Increasing average order value (AOV) is a tried-and-true strategy for maximizing revenue from existing customers. You’ve been there, done that. However, now that the subscription eCommerce market is growing by leaps and bounds, you may want to consider how you can apply this strategy to your subscription customers.
- Initial subscription purchase
- Boosting ASOV for existing subscriptions
- Best practices for increasing ASOV
Is it really all that different? Yes and no. The tactics can be similar. What’s more nuanced is the approach. Unlike single-purchase buyers, with subscribers you’re investing in what’s hopefully an ongoing, long-term relationship that generates consistent revenue. This difference makes it essential to be very thoughtful about how you persuade customers to spend more so that you don’t induce churn.
At a high level, the key to successfully driving increased average subscription order value (ASOV) is carefully considering how to grow the relationship by providing value to the subscription customer over time.
At a high level, the key to successfully driving increased average subscription order value (ASOV) is carefully considering how to grow the relationship by providing value to the subscription customer over time. Yes, you’re asking them to buy more, but the upsell, cross-sell, etc. must be highly relevant and perceived as useful. You want your subscription customers to think, “That’s a good suggestion, they’ve really got my back,” or “That’s a great offer that gets me the most for my money each month.”
Ensuring product recommendations are relevant and valuable depends on leveraging analytics and personalization tools so that you promote the right products at the right price point at the right time. Additionally, when developing plans for increasing ASOV, it’s useful to bucket subscription customers into two categories: initial sign-ups and ongoing subscriptions.
Increasing ASOV off the bat: Initial subscription purchase
Increasing ASOV for new customers can be a delicate dance. You want to make a stellar first impression. Subscribers should be able to sign up with as little friction as possible, so any additional offers should not distract them from this first, very important step. Your primary goal is to get them To. Sign. Up. However, there are gentle nudges that can produce a win-win for your business and the customer – if positioned right. Let’s take a look at a few examples.
Offering free shipping with a minimum purchase amount is a great way to increase ASOV from the get-go. When a customer is close to your predetermined threshold for free shipping, it’s smart to present relevant subscription cross-sell items to take them over the line. They get another useful product for what they’d pay in shipping anyways – a valuable trade-off. And your business benefits from a slightly higher recurring payment.
Offering an upsell like a kit that bundles products together is another tactic to increase ASOV at the start of the subscription customer relationship. For example, for a customer who is about to purchase a subscription for razors, you could offer a razor kit that includes shaving cream and after-balm (and sweeten the deal with a 10% discount). Even if they don’t bite, most customers will appreciate a thoughtful suggestion like this that could help to optimize their experience with the product they are purchasing. Also, introducing compatible products at this point may plant a seed for later.
Everyone likes to get a good deal. For some products, offering discounts for buying in bulk can be a compelling offer to boost ASOV. The trick is identifying which products make sense for a volume discount. If a customer purchases more of a product than he/she can use, it can increase the risk of subscription cancellation. To mitigate this risk, it’s essential to enable customers to easily adjust their subscription quantities and/or delivery cadence on an ongoing basis.
Boosting ASOV for existing subscriptions
If you’re not successful increasing ASOV at the point of a customer’s first subscription purchase, not to worry. There are many opportunities for increasing ASOV over time with subscription customers. Again, providing value is the key to success.
Delivery reminder: Quick & easy add-ons
When you send an email or text message notifying a customer of his/her upcoming subscription delivery, it can be a great opportunity to offer relevant add-ons. Suggest targeted complementary products that can be added to a recurring order or as a one-time purchase (ReCharge now enables this capability). The offer should be relevant to the product the customer is ordering, priced as an “add-on” (i.e., low), and easy to add directly from the email or SMS (i.e., no account login required). For example, for a customer who has a subscription for protein powder, you could highlight a new line of flavors with an offer to add a sample pack to the upcoming order.
Delivery reminder: Too much? Gift to a friend instead!
When we love a product, often we want everyone we know to try it. You can make it easy for your brand evangelists to share by offering a new option for managing their subscription accounts. Typically customers have the choice to “skip” a shipment if they have too much product or will be out of town. What if, instead, they could divert their upcoming subscription delivery to a friend? Another win-win: your customer does something nice for a friend and feels great about it. And, not only do you retain that revenue, you’ve reached another potential customer in the bargain.
New model upsell
While some customers want to stick with what they know, most appreciate a heads up when there’s a new (better?) alternative to the product they use. This tactic also can serve to re-engage long-time customers to become excited about your products again. Sending notification to customers about a new version or model of a product they’re currently purchasing can incentivize them to upgrade – particularly if the new version only costs slightly more. For example, a new “Pro Plan” dog food formula that costs $5 more/month.
Although gifting isn’t increasing a customer’s ASOV per se, this is a two-fold opportunity to increase revenue and potentially acquire a new customer in the future. After all, people are more likely to buy from a brand when referred by a friend. The holiday season is a prime time to try this tactic. You’re adding value by suggesting a thoughtful gift idea and making it easy to check someone off a customer’s gift list.
Quick review: Best practices for increasing ASOV
To recap, the following are some key takeaways of what’s important to consider to successfully increase the average order value for your subscription customers.
- Always add value: This can’t be stressed enough. Make sure you evaluate any subscription campaign or personalization strategy through this lens. You don’t want subscription customers to feel like you’re arbitrarily pushing products on them – only offer products that are personalized and compelling. Marry the business goal with what’s right for the customer.
- Choose “right-priced” items: Ensure the cost of the cross-sell or add-on products are within the realm of what needs to be spent. For example, to cross the free-shipping threshold, don’t highlight $50 products if the customer only needs to add $10 to the cart. Test to see what gets you the best results with different customer segments.
- Consider cadence: If you want to cross-sell a complementary product as a permanent addition to a recurring order, offer complementary products that would be consumed on the same timeframe as the main product (such as shampoo and conditioner, not shampoo and styling pomade).
- Leverage personalization technology: One of the great things about offering subscriptions is that repeat customers provide the opportunity to collect more data over the long term on shopping behaviors, preferences, etc. Feed this data into personalization tools that use machine-learning to help more finely tailor your offers (e.g., right item, right price, right time) at scale.
Timing is everything
When is the right time to implement a strategy to increase ASOV? We recommend that brands focus on boosting ASOV for subscription customers only after they see good results from their retention efforts. You want to make sure existing subscription customers are happy with the brand experience before you try to sell them more. Once retention rates are in a good place, then looking at ways to boost ASOV is the next step. We can help you get there – let’s talk!