How to add 50% in AOV (Average Order Value) by setting the right defaults.
Power of setting the right defaults. We share 3 experiments that add 50% in AOV during checkout, increase pension participation, and add $10s million in GMV sales.
Experiment 1: Increasing the AOV by 50%+ by defaulting an add-on
Applicable in: B2B, HR, healthcare, fintech, B2C, CPG, E-commerce
Problem: This experiment aimed to increase the Average Order Value (AOV) by 50% or more while improving the conversion rate from free trial to paid for a Unicorn construction software company. The challenge was related to the low "seat" attach rate at checkout, even though many businesses using the software had larger teams. The issue stemmed from business owners wanting to evaluate the software individually during the free trial, delaying revenue recognition. However, the software shined the most when the team used it and collaborated.
Experiment: To address the problem, the company conducted research and found that the average company size was 3-5 employees. Using this data, they implemented a default setting tactic. At the point of checkout, they defaulted to 3 seats, allowing users to remove or add additional seats before starting their free trial. Bringing more team members on board also enhanced the product's stickiness due to its collaborative nature, which subsequently improved retention rates.
Impact: The experiment had significant positive impacts:
AOV (Average Order Value) increased by over 50%.
Conversion from free trial to paid subscriptions increased by over 10% relative to previous rates.
Learnings: Several valuable lessons were learned from this experiment:
Positioning the product as a team-oriented solution increased user intent to sign up, resulting in a higher free trial to paid conversion rate.
Positioning the funnel as "most users bring on their team" rather than presenting team membership as optional built trust with the product and facilitated communication.
Experiment 2: Simple Default Setting for Pension Participation in the UK that led the participation of employees from low double-digit % to ~90%
Applicable in: B2B, HR, healthcare, fintech
Problem: Employee participation towards saving % of their income towards a pension (aka 401k retirement savings for the UK) had a low adoption % and the UK government wanted to increase this significantly encouraging them to save money.
Experiment: This particular experiment focuses on the impact of default settings on pension participation in the UK. In this setup, employees were free to opt out of the pension program. However, the default setting was configured so that all employees automatically contributed to the pension.
Impact: Before the default setting change, pension participation levels were in the single digits. However, with the introduction of the default setting, close to 90% of employees didn’t opt out of the pension program as that is what was assumed to be “normal”.
Learnings: Increase adoption of healthy plans/products by making it look “normal” that everyone is doing. The great Rory Sutherland calls it psychological moonshots.
Experiment 3: Setting the right defaults led to a $10s of millions increase in GMV for a multi-billion-dollar commerce marketplace
Applicable in: Marketplace, Consumer
Context: This marketplace has buyers and sellers that transact physical items with each other
Problem: The objective of this experiment was to help the sellers grow on the marketplace platform.
Experiment: When a buyer expressed interest in an item, they would message the seller asking questions/more information about the item. In this experiment, a particular focus was placed on the negotiation feature, which allows messaging and open-ended communication between buyers and sellers. The platform introduced structured time limits for these negotiations, with options of 24 hours and 48 hours.
Thesis: The hypothesis was that shorter negotiation timeframes would bring a sense of urgency to the process and would increase the speed to sale, in turn, overall GMV.
Impact: this resulted in a 3 - 5% increase in GMV on a scale of $10s million of transactions.
Learnings: The experiment yielded several important insights:
The majority of sellers (98%) did not change the default negotiation time settings, indicating a preference for the defaults.
The team experimented with a shorter time frame of 6 hours or 12 hours but that led to a decrease in GMV transactions, thus settled on 24 hours.
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