For marketers and DTC business owners, mastering the art of increasing average order values (AOVs) is a game-changer. In a landscape where low AOVs can spell the difference between profitability and mere survival, deploying the right strategies is paramount. This article features a video interview demystifying the process of scaling a DTC business profitably, even when starting with lower AOVs.
Watch the video below to explore insights on how to scale a DTC brand despite low AOVs.
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In this blog post, we explore a variety of tactical maneuvers and strategic adjustments designed to enhance AOVs without compromising on customer acquisition costs. From upselling and cross-selling techniques to leveraging data-driven insights for personalized experiences, this article is tailored for DTC brands striving to make every dollar count. Whether you're looking to refine your existing approach or build a robust AOV strategy from the ground up, this resource is your blueprint for turning modest transactions into substantial gains.
Scaling profitably despite small AOVs: An interview with Bumpli’s founder Enis Eyari
In an insightful conversation, Enis Eyari, founder and CEO of the German DTC Bumpl, sheds light on the challenging yet attainable goal of scaling a business with low Average Order Values (AOVs). This interview reveals the strategic nuances and the practical wisdom behind Bumpli’s ability to remain profitable in a market segment often perceived as difficult to scale. Enis discusses the importance of market fit, brand trust, the strategic use of sales channels, and the crucial role of customer relationship management in navigating the complex terrain of e-commerce with small order values.
Particularly compelling is the focus on the necessity of good decision-making and the optimization of profitability from the very first purchase. The discussion offers valuable insights into using special offers and implementing upselling and cross-selling strategies that have propelled Bumpli to success. The interview iterates that with the right approach, even businesses with lower AOVs, can achieve scalability and profitability.
Markus Repetschnig, Admetrics’ CEO:
Today we're discussing small shopping cart values with Enis Eyari from Bumpli in Kiel. At Bumpli, you're dealing with relatively small AOVs. Can you tell us where they approximately stand?
Enis Eyari, Bumpli’s CEO: Yes, our AOVs are, on average, between 27-28 euros net to 36-38 euros. It really depends on the campaign we're running and the discounts we offer. The higher the discount, the lower the CPO; the lower the discount, the higher the CPO. You really need good tools to understand what's happening in real-time. For example, right now, I have an AOV of 28 euros, which is almost 10 euros less than in other significant phases we run. And it's profitable and works wonderfully. It always depends on how the market is ticking and what the market currently desires. Right now, the market wants good prices and good quality.
Markus: Many DTC marketers say that AOVs under 40-50 euros are difficult to scale profitably, especially in direct sales. What are your experiences and tips in this area?
Enis: I agree that it's not easy. You definitely need market fit; your customers must want your product, and it should not be a niche product, to be honest. It should be products that can be made accessible to the masses - a mass product if you're working with low cart values. And yes, a strong brand presence is a must. You absolutely need to build trust.
Markus: Could you share which channels you use to sell your products and how important it is to be present on marketplaces with lower basket values?
Enis: Marketplaces are known for not having high-priced items and having low AOVs. Therefore, for companies that are really working with low AOVs, it's absolutely relevant to be present on all marketplaces, try to build good listings, and do a bit of PPC to see what happens. For example, Otto works very well, and then there's MyToys and Kaufland. There's not so much traction there yet, but it's getting to the point where you absolutely must be present to survive. Because only on Shopify, with my team size, it would be impossible, but with a three-man company, you can also build a profitable business on Shopify alone.
Markus: When dealing with lower basket values, how much more do you need to focus on profitability, and what measures do you take?
Enis: Well, for one, we don't have unlimited SKUs. We only have 60 or 65 across six categories. We don't have the best customer lifetime value, so making the first purchase profitable is even more important. We do everything we can to optimize and make as many good decisions as possible to optimize our profit, which works quite well.
Markus: What are your experiences with special offers and discounts? What works well for you?
Enis: It's extremely difficult to discount cheap products again. Absolutely, the target group of young families is very keen to make sure they are getting real bargains. We are talking about the masses, and you should not go niche in this case. So if you have low AOVs, you should already have a product that is intended for the masses. That's the rough assessment because I imagine it would be difficult if you have a niche that's maybe 500,000 people large to cater to profitably. You probably already need acquisition costs of plus 20 euros more. So it should be a mass product that is in high demand. You must be able to set yourself apart from the competition and give it your best.
Markus: How important are upselling and cross-selling?
Enis: Super important. Whoever doesn't upsell, doesn't cross-sell, and doesn't have good customer relationship management and good follow-ups... really building a flow for their customers, to pick them up with a post-purchase flow or shipment tracking, to really create the best possible journey for the customer. That's the customer experience, and customers love it. We just integrated a fortune wheel where you can save extra percentages, and we have 1000 sign-ups weekly, and it works wonderfully. Why not do something that works and makes people happy and can be scaled profitably?
Markus: What has been the most successful measure for you so far?
Enis: The wheel has been fantastic, with extremely strong discount promotions now and then on individual products that need to be sold off. For example, with a lunch box, we only reduce the least popular color significantly, and with that, we've still managed to get a good AOV and run super profitably. Or even selling returned goods as B-goods, which also works super well. There are many best practices that you can test here, but if you have low AOVs, I would already pay attention to having a very good product and communicate very well what the advantages are, what you can do better, and let's go.
Markus: What would you recommend to other founders who want to launch into this lower-price segment?
Enis: Definitely do a proper analysis, look at the market, evaluate the reviews, and what customers say, build word clouds where you write down all the positive and negative facts, take a look, and try to optimize your product and enliven it, what might please customers even more, and go in with the same price as the competition, but add an additional feature to your product. Why shouldn't the customer buy from you?
Markus: Now, about mistakes - which one would you have liked to avoid, and what would you have liked to know before you founded Bumpli?
Enis: There were many mistakes, but I must honestly say I don't regret my mistakes. That's the mindset I've adopted, that I don't regret my mistakes, but one must learn and be mindful not to repeat them. You should really think carefully about what you want to do, how you want to work, and whether you need a team, and here, for example, you can ask Chat GPT. You say, Chat GPT, hey, this is my business model, I want to earn a million euros this year, I plan to sell this product here and there and there; what staff might I need, you could already consider a bit of a personnel quiz, to give you good suggestions, use Chat GPT as a sparring partner, my recommendation for the year 2023.
Markus: Thank you Enis!
How to scale your DTC brand despite low AOVs
DTC brands face a unique challenge when their average order value hovers around the $20 mark. The key to scaling profitably under these conditions lies not just in increasing the number of transactions, but also in enhancing the value of each interaction and fostering brand loyalty. Here are advanced tactics and strategies to help knowledgeable DTC owners and marketers overcome the low AOV hurdle.
1. Establishing a Robust Brand Identity
A strong brand identity is your mooring in the relentless tides of the digital marketplace. Mike Jackowski CEO of beauty company Veautie emphasizes the importance of a brand as the complete customer experience, not just a logo or tagline. Consistency across platforms—be it your website, social media, or physical advertising—enables instant recognition and a seamless narrative for your brand.
2. Leveraging Data for Targeted Marketing
Harnessing consumer data to tailor marketing efforts can dramatically enhance efficiency. Data-driven marketing allows for targeted offers that resonate deeply with specific consumer segments, leading to higher conversion rates and customer retention.
3. Social Media Mastery
Social media is a gold mine for DTC brands. It serves multiple functions: a platform for gathering consumer insights, a direct sales channel, and a means to humanize the brand. Successful companies maintain their brand identity and engage in real-time with their audience, just as Wendy’s and Netflix have done to build loyal followings.
4. Smart Collaborations and Partnerships
In the era of social proof, partnerships with influencers and brand evangelists can provide a significant lift. These partnerships should be more strategic than transactional, fostering genuine endorsements over paid promotions and tapping into the authentic narratives that customers can relate to.
5. Crafting Viral Content
While no formula guarantees virality, Dollar Shave Club’s success story illustrates the power of a clever ad with personality. The challenge lies in striking a balance between brand authenticity and the unpredictable nature of viral content.
6. Personalizing the Customer Journey
Personalization is the bridge between a transaction and an experience. From quizzes to augmented reality (AR) try-ons, the aim is to make the consumer feel understood and valued on a personal level.
Best Practices for Scaling with Low AOVs
Fcus on Lifetime Value (LTV): Acquiring a customer is just the starting point. The goal is to maximize the LTV by increasing the frequency of purchases and promoting higher-value products.
Optimize for Efficiency: Streamline operations and customer service to minimize costs. Use technology to automate where possible, without sacrificing the personal touch that differentiates your brand.
Experiment Constantly: Be agile with marketing campaigns. Test and learn from every initiative. Small bets can lead to big insights.
Community Building: Cultivate a sense of belonging among your customers. Engage them beyond the purchase with content, events, and interactions that reinforce the community aspect of your brand.
Sustainability and Ethics: Consumers increasingly align their purchasing decisions with their values. Transparent and ethical practices can elevate a brand’s desirability and justify a premium.
Best Practices for DTC Growth Amidst Low AOV
Optimize Customer Acquisition Costs (CAC)
With lower profit margins per transaction, DTC brands must streamline their acquisition strategies. Utilizing organic channels, refining SEO practices, and leveraging community engagement can attract customers at a lower cost compared to paid advertising.
Maximize Retention Rates
Cultivating a high customer lifetime value is critical. Implementing subscription models, where appropriate, can transform single purchases into recurring revenue, ensuring a steady cash flow.
Harness the Power of Analytics
Data analytics should drive decision-making. Understanding customer behavior patterns, preferences, and feedback can uncover opportunities for cross-selling and product development that resonate with the target audience.
Staying ahead with product innovation can attract a broader customer base. Limited-edition items or new features can create a buzz, prompting existing customers to increase their spend and attracting new ones.
Efficiency in operations can save costs and improve customer experience. Automating fulfillment, optimizing supply chains, and utilizing customer feedback for process improvements can lead to a leaner, more responsive business model.
These practices, when executed with precision, can help DTC brands navigate the challenging waters of low AOV, turning potential constraints into a well-oiled growth strategy.
Best Practices for DTC Growth Amidst Low AOV
Increasing Average Order Value (AOV) is essential for DTC brands looking to maximize revenue and profitability. Let's explore nuanced strategies DTC giants employ to upscale customer purchases and increase average order values.
Cultivating Premium Upgrades
Casper's approach extends beyond their staple mattresses; it encourages customers to invest in advanced features and high-quality bedding accessories. This not only enhances the customer’s initial purchase but also aligns with the brand's ethos of a superior sleep experience.
Incentivize Bulk Purchases
The Honest Company capitalizes on the consumer's desire for economical purchases. By offering scaled discounts on bulk items, they not only promote larger order sizes but also foster a sense of smart shopping among their customers.
Strategic Product Combinations
Glossier excels at curating product sets that deliver a comprehensive beauty routine. These bundles, often presented with an appealing cost benefit, nudge customers towards a more holistic purchase, increasing the perceived value and the AOV.
Leverage Loyalty for Upsells
Sephora’s Beauty Insider program masterfully encourages repeat business and higher spending. Reward points that lead to exclusive products incentivize customers to invest more in each transaction, intertwining customer loyalty with increased spend.
Implement Spending Thresholds
Bombas uses a free shipping threshold to subtly urge customers to add more items to their cart. The dual benefit of convenience and cost-saving is a powerful motivator for customers to incrementally increase their order values.
These approaches demonstrate the intricate art of balancing marketing psychology with financial incentives to enhance the purchasing behavior of customers, proving that with strategic thinking, even marginal increases in AOV can significantly impact a brand's bottom line.
Download Admetrics Data Studio and access comprehensive insights on customer behaviors, sales cycle optimizations, and much more. Elevate your strategies and use these insights to navigate the complexities of customer conversion journeys.
Q&As: Scaling Profitably Despite Low AOV
Q: Define a low AOV for a DTC brand and its implications.
A low AOV indicates smaller revenue per transaction, challenging DTC brands to find cost-efficient scaling methods.
Q: How can upselling impact AOV?
Upselling entices customers to opt for premium products or services, thereby increasing the overall transaction value.
Q: Can product bundling be an effective strategy to raise AOV?
Absolutely, bundling offers a perceived value deal, prompting customers to spend more on a single purchase.
Q: What role do loyalty programs play in AOV enhancement?
Loyalty programs reward frequent shopping, nudging customers to increase spending to avail of perks.
Q: How do free shipping thresholds affect AOV?
They encourage customers to buy more to qualify for free shipping, effectively raising the AOV.
Q: Are volume discounts beneficial for low-priced products?
When presented correctly, volume discounts can persuade customers to buy more, leveraging the cost-benefit angle.
Q: What is the relationship between customer retention and AOV?
Retained customers are more likely to make repeated purchases, which can cumulatively surpass the value of single higher AOV transactions.
Q: What role does analytics play in scaling DTC businesses?
Analytics inform targeted marketing and operational strategies, essential for scaling decisions and improving AOV.
Q: How does product innovation influence AOV?
Innovative products can command higher price points, attracting customers and lifting the AOV.
Q: Why is operational efficiency crucial for DTC brands with low AOVs?
Streamlined operations save costs and improve the customer experience, freeing up capital for growth initiatives.