order value is more than just a number. It’s a reflection of potential revenue opportunities and areas of improvement for an ecommerce business. By taking strategic action to reduce this metric, businesses can not only recapture lost revenue, but also provide a better shopping experience for their customers.
Average Abandonment Order Value on Website (AAOV) FAQ
What is Average Abandonment Order Value?
It’s the average monetary value of products added to shopping carts but not purchased on an ecommerce platform.
How can understanding this metric benefit my business?
By understanding the Average Abandonment Order Value, businesses can gauge the potential revenue they’re missing out on and implement strategies to recover these funds.
What are the common reasons for high Average Abandonment Order Value?
Reasons may include complicated checkout processes, hidden costs, lack of payment options, or concerns about payment security.
How can I reduce cart abandonment?
Streamlining the checkout process, being transparent with costs, offering various payment options, and reassuring customers about the security of their data can help reduce cart abandonment.
If I reduce my Average Abandonment Order Value, will my revenue increase?
While it’s a strong indicator, it’s essential to consider other factors like traffic and conversion rate. However, generally, a decrease in Average Abandonment Order Value correlates with an increase in completed purchases and thus, revenue.