How to Increase Your Average Order Value Using Returns
May 17, 2023
by Rebecca Fox

Returns can be a valuable opportunity to increase your average order value and create a positive customer experience. 

By implementing a customer-centric approach to returns management and adopting strategies such as offering store credit and encouraging exchanges, you can turn product returns into a powerful tool for generating additional revenue and boosting your store’s profitability.

What is Average Order Value (AOV)?

Average Order Value (AOV) is a crucial metric in eCommerce that measures the average amount of money your customers spend on each order.

How to Calculate Average Order Value

To calculate your store’s average order value (AOV), divide the total revenue within a certain timeframe, i.e a year, by the number of orders in that same timeframe.

Average order value = total revenue ÷ total number of orders

Once you know your store’s average order value, you can use it to track how much customers are spending on average and monitor changes over time.

The Impact of Product Returns on AOV

Although at first glance product returns may seem like a negative thing, they actually provide a valuable opportunity to increase your revenue.

When customers return products, it can reduce the total revenue for that order and bring down the AOV for their purchase. However, by offering incentives such as the option to exchange products, you can encourage customers to spend more money on their purchase and generate additional revenue.

For example, if a customer returns a shirt that doesn’t fit, you could offer them a higher-value variant, increasing their purchase value and boosting your store’s average order value. 

Understanding how to increase average order value is essential for having a profitable eCommerce store, and product returns can have a significant impact on this metric.

By using returns as an opportunity to increase AOV, you can turn a potential negative into a positive for your store and boost your profitability.

How to Increase AOV Using the Returns Process

The returns process presents a valuable opportunity to increase your average order value in various ways. 

By implementing strategies like encouraging exchanges, offering store credit instead of refunds, and displaying social proof, you can make returns profitable for your store.

1. Encourage Exchanges

Instead of offering refunds for returned items, encourage customers to exchange them for different items. This keeps the revenue in your store and provides an opportunity to upsell and cross-sell.

To encourage exchanges, make sure to communicate your return and exchange policy clearly on your website and in any post-purchase communications. Provide instructions on how to initiate an exchange and make sure the process is easy and convenient. 

One way to encourage exchanges is to offer free shipping for exchanged items. This incentivizes customers to make an exchange and removes a potential barrier to completing the transaction. 

Another approach is to offer a discount or incentive for exchanging an item for a higher-priced one. This increases the overall value of the exchange and encourages customers to consider higher-priced products they may not have otherwise.

You can also use techniques like personalized product recommendations or discounts to incentivize customers to make an exchange.

It’s important to remember that the exchange process should be as seamless and efficient as possible. Make sure to have adequate inventory and a clear exchange policy to avoid delays or confusion.

2. Set an Order Minimum for Free Returns

To balance the benefits of offering free returns with the costs, consider setting a minimum order threshold for free returns.

For example, you could offer free returns for orders over a certain amount, such as $50 or $100. This encourages customers to make larger purchases and increases your AOV.

Make sure to clearly display the minimum order threshold for free returns on your website and in any post-purchase communications. 

You can also use strategies like countdown timers or limited-time offers to create a sense of urgency and motivate customers to make a purchase that qualifies for free returns.

3. Implement a Loyalty Program

Loyalty programs are a powerful tool for building customer loyalty. Loyal customers can be extremely valuable for your store, as the average amount spent per purchase by loyal customers is 67% higher than by new customers.

Since retaining existing customers is much more cost-effective than looking for new ones, a loyalty program can help you keep customers coming back to buy from your store again and again by rewarding them for spending more.

When creating a customer loyalty program, think about which customers you want to target and what kind of loyalty you want to build. What do you want them to do?

For example, you could offer points or discounts for purchases made with store credit from returns. This increases the value of the return for the customer and encourages them to make additional purchases, boosting their average order value.

Loyalty programs can take various forms such as point systems, tiered rewards, exclusive discounts, or referral programs. 

Your rewards should be relevant to your target audience and align with your brand’s messaging and branding.

4. Offer Store Credit Instead of Refunds

Instead of issuing a refund, offer the customer the option to receive store credit or a gift card that can be used towards future purchases. 

This keeps the customer within your eCommerce store and provides an opportunity to increase their AOV by encouraging them to make additional purchases.

To encourage customers to choose store credit, consider offering an incentive such as a higher credit amount than the refunded amount or a bonus credit amount for future purchases. This incentivizes customers to choose store credit over a refund and increases the overall value of the transaction.

5. Provide a Personalized Customer Experience

Personalization is an effective way to create a positive customer experience and increase the likelihood of repeat purchases. 

A positive experience at a store increases the chance that the customer will seek out that store again next time. 80% of customers are more likely to make a purchase if they are provided with a personalized experience.

Use data such as previous purchases, browsing behavior, or demographics to personalize the shopping experience for each customer. This can include customized product recommendations, personalized offers, or personalized post-purchase follow-up emails.

To implement personalization effectively, use a combination of automation and human interaction. Use data and algorithms to make relevant suggestions, and provide opportunities for customers to interact with your store and provide feedback or input.

6. Automate Your Returns Process

Automating your returns process can save time and resources while providing a faster and more convenient experience for customers. 

By using tools such as returns management software, you can streamline the returns process, resulting in a better customer experience and increasing the likelihood of repeat purchases.

Self-service return portals enable customers to initiate returns and exchanges on their own, reducing the likelihood of errors and delays in the returns process.

In addition to increasing efficiency, automated returns can provide an opportunity to increase AOV by offering customers various options and incentives throughout the returns process.

For example, you can set triggers to automatically offer certain customers the option of exchanging their returned item for a more expensive item and paying the difference, or offer a discount code for future purchases when they choose store credit instead of a refund.

Providing a convenient self-service returns process and incorporating personalized upsell opportunities into the returns process helps increase the chances of your customers making additional purchases and being valuable to your business.

Chat with our experts to boost your customer return experience and LTV today.

7. Display Social Proof

Social proof can be a powerful tool for increasing AOV. 97% of customers look at product reviews and ratings before making a purchase.

Potential customers are more likely to trust information from other customers than from the eCommerce store itself. When they see that others customers have had a positive experience with your returns process, they are more likely to trust and buy from your store.

One effective way to collect social proof is by requesting reviews from customers after they’ve completed a return, and displaying that user-generated content on your product pages and social media.

8. Send Post-Purchase Emails

Post-purchase emails are an effective way to communicate with customers after a purchase and encourage them to make additional purchases. 

Engage with your customers by sending them order confirmation emails, thank you emails, or asking for product reviews.

One way to use post-purchase emails to increase AOV is to recommend related products based on the customer’s purchase history or browsing behavior. For example, if a customer just bought a shirt, you can recommend a pair of pants or a jacket that would complement it. 

Personalized recommendations encourage additional purchases by providing a relevant and engaging shopping experience.

Another approach is to offer discounts or promotions on future purchases in your post-purchase emails. Offer a discount code for the customer’s next purchase, or provide a limited-time promotion on a specific product or category. 

Post-purchase emails can also be used to gather feedback and improve the customer experience. You can include a survey or feedback form in your post-purchase emails to gather insights into your customers’ shopping experience and identify areas for improvement. 

Make sure to include clear calls-to-action and provide relevant and engaging content that encourages the customer to take action. You can also personalize the emails with the customer’s name and purchase history to provide a more personalized experience.

Maximize AOV with Effective Returns Management

Returns can be a valuable opportunity to enhance loyalty and trust in your store. By implementing strategies such as offering store credit instead of refunds and encouraging exchanges, you can turn returns into a positive shopping experience that generates additional revenue.

To fully capitalize on returns as an opportunity for increased profitability, use ReturnGO to provide a personalized and engaging shopping experience that meets the needs and preferences of your customers.

A customer-centric approach to returns management will help you increase your average order value and boost your store’s profitability while improving the customer experience.

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