Acquiring new customers isn’t always the best way to increase revenue. In fact, it’s just one of many things that ecommerce business owners can do to reach the level of success that makes this all worth while.
- Increase the customer average order value (AOV)
- Increase a customer’s average purchase frequency (APF)
- Acquire new customers
Current customers are nine times more likely to reorder than a first time buyer.
Increasing your customers’ average order value and average purchase frequency is not only cheaper through email marketing, but also several times more profitable than customer acquisition.
How to Maximize Your Ecommerce Revenue
Your store’s primary goal should be building retention. Acquisition can come later.
Once you have your AOV and APF email setup and optimized, it’s time to refocus the shift to customer acquisition.
Simply increasing your AOV and APF by 40% (which is low if you currently have no AOV/APF strategies in place) can have a huge impact on your revenue.
Let me give you an idea of what a 40% increase would do for a business:
- $100 (average order value) x 2 (average purchase frequency per 365 days) x 500 (customers) = $100,000
If we increase the AOV and APF by 40%, you get the following:
- $140 (average order value) x 2.8 (average purchase frequency per 365 days) x 500 (customers) = $196,000
That’s a 96% increase in revenue per year without having to acquire a single new customer.
Calculating the Average Order Value (AOV)
Before you can start to increase your AOV, you need to find out your current AOV to use as a benchmark.
Average order value = total revenue / total orders
For example, if your total revenue for the last 365-day period was $50,000 from a total of 268 orders, your AOV is $186.56 (50,000/268).
This is the most basic way to calculate AOV. You can also add your cost margins to find your net AOV.
Calculating the Average Purchase Frequency (APF)
Figuring out your APF is just as easy. You need to calculate two things:
Average purchase frequency = total orders / unique customers
For example, if you receive 268 orders (in a 365-day period) from a total of 42 customers, your average purchase frequency is 6.3 (268/42) orders per customer per year.
Average time between purchases = 365 days / average purchase frequency
With 6.3 orders per year, if we divide that by 365 days, a customer orders every 57 days, on average.
The reason why it’s important to know your average purchase frequency is so you don’t bombard your customers with too many or too few emails. Based on your store’s APF, you’ll be able to gauge how many emails you need to send your customers each month.
So now you have calculated these two important metrics, here is how you can use a few emails to increase your store’s revenue through email marketing without having to acquire new customers.
Cross-sells and Up-sells Can Help You Increase Revenue
Cross-sell and upsell emails are the bread and butter of increasing AOV and APF for all businesses. If you’ve ever bought a car from a dealership, then you get this—the mats, leather seats, and USB add-ons are cross-sells and up-sells.
An up-sell is an upgrade to the current item the customers are viewing. For example, going from a regular meal to a large meal at McDonald’s is considered an up-sell.
A cross-sell is when customers are shown complementary items to the core product. It’s the classic: “Would you like fries with that?”.
You can apply cross-sells and upsells to your e-commerce store through email marketing based on a customer’s purchase history.
For example, Dollar Shave Club’s email below offers a cross-sell for a customer that has just purchased The Executive Cartridges.
This email is great because it’s actually an order confirmation email wrapped into a cross-sell email. They give the customer until the 9/10 (the date in the header of the email) to add more products to their cart before delivery.
Harry’s use a similar approach by sending customers an up-sell email for one of their new products after the purchase of a shaver.
Send Product Recommendation Emails
Product recommendation emails let customers know about other products you have that may be of interest to them. The goal of product recommendation emails is to make customers aware of other products. The more products they buy, the more likely they are to buy them again, thus increasing your AOV and APF.
There are two ways you can set up these emails. The first is to include them in your transactional emails. In the email below, Amazon recommends books that other customers have bought who also bought an item the customer just ordered.
I’m sure this method increases Amazon’s APF because they have millions of customers, and abandoned cart emails with product recommendations have a higher conversion rate and AOV. But I recommend product recommendation emails that solely focus the entire message of the email on the product, instead of merging it with a transactional email.
If customers have to pay delivery charges, not many customers will immediately place a second order and pay a second handling charge. Also, there are two key messages in the email, diluting your product recommendation. Based on your APF, I’d much rather go ahead and send a bespoke email with a single message, like this Amazon email.
Amazon used these exact emails to generate not one, but three board game purchases out of me.
Send a Refill Email
A refill email is best suited for products that need to be ordered on a regular basis, typically consumable products.
You want to time your refill emails approximately seven days before the customer is about to run out, as this gives them enough time to reorder and wait for shipping before they run out.
A refill email needs to offer the customer total convenience. Customers shouldn’t have to trawl through your store, select their order quantity, and type in their details again. The email should be straight to the point, giving the user a simple action to make with an added touch of urgency.
This refill email from Rockin’ Wellness keeps it simple with a single call to action and no other elements that might distract the customer from the main goal of the email.
Use this method on your most reordered items.
Send Win-back or Reactivation Emails
Recent studies reveal that around 70% of subscribers within an email list are currently inactive.
Inactive customers need to be removed from all email segments and placed into a win-back campaign with a tailored message. You can’t send them product recommendation or broadcast emails because due to their order history, they clearly aren’t working.
Duolingo, who offer online courses and sell language books, use the simple “We miss you” subject line to gain customers’ attention again.
This type of email is okay to send, but it doesn’t really offer the customer any incentive to try them again; and in my opinion, it is a little weak.
I much rather prefer using an offer in win-back emails, like Reebok, because it gives the customer an incentive to try your brand again.
If you’re not in the business of offering discounts, use a compelling and direct subject line like Duolingo. You can also consider following Reebok’s route of offering a voucher or discount.
If they don’t respond, manually remove them from your email list and send them a final email letting them know they have been removed and whether they want to be re-added.
The Impact of Retention and Engagement on Increasing Revenue
The four email types above can all be automated based on customer behavior.
Automated emails are a must to drive sales, but I’m also a strong believer of using retention- and engagement-based emails to achieve the same thing.
Retention emails are quite simply broadcast emails that you send when you have a new item in stock or run a promotion.
Customers love sales and want to know about new products in stock, so don’t be afraid to let them know. You just have to be careful that you don’t overload them with emails of every new item you get in stock.
Use the email frequency table to decide how many emails customers should receive each month.
Engagement and content emails aim to either educate your customer or provide them with value. The goal of engagement emails isn’t to drive sales, but to keep engagement with customers and build stronger relationships, which as a secondary goal will end up driving more sales.
Customers who are better educated about your brand and product benefits are more likely to stick around and order new things.
Customer acquisition is important to grow your business, but if you aren’t following up with your new customers by using the email methods I’ve laid out above, your acquisition effort will be done in vain, as new customers will come in from one side and leave from the other.
Review your current email funnel and see where you can place more automated and broadcast emails to increase your customers’ average order value and average purchase frequency.