The AOV Paradox

Howdy readers 🥰

In this newsletter, you’ll find:

🧩 The AOV Paradox: Why More Doesn’t Always Mean More Profit

🚀 Microsoft’s AI-Powered Revolution in Advertising

💡 Ad of the Day

If you’re new to ScaleUP, then a hearty welcome! You and 50k+ CEOs, CMOS, and marketers have reached the right place. Let’s get into it, shall we? Oh! Before you forget, if someone forwarded this newsletter to you, don't forget to subscribe to our newsletter so you never miss out!

Together with Swap

From tariffs to GSPR compliance, the $8 trillion global eCommerce industry is more complicated....and a bigger opportunity than ever. Does your business have a clear plan to stay competitive?

While these sweeping changes could lead to higher operational costs and new regulations, Swap's Global Trade Playbook has the rundown on how to get ahead including:

• How new tariffs could impact your margins
• Key strategies to optimize your supply chain
• Unlocking GPSR compliance in the EU

Swap is the eCommerceOS for Shopify brands, consolidating shipping, returns, package protection, tracking, and cross-border logistics under one roof, saving brands upwards of 30% on their eCommerce tech stack.

Get Swap's playbook for expert insights and real-world strategies. 

Download The Global Trade Playbook Today!

🧩 The AOV Paradox: Why More Doesn’t Always Mean More Profit

Bigger bundles. Higher AOV. More revenue. Sounds like the perfect formula, right?

Not quite.

Most brands assume increasing Average Order Value (AOV) leads to more profit, but in reality, larger orders can silently erode margins. Offering bulk discounts, adding free gifts, or stuffing bundles with low-margin products may boost revenue but often reduce actual profitability.

Instead of chasing bigger carts, the smarter move is designing AOV strategies that maximize both revenue and profit.

1️⃣ The Illusion Most brands discount aggressively to increase order value, but there’s a better way—price framing.

of Discounting: How to Increase Value Without Cutting Margins

• BOGO vs. Discounts → “Buy One, Get One Free” feels like a 50% discount but costs far less than slashing half the price.
• Decoy Pricing → Introduce a “bad deal” bundle next to your preferred offer to make it feel like the best choice.
• The Gift Swap → Instead of free gifts that drain profits, offer low-cost, high-margin add-ons perceived as high value.

Example: Fast food chains don’t discount individual items. They bundle fries and drinks, which cost pennies to make, to increase perceived value.

2️⃣ Smart Bundling: Why the Best Bundles Aren’t the Biggest

More items in a cart don’t always mean more profit. The wrong bundles:

Reduce repeat purchases – If customers buy a six-month supply upfront, they won’t return for months.

Increase fulfillment complexity – Bigger bundles mean higher shipping costs, more returns, and logistical headaches.

Instead, structure bundles to encourage long-term spending:

• Subscription Starter Bundles – Include a discounted first-month subscription to lock in repeat revenue.
• Post-Purchase Incentives – Give customers a special discount on their next order rather than upfront bulk savings.
• Trojan Horse Offers – Bundle a high-consumption product with a premium one so they keep coming back.

Example: Nespresso sells machines at a discount but profits from the coffee pods customers have to keep buying.

3️⃣ Upsell Smarter: The Hidden AOV Boosters

Instead of bloating orders with unnecessary products, increase profitability through precision upsells:

• One-Click Upgrades – Offer express shipping, premium packaging, or gift wrapping at checkout.
• Post-Purchase Add-Ons – After checkout, give customers 5 minutes to claim a discounted upgrade.
• Bundle Alternatives – Let customers customize their bundle rather than forcing pre-packaged bulk deals.

Example: Apple doesn’t bundle iPhones with discounts—they upsell AppleCare and accessories, boosting AOV without discounting.

Smarter AOV = Sustainable Profitability

The goal isn’t bigger orders. It’s more profitable transactions.

• Sell perceived value, not discounts
• Engineer bundles for long-term revenue, not just one-time spikes
• Leverage upsells instead of relying on bulk orders

AOV isn’t about selling more. It’s about selling smarter. 

🚀 Microsoft’s AI-Powered Revolution in Advertising
Insights from Microsoft Advertising

Microsoft is transforming digital advertising with AI-powered solutions, enhancing engagement, personalization, and efficiency. At the Microsoft Advertising Accelerate event, the company unveiled new AI-driven ad formats, conversational brand agents, and expanded Copilot capabilities to redefine how brands connect with audiences.

The Breakdown:

• Conversational AI is Reshaping Engagement - Generative AI is eliminating fragmented digital experiences by introducing AI-powered brand agents that assist consumers in discovering, exploring, and purchasing products. Microsoft is piloting AI-based brand assistants for websites.
• AI-Driven Ad Innovations & Expanded Copilot Reach - Microsoft’s Copilot-powered ads are now available in English, French, and German, with Spanish and Japanese launching soon. These ads boost relevance by 25% while Microsoft also ensures clear ad labeling while keeping organic results unbiased.
• New Interactive & AI-Powered Ad Formats - Microsoft introduced Showroom Ads, an immersive experience replicating in-store shopping, and Dynamic Filters that refine searches for better conversions. Dynamic Ad Generation, leveraging query signals, has increased click-through rates by 20%.
• Expanding Microsoft’s Advertising Ecosystem - Microsoft Edge now holds a 30% market share on Windows, and gaming ads are expanding across Candy Crush, King Games, the Windows Start Menu, and the Microsoft Store.

Microsoft is revolutionizing digital advertising by making AI the backbone of audience engagement. As AI continues to reshape the industry, Microsoft’s advancements position it as a key player in the future of advertising.

🎥 Ad of the Day

What Works:

The ad humorously plays with the audience's expectations by suggesting a high-profile endorsement and then subverting it with fine print.

The self-aware footnote "She's a student from London and we paid her to eat it but the point still stands" creates a humor most viewers like, making the ad highly shareable and engaging. This transparency not only builds trust but also humanizes the brand.

Broader Insights:

This campaign uses shock-value humor to cut through the clutter of traditional billboards. The bold claim followed by an unexpected twist forces viewers to stop and read, increasing ad recall.

Surreal establishes itself as a fun, self-aware brand willing to poke fun at marketing clichés, setting itself apart from conventional cereal brands. 

What Could Be Better:

The bowl of cereal and product packaging could be more prominently featured to balance the humor with product appeal.

Advertise with Us

Wanna put out your message in front of over 50,000 best marketers and decision makers?

Find our Partner Kit here🤝

We are concerned about everything DTC and its winning strategies. If you liked what you read, why not join the 50k+ marketers from 13k+ DTC brands who have already subscribed? Just follow this.

At ScaleUP, we care about our readers and want to provide the best possible experience. That's why we always look for ways to improve our content and connect with our audience. If you'd like to stay in touch, be sure to follow us EVERYWHERE🥰

Thanks for your support :) We'll be back again with more such content 🥳