How Live Chat Can Help Improve Average Order Value

By in LiveChat Blog > Ecommerce,
average order value

I’m sure most – if not all – ecommerce store owners will agree that the only thing better than making a sale is making an even bigger sale.

Whether selling more big-ticket items than usual or offloading an increased number of small-ticket products during individual transactions, we all strive to sell as much as we possibly can (while simultaneously attempting to minimize the number of resources we invest in doing so).

We want our Average Order Value to continuously be on the up and up.

In this article, we’re going to discuss how you can use on-site live chat to make sure this happens.

Before we dive in, though, let’s hammer out exactly what Average Order Value is, and why you should focus on improving it in the first place.

What is Average Order Value, and why is it important?

As the name suggests, Average Order Value (AOV) measures the average amount of revenue a company generates per transaction.

average order value

To calculate your company’s AOV, simply divide the amount of revenue you’ve generated over a specific period of time by the number of sales transactions that have occurred over that same time period.

As a simple example, let’s say you have three customers over the course of a day:

  • Customer A spends $30 on a single transaction
  • Customer B spends $60 during their transaction
  • Customer C spends $10 during their purchase

In total, your company generated $100 worth of sales over three transactions. Your AOV, then, would be $33.33.

While this is pretty straightforward, there are a couple things to take note of, here:

First, the number of items a customer purchases in a given transaction doesn’t matter. Customer A may have purchased three items that cost $10 each, while Customer B may have purchased one item that costs $60; if the items were purchased all at once, it counts as a single transaction.

Along with this, separate purchases by a single customer still count as separate transactions. For example, if Customer A came back later on in the day and purchased another $20 worth of items, the total number of transactions for the time period would then be four (and, of course, the final AOV would change, as well).

Keeping track of your AOV – and continually focusing on improving it – is important for a number of reasons.

First of all, you certainly want to know, on average, how much revenue your business is generating per transaction. You can use this number to set goals for the future, determine a potential need to make pricing adjustments, or simply compare your company’s performance to that of your industry’s average.

Beyond this “face-value” information, you can also use AOV to get a feel for how your customers tend to shop at your store and to gauge your ability to put your customers into “buying mode.”

For example, a low AOV may tell you that your customers come to your ecommerce site looking to make a single purchase – and end up purchasing only that item. On the other hand, a higher AOV might be a sign that your customers come to your site to browse around – and end up making additional purchases in the process.

(Note that you’ll definitely need to dig a bit deeper into your customers’ shopping habits and purchasing trends to get a better idea of what your current AOV really means. The first step, though, is to take note of your AOV in the first place.)

average order value

Improving your AOV does more than simply increasing the amount of revenue your company generates per transaction, too.

For one thing, an increased AOV generally correlates to an increase in customer lifetime value. Going back to our example from above, if Customer A begins habitually spending $35 per transaction (up from $30), their LTV will essentially skyrocket over time.

An increase in AOV also typically correlates to a decrease in your organization’s overall cost per sale.

Again using our example from above, it won’t cost near as much to get Customer A to spend $5 more per transaction than it would get a brand new customer to spend $5. And, once the extra investment in increasing Customer A’s AOV becomes profitable, it will pay off in dividends moving forward.

As an added bonus, the more you save on cost per sale, the more money you’ll have to invest elsewhere. In other words, by increasing your AOV, you’re not just making more money upfront – you’re also ensuring that your overall budget can be stretched even further over time.

How live chat can lead to an improved Average Order Value

Let’s dig into some of the ways live chat can contribute – either directly or indirectly – to an increase in Average Order Value.

1. Live chat facilitates engagement

While the advent of ecommerce has, in general, made the process of shopping and making purchases incredibly convenient in a number of ways, one disadvantage of online stores (when compared to their brick-and-mortar counterparts) is that it’s a much more hands-off process.

Whereas in physical retail stores customer service staff members are available whenever a customer is in need, this typically isn’t the case when shopping online; ecommerce customers are generally on their own. Or, at the very least, they’ll need to actively reach out to the company’s service department if they’re in need of assistance (rather than receiving proactive service upon logging onto the site in the first place).

Of course, live chat changes all that. Using live chat technology, you can proactively reach out to your site’s visitors, facilitating engagement with them in the process.

By engaging with your potential customers via live chat, you accomplish a number of things. For one, you make clear that you’re prepared to help them with whatever questions or issues they may have when browsing your site and your products. Additionally, you ensure that you’ll be able to provide such assistance in a timely manner (a major expectation of the modern consumer).

This proactive offering of customer service and support typically increases the level of trust your visitors place in your company. This, in turn, can potentially lead to an overall increase in AOV – and many other improvements, as well.

average order value

Again, we can’t necessarily claim that proactively facilitating engagement with your ecommerce customers directly affects your AOV; but it’s certainly a contributing factor.

2. Personable and personalized messaging

Live chat enables you to inform your visitors that you’re readily available whenever they need you. Taking this a step further, live chat makes it possible for you (or a representative of your company) to communicate with your customers on an authentic, human-to-human basis.

(Yes, chatbots can definitely be effective…but human interaction is always preferable.)

In the screenshot above, the service representative introduces herself rather cordially but takes on a more excited tone as she fulfills the customer’s request. Such a simple tweak can make a world of difference in terms of the customer’s overall experience.

(To elucidate, imagine if Amy’s response was “The cost of shipping is $0.00. Your shoes will arrive on April 25th, 2018.” From the customer’s perspective, it just wouldn’t have the same “feel,” would it?)

Essentially, live chat enables you to tailor your manner of speaking to your customer’s mood and/or outlook.

As we’ll talk about in a bit, a skilled live chat representative will quickly be able to tell whether to take a more laid-back, jovial approach or to be more serious and empathetic to a given customer depending on the current circumstances.

In addition to being personable, live chat enables you to also personalize a specific engagement, as well. This means going beyond the surface of a given conversation, and working to determine exactly how you can provide for the needs of each customer you interact with via live chat.

Again, this all ties back into building trust and forging an authentic relationship with your customers. As reported by Certona in 2014, such personalized service and messaging can lead to an astounding 50% increase in Average Order Value – whether directly or indirectly.

3. Upselling and cross-selling

Now, let’s dig into two ways in which live chat absolutely affects Average Order Value in a direct manner.

As a quick review:

Upselling is the process of presenting a more valuable product or service to a customer who shows an interest in purchasing a product or service of lesser value. For example, a customer service representative at an Apple Store might try to get a customer to purchase an iPhone X with 256GB hard drive rather than the 64GB model.

Cross-selling, on the other hand, is the process of presenting additional, complementary items or services to a customer who shows intent to purchase a different item. For example, the service rep from our hypothetical Apple Store may point the customer toward a variety of phone cases, or an insurance plan for their new phone.

It doesn’t matter whether the customer spends more on a single, upgraded item (upselling), or on multiple smaller items (cross-selling); as long as it’s all in one purchase, it counts positively toward your AOV.

Now, while there are many ways to automate upselling and cross-selling offers on your ecommerce site (e.g., predictive analytics, marketing automation), live chat, again, allows you to proactively personalize these offers for each of your customers.

average order value

To illustrate, let’s look at how such techniques work without live chat in play:

  1. The customer adds a fishing pole to their online shopping cart,
  2. Using predictive analytics, the next page provides a list of three related items the customer may also be interested in (e.g., a reel, a spool of fishing line, and a pack of lures),
  3. The customer either decides to add the additional items to their cart – or simply move forward with their original purchase as intended.

While this method certainly can lead customers to end up making additional purchases, it also leaves this possibility largely up to chance. Not only do the suggestions sometimes come off as an afterthought, but, as the suggestions offered are generated via algorithms (rather than human interaction), they may not be all that accurate in the first place.

Now, imagine live chat is thrown into the mix:

  1. The customer adds a fishing pole to their online shopping cart,
  2. Using predictive analytics and a real-world understanding of the customer’s needs, a live chat representative reaches out and provides laser-targeted suggestions to the customer (e.g., a more durable fishing pole, lures for a specific type of fishing, etc.),
  3. While, of course, the customer may still object to the upsell or cross-sell, the additional personalization makes them just that much more likely to increase their order value.

Not only can the live chat representative immediately provide more accurate suggestions to ecommerce customers, but they can also probe for a deeper understanding of the customer’s needs, as well.

Using the above example, the representative might determine that the customer hopes specifically to catch largemouth bass – and can provide numerous product suggestions that will optimize their bass fishing experience.

Now that we’ve gone over how live chat can lead to an increase in your ecommerce store’s Average Order Value, let’s briefly discuss what you’ll need to do when implementing it.

Live chat best practices

Of course, simply providing a live chat experience to your online customers isn’t enough to increase your AOV. As with everything else you offer your customers, you need to optimize the experience for it to be effective.

1. Make live chat available on all pages

You don’t need me to tell you how often modern consumers jump from page to page during their typical virtual shopping session.

Whether they’re opening fifteen different product pages on fifteen different tabs or clicking from page to page on a single tab, your customers likely don’t stay on a single page for too long. So, for your live chat feature to be effective, you need to ensure that it follows them from page to page.

(In fact, the ability to multitask while live chatting is one of the reasons consumers love the feature in the first place.)

Now, you want to be sure that your live chat feature is set up so that a single session follows your customers from page to page (rather than beginning a new chat with each new page). This, of course, will ensure a continuous experience for your customers – and will ensure you don’t unintentionally overextend your live chat staff.

average order value

2. Ensure your staff is prepared

As we mentioned in the previous section on upselling and cross-selling, your staff’s ability to engage with and provide value to your customers is essential to the success of your live chat initiatives.

Most importantly, your live chat representatives need to be knowledgeable with regard to:

  • Your customers’ needs and expectations,
  • The products or services your company offers that provide for these specific needs
  • The optimal offer for a specific customer that will both enhance the customer’s experience and improve your Average Order Value in the process

Additionally, your live chat reps need to be able to engage with your customers in a personable and empathetic manner. While you’ll want to create a general “script” for them to follow when initiating contact with customers, your live chat representatives should also be free to engage authentically with them in order to best meet their needs, as well.

Essentially, your live chat reps should be equipped with the same skills they would have if your store was of the brick-and-mortar variety. Like we said before, one of the main reasons live chat exists in the first place is to simulate the real-world shopping experience as best as possible.

3. Focus on continuous improvement

As with all of your marketing initiatives, you want to keep a close eye on how your use of live chat has led to improvements within your organization over time.

For our purposes, you want to determine how live chat has affected your overall Average Order Value. While you may be able to draw general correlations based on the increase in AOV since you began implementing live chat, you’ll also want to assess specific instances to be sure that a live chat session specifically resulted in a customers increasing their order value.

Now, you can look at this in two ways:

You can assess individual instances in which a customer increased their order value after engaging with a live chat rep. For example, if they added one item to their cart, spoke with a representative, then added a suggested item to their order, it’s safe to assume the engagement led to this addition.

average order value

You can also look at the overall AOV of a long-time customer, and analyze how (or if) a live chat instance affected such. For example, if a customer typically spends $20 when they log onto your site, but they spend $30 after a specific live chat instance, you’ll want to take a closer look at why the session was so effective.

And, of course, as you pinpoint what’s working – and what isn’t – with regard to your live chat representatives’ ability to increase your customers’ AOV, you’ll want to focus on making the appropriate improvements moving forward.

Where do you go from here?

As we just discussed, you always want to keep your eyes on the future with regard to your live chat initiatives.

(Believe us: There’s a lot to look forward to.)

The name of the game will always be providing a more personalized, convenient, and authentic experience for your ecommerce customers. The better you’re able to do so, the better your chances of seeing your AOV steadily increase become.

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