I want to tell you a little story about what happened to me yesterday buying stuff online, and the kind of lesson within it. So last week I mentioned to you guys how we were all excited about these new boxes that we ordered, that were going to make us more money, and speed up our packaging, and all that well they worked out really well. And we’ve got another container coming in this next week, and we need boxes.
So yesterday I went on Uline to get a quick order, (we usually or from a packaging supply house what ordered from Uline) this time to get a quick order. I needed 6,000 boxes, so I ordered six thousand boxes. As I go to check out, that little thing pops up that says, “Hey, if you spend three hundred dollars more you can win this free or you get this free zero-gravity chair.”
Well apparently, I’m a sucker for a zero-gravity chair because I went back and I added $370 worth of more boxes and then checked out. Did I need those boxes? No, but I wanted a gravity chair. It was an irrational decision. Now that chair (it’s a very nice chair by the way) I got it yesterday because Uline from California to here has less than 24 hour delivery. So what did they do right there? They got me to spend three hundred and some odd dollars more money.
The other thing that happened was I noticed when I went back they also charged me more in shipping (after I accepted the free chair) went up by like 30 some odd dollars.
So my shipping charge went up, I bought a couple hundred more boxes, and I spent three hundred more dollars all to get this free promotional chair.
What they’re doing there is the same thing we do when we offer free shipping or incentivizing your customers just just basically spend more money. All they’re doing is trying to raise their average cart value or or average order value, and it worked!
Did I need that zero gravity chair? No. Could I have bought a zero-gravity chair for less than $300 that I spent? Did that chair cost them a bunch of money? No, I’m sure they bought it in bulk. They had their name on it. I’m sure it cost them maybe $40. Looking at the chair, it’s a nice quality, but I bet if they bought it out of China, they could get it for $15. So for a $15 incentivized item, that also promotes their brand, they were able to get a significant increase on their cart value from me.
Now, why is that important? Well, average cart value is where you make profit on the sale. The larger the cart value, the more profit that’s in there. And a company like ULine has very very small margins on a lot of their products because they’re commoditized box prices or commodities. They’re not unique products, so it’s very important to do that.
In niche businesses, we do the same thing, in our smaller businesses or less commoditized mainstream business. We may incentivize them with a “get extra extra product” or get a “buy one get one” or whatever. The most common ones that we use is the “free shipping” and you’ll see this all over the place the “free shipping on any order over a $125”.
Why is that? Well technically, it’s because their their average order value is around $100 — but that’s their average order value is about $100. So what they do is say, “Hey, if you spend $125 which is a 25% increase in your order, we’re going to give you free shipping.” Studies have shown that when offered incentivize free shipping, customers are willing to spend more (I think it’s somewhere in the 30% range).
Uline got me yesterday for an extra $300 with a more boxes just so you get a chair (which I will I ever sit in it and maybe I’ll probably I’ll take it with us when we go camping but that’s about it). So those little incentivizing tricks to get your cart value up… it works really really well. It works on me, it works in your market, and it doesn’t have to be privatized. It could be as simple as giving them free shipping or giving them a little an extra product or something.
You don’t even have to have a different like Uline is giving away chairs, when their main products are not chairs, so it doesn’t have to be like that, but anything you can do to incentivize your customers to spend more to bump up their average order value without also decreasing your profit margin significantly. Because you obviously want to keep your profits high if you’re going to increase the cart value.