Online shoppers have never had more options than they do today. With so many stores to choose from, it's vital as an eCommerce store to know how to keep your costs down while still offering a great user experience.
This article will discuss the best practices you can implement to reduce costs per order and maximize profit without sacrificing quality or service.
What Is Cost Per Order?
Cost per order is the total cost of a single transaction, calculated by dividing the total cost of the sale by the number of units sold. This metric helps businesses estimate how much they spend on each trade and identify areas for improvement.
You can measure cost per order to compare different types of orders, such as those placed online versus those set in-person or over the phone. It can also be used to determine whether an increase in volume translates into higher profits, lower costs, or both.
Reducing costs means increasing profits and improving customer satisfaction with lower prices. In this article, we'll look at some best practices for reducing cost per order in critical areas of eCommerce like inventory management, shipping logistics, and marketing.
6 Ways To Reduce Cost Per Order For Your E-Commerce Business
There are many ways to reduce your cost per order. Here are some best practices for reducing cost per order:
1- Use Your Customer Data
One of the best ways to reduce cost per order is using your customer data. Knowing what products your customers like and buy, you can keep costs down while increasing sales.
The customer's purchase data will help you decide how much inventory you should keep for a particular product. You can then use this information to reduce costs by ordering only the products people want.
Additionally, successful companies realize that a high number of repeat customers entails less cost for each transaction. That's because their previous purchases indicate interest in your company's brand, and professional, reliable transactions from the past are likely to become new habits.
With existing customers, you already know what they like and what they will buy. And because they already know, like, and trust you, they're less likely to bounce back and forth between websites trying different deals or shopping carts. Instead, they're more likely to stick around and make repeat purchases on your site.
2- Outsource Non-Core Functions
While there are various ways to reduce cost per order, one of the most effective is outsourcing non-core functions. Working with an affiliate service provider can cut costs while still providing your customers with high-quality products and services.
You can partner with a third-party company that specializes in non-core tasks. The third-party company will handle all aspects of the process, including creating and managing customer accounts, processing payments, and providing customer support.
In addition to reducing your overall operating costs, outsourcing non-core functions will allow you to focus on growing your business.
Here are some non-core functions and services you may outsource:
- Payroll management: You can outsource payroll management to a third-party payroll service. This is an excellent way to save time and money and ensure that your company's employees are paid in full and on time. You will also save money in terms of salary expenses and benefits coverage.
- Shipping: This is another area where you can outsource. You can find online shipping services that will deliver packages immediately. Hiring a third party means you won't have to worry about late deliveries or lost packages. You can also use these services to test different shipping methods and determine which one(s) works best for your business.
- Customer service: You don't have to be the only person answering customer questions, so why not outsource this task? Plenty of companies do customer service on demand, so it's not something you need to worry about at all.
- Account service: Outsourcing accounting services will help make sure that all transactions within your company's books are accurate and up-to-date. You will spend more time on important things like providing excellent products and services than transaction account tracking.
- Staffing: Outsourcing staffing will allow you to hire personnel trained in specific areas like customer service or sales. They can hit the ground running when they start working for your company. Otherwise, they'd have to learn everything on the job if hired directly through your HR department.
3- Create Targeted Upsells And Cross-Sells
In e-commerce, the average order value can significantly determine your cost per order (CPA). You want to create products and cross-sells that are highly targeted at your customers and can increase the average order value.
Cross-selling and upselling are two tactics that can increase the average order value for your e-commerce business.
- Cross-selling is when you offer multiple products in a single transaction, often during checkout. For example, suppose you sell women's clothing. In that case, a customer who buys a few items might also want to buy a couple of pairs of shoes or accessories simultaneously.
- Upselling is when you offer additional features or benefits for higher-priced purchases. For example, suppose your customers pay extra for free shipping. In that case, you could offer them a coupon code for an additional discount on their investment.
Upsells and cross-sells are powerful tools for increasing sales. They encourage customers to buy more from you. Each upsells or cross-selling should offer something of value more than what is provided in the main product area.
When creating your upsells, don’t be afraid to cross-sell too! A great way to do this is by selling related products or services in addition to your main product or service. For example: “If you buy this product and also sign up for our newsletter, we’ll give you 10% off on all future purchases.”
4- Optimize Your Advertising Strategy
Ecommerce marketing ads are a crucial way to gain more customers. However, customer acquisition costs (CAC) can cost a lot of money if ads are not adequately optimized. You must start by optimizing your advertising strategy to reduce your cost per order.
CAC is the cost of acquiring a customer and includes everything from advertising to customer support. The average e-commerce company spends over $58 on acquiring a single new customer, which means that CAC is a large portion of the cost per order.
Marketing ads take a large portion of your cost per order. If you're looking to lower your cost per order, increase sales and focus on improving customer lifetime value.
You will need to create ads encouraging customers to return for more purchases or repeat purchases over time instead of just getting them in the door once with an ad campaign.
Here are some ads optimization strategies that will help reduce your cost per acquisition and, ultimately, cost per order:
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Explore Newer Digital Channels
It's essential to keep an eye out for new digital channels that could help you reach customers more efficiently. For example, you notice that most of your traffic comes from Facebook, but your conversion rates are low. In this case, you might consider making changes to improve your return on investment (ROI).
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Track Customer Lifetime Value (CLV)
Understanding what drives customers' behavior helps you tailor your marketing campaigns so that they're more likely to convert into sales. To do this, track customer lifetime value (CLV), which refers to the amount of money a customer spends with a business over time. This metric can help determine whether investing in a particular campaign or product launch makes sense. If the marketing campaign doesn't make enough money per sale, it might not be worth it for your business.
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Improve Repeat Purchase Rate
A business must ensure that it offers good-quality products to retain its customers. When product lines or promotions don't get repeat business from buyers, it's time to rethink your marketing strategy. This can be due to the way your product is packaged or the type of messaging used to promote it. To get customers to buy more often, ensure your ads have a sense of urgency and a clear call to action. It's also essential to test different messaging formats, such as video ads and images with text overlays, to find out which works best for your audience.
- Diversify Your Customer Acquisition Strategy
You don't want your customer acquisition strategy to focus on just one customer type. Using a variety of ad formats and strategy is the best way to ensure you're reaching as many people as possible. In addition to search engine marketing, social media ads can be an effective way to get new customers.
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Focus on Product Discovery and Retention
You should also focus on product discovery and retention for your business. This means that you should be creating content that helps people learn about what you sell and how they can use it in their daily lives. The more people who know about your products and services, the better their chance of purchasing them from you.
- Measure Performance by Channel, Not by Campaign
If you're running a marketing campaign, it's easy to get carried away by the numbers. But the best way to measure performance is to account for each channel separately. For example, you might have an ad that's doing well on Facebook but not as well on Instagram, or vice versa. This will help you pinpoint exactly what needs improvement and where it can be found. If you're advertising through multiple channels at once, measuring how each one performs individually is essential.
5- Pursue Co-Branding Opportunities
Co-branding is a great way to get an e-commerce business off the ground. By partnering with other companies, you can leverage their brand to drive sales for your own business.
Co-branding is also a great way to lower your cost per order since you essentially offer a bundled package at a discounted price.
The concept behind co-branding is simple: You partner with another brand, who will then put their logo on your product and promote it as part of their own brand. This way, you don't have to worry about marketing or advertising your products because someone else will do it for you.
Co-branding has many benefits over traditional advertising, including:
- Less cost per order
- Higher sales volume
- Increased market share
In addition to providing access to existing customers, co-branding also gives you access to new customers who want to shop with both brands. This helps expand your reach beyond just the customers who already know about your brand, which is crucial in today's competitive market.
6- Reduce Returns
Returns are not just costly; they also negatively affect customer satisfaction. A 2021 survey by the National Retail Federation found that more than half of all online shoppers who returned an item did so because it didn't fit or function as expected.
Even if the return isn't your fault, chances are you've been stuck with the cost of shipping and handling charges for returns. To avoid being financially penalized for making a mistake, here are some tips on how to reduce returns:
- Make sure the product fits your customer's needs. If you sell clothing, for example, make sure the size is correct before sending it out.
- Use tracking numbers to avoid lost packages. If you're shipping goods internationally, use tracking numbers to ensure customers receive their orders as quickly as possible.
- Provide easy instructions for returning products. The instructions should include how long customers should wait before sending back a product if they're unsatisfied with it.
- Make sure your packaging is sturdy and secure. Ensure that your boxes have clear windows so customers can see their product inside the box without having to remove it first. Ensure that all the pieces are adequately tied up in the package so they won't get lost or damaged during transit.
Consider all aspects of product or service returns when developing your reduction strategy. This includes shipping fees and refunds. When certain products are being returned frequently, this may signify that something needs re-evaluation for your business to thrive.
Final Thought: Reduce Cost Per Order By Conversion Optimization
ECommerce ads are an excellent choice for people looking to increase their sales and exposure. However, you must ensure that your ads' conversion rate is high enough, or it will reduce your cost per order. You can achieve this by ad conversion optimization.
Conversion optimization is optimally distributing ads across channels and audiences that match your customers' needs. It helps you reduce cost per order and increase sales.
Leverage our ads automation platform ConvertedIn to optimize your conversion. Converted is an intelligent ad automation platform that maximizes your return on ad spend (ROAS). Our personalization engine continuously learns from user data to anticipate their needs and optimize ads accordingly.
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