How to Forecast a Competitor’s AOV & Beat Them

One thing companies don’t realize when they brag about revenue and sales is that they give away a lot of their secret sauce.  For example, I build (have someone build when it’s out of my skill set or I’m being lazy) weird algorithms and formulas for fun regularly (mainly because it is fun to mess with colleagues and friends) and because it gives me an advantage in the business world.

Whether it is creating a plan to destroy a client’s competitor, pitch a new affiliate or pitch a potential client who won’t share data, I can get solid estimates by simply gathering some of the data points they post publicly and weighing them out with a series of if/then, and/or statements and weights.  The company is usually shocked when I start reading the results to them, mostly because they don’t realize how simple it is to do this.  The best part is that most of it is publicly available, you just need to put the pieces together.  So why did I just ramble for two paragraphs?

Someone recently said, you can’t tell my AOV and I won’t share it.  If you know me well you know I love a challenge, so here’s what I did.

Note: I have not created this algorithm….yet….but I might in the future.  =0)

how to forecast a stores total orders

How to Build a Formula to Get a Competitors Average Order Value

Each of the items and thoughts below is a data point I would use (I’m purposely leaving a few out of here) and why they are important to the algorithm.  I also share some of the thoughts I had on each (but I don’t share all of them) so you can try to guess the weight or important for if/then, and/or as well as highly-important/low-importance statements.

I’m sharing enough for you to be able to take this and run with it.  If you are able to figure out what I left out, and even add more to it, you and I should be connected whether its to work together or to be able to bounce ideas off one another.

First start to look for interviews where they say “online sales” or “ecommerce sales”.  You’re looking for revenue here so you can guess what opportunity is out there for you if you want to pitch them as a client or how you can grow them, or simply to take if you’re a competitor.

  • It’s important to also look at ecommerce revenue vs. retail because ecommerce is what you can take more easily and you’ll use for your algorithm.

Look at their website for the amount to get free shipping or an add on at $XY.  This is normally the number they want to get their AOV up to.  If it’s $100, then you know their AOV on average is under that.  By offering free shipping or an additional item, they’re now hitting their goal AOV or are potentially more profitable or most profitable at or above this number.

Bonus: if you build an app that triggers as a user walks into the store, you can have them scan the current price and if you can beat that price in your store, let them shop direct and save…now you can take a competitors in store sales too.

Next use a tool that tracks PPC ads and their history.  By having the history you can download the ads and sort by free shipping over $XY to find their baseline or what they want their goal to be.  (Bonus: you can also forecast holiday sales this way).

By doing this it:

  • Lets you see what products they push harder than others and by which season
  • Gives you knowledge into which products and categories convert vs. doesn’t by search engine they advertise in
  • Allows you to estimate what is most profitable for them and what they want to sell more of.  Once you know where they spend and get more competitive (when and where they spend more), you now know what is most important to them and you have the product price range because of the products on the landing pages they point too.
  • Add in the average cost per click using the tool’s guestimate and check:
    • The position they’re in (if position is available)
    • For what the average conversion rate is for their niche
    • The average price for product within that category or their landing page series
    • When the on season is (competition goes up and so does CPC) and level that out

Now that we’re done with the PPC, lets start adding in SEO factors.

Pull all of their organic search keywords and sort by keywords in the top 5 positions and search volume.

Add weight to the amount of traffic they get from these positions and cross reference it with how often the ads run and their position for it within the PPC campaigns based on the search engine (i.e. adwords ads for Google and AdCenter ads for Bing).

Apply official weights to these based on the position and potential traffic share.

Look up total search and also brand or URL + coupon code and look to see what percentage of people go to the site and also search for a coupon code at checkout.  If you have any slightly accurate stats for that niche about how many people use coupon codes, you can apply this as another weight for total sales and for their current conversion rates.  But you have to check for a few outliers as well including:

  • Do they have a deal running across the top or on the homepage they’re pushing
  • Is there a box at checkout that says “click here for all available deals”
  • Are there any deals available on product pages
  • Upon reaching checkout, do they have a coupon code already applied
    • bonus if it clearly says it’s the best based on the products in their cart

Now look to see if there is a local pack and if their niche is an immediate solution, private product niche or something that is either online or offline non-exclusive.  If there is a good chance that the person is shopping in store, it won’t count towards AOV or total revenue since you are an ecommerce shop.

Here are a few examples of this to make it a little easier to understand:

  • If private like lice shampoo or bed bug spray – chances are they looking to get rid of the infestation immediately and will go to the store nearest them.  (i.e. lice shampoo as a query vs. reorder xy brand lice shampoo)
  • Lingerie or adult toys may not be impacted by a local pack because shopping for them in public is embarrassing and online could be better.  Even if there is a local store.
  • Time sensitivity is key here too.  If they have both retail and ecommerce, determine and add or take away weight from the local pack based on if the person can shop online or needs it in store.  An expensive appliance is more convenient to have delivered and if they are going by brand name (kitchenaid stand mixer) then the local stores may not get the sale and the ecommerce store which delivers to the person’s door will.  The same could be a mattress.  Try it out in store but go online and get it delivered for free and possibly for cheaper.

Other Things to Include in Your Competitor’s Revenue Algorithm

Other channels and the overall experience of the website can play into sales and AOV.  If the site you are studying has not implemented something that can increase conversion by .5% for example, this is a potential win for you and by figuring out potential total orders and AOV, you now have a big opportunity to either help them be more profitable or be more profitable if you go into competition (not to mention more appealing to an investor).

  • Check affiliate networks for the AOV of their store.  Many provide this on program description pages or within the interface to potential affiliates so that new affiliates can estimate how much they may make per sale if they join.  (i.e. an AOV of $100 with a 10% commission is $10 per sale.  A conversion rate of 2% means $XY).  But there are outliers here too.
    • Make sure the page has been updated within the past few months or year
    • If there is no coupon code box on the site then it may be more accurate
    • If they have affiliates pushing a system, flat price product, a package deal or system that is on reorder, or specific priced product for the channel, but the store has individual products in addition to free products or systems/subscriptions, the numbers here are skewed.
  • Look at the ease of checkout for both desktop and mobile and add weight for good or bad depending on the paths and landing pages.
  • Do they require an account to be created or give you a quick and easy checkout?
  • What other conversion boosters do they have which can increase conversions like:
    • money back guarantees
    • free return shipping
  • Track their hashtags, especially with influencer campaigns and also look to see if they are using affiliate links too.

The last thing I add in are reports that are hard to find unless you pay money.  i.e. why I’m not including them here.  There are groups that monitor tv spend by brand, commercial and ad.  Same with other advertising platforms and channels including print.  You should also do your best to tie in weights for outliers like multiple touch points with social media ads and social media spend, tv commercials, print, etc…

Now’s the fun part.  You have to create formulas to run through the algorithm with situations that have controls and some that have less or none.  The most basic way to do this is to look at total claimed ecommerce value and the AOV that is generated from the algorithm.  By dividing the revenue by AOV you will get an estimate of total orders and can now start to project what you can do to compete, or how you can help the company or potential client.  If you also know you can convert X% more sales on average by implenting XYZ, you can also forecast that into the AOV algorithm for profit as well.  Now set up your controls and begin to plug and play until you have a solid model.

So that’s how it works.  Whenever I hear something or when there isn’t a solution for it, I map it out in my head and verbally.  I can’t code to save my life, but I can watch videos on modifying spreadsheets and creating formulas (unfortunately I forget what I did almost immediately after) and I’m able to get some cool data and info.  Other times when it’s too complex (which is always) I go onto a contractor site and source it out, depending on how bad I really want to know the answer or get an estimate.  If it is going to be too expensive to build, I let it go back into the abyss of my mind and one day might give it a try again.

If this is something you do too, I’d absolutely love to connect with you and have you in my peer network.  Contact me with similar things you do or obstacles you’re facing and let’s brainstorm together.  Or you can hire me to help solve this for you through my contact form here.

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