As an ecommerce retailer, there are many key metrics that are important for you to know. How to interpret those key metrics will help you to gain valuable insight about your customers, their buying methods, and how to continually improve their shopping experiences to increase your store’s profitability.
Just as there are many types of online businesses, there are many types of online customers. Most online retailers will tell you that the most common type of buyer they encounter is the value shopper. A value shopper is someone who is looking for the best possible value for the cost of the product or service. That doesn’t necessarily mean that they are looking for the lowest price, it means that they are focused on the value per dollar they spend.
It’s important to understand the buying habits of all of your customers so that you can adjust products, pricing, marketing, deals, and discounts to optimize revenue and profitability. There are some real advantages to determining who your value shoppers are and how to work with them to increase their buying on your site.
When you are able to identify those customers who are value-sensitive you can employ the right strategies to encourage them to buy more products or more profitable products, which will increase your bottom line. Here are some tactics that may appeal to the value shopper:
While these strategies are efficient for all customers, they are especially useful for value shoppers as they encourage them to spend more, increase their average order value (AOV), and increase your profitability.
Adding recommendations for additional purchases as your customers go through the checkout process often works. For example, offer a package of socks to go with the tennis shoes they are ordering.
Offering some of your more profitable products with fast-selling (but lower profitability) products may help increase your margins. Read our strategies for successful product bundles.
This increases the value of the customer’s products with an increase in price. For example, offer a similar, higher-value item instead of the one that is in their cart. Go in-depth on our Cross Selling strategies here.
Offer discounts for buying multiples of the same product.
Offer free or discounted shipping with a specific minimum purchase.
Calculating your value shoppers is complicated. There isn’t a simple calculation that is going to tell you who your value-sensitive shoppers are. However, you can use the AOV, with some minor adjustments, to have an idea of whether your customers tend to order more profitable or less profitable products. If your average sale is on the low end, then you likely have more value-sensitive customers. Using the right strategies (those listed above) will help you increase your customers’ AOV and overall profitability.
Average order value (AOV) is easy to calculate:
AOV = total sales amount divided by the total number of sales
To illustrate this, imagine you sell running shoes. Your total sales for last month were $6,700 and you had 90 sales. $6,700 divided by 90 equals $74, so your AOV was $74.
Remember, the AOV does not take into account the amount of profit, only the amount of revenue. However, to get a better perspective on your value shoppers, you can substitute total net profit in place of total sales. That will show you what your average profit per sale is.
To understand the overall profitability of each of your customers, you have to break down your calculations to the customer level. If you have more than just a few customers, you can count on that taking a lot of time and brain power. But when you have the right software solution, the data you need is right at your fingertips, available quickly and easily. Glew offers a full array of ecommerce reporting and analytics that will help you determine just what type of shoppers you have so you can appeal to them specifically.
Let Glew help you make sound business decisions about your product line. Try us for free for 7 days.
Connect your data for a 10-day free trial today - no credit card or commitment required.