Average Order Value (AOV) is one of the key metrics that influence spending and store layout decisions. It is directly related to ROAS because if the AOV is increasing likely the ROAS will be increasing as well. However, fluctuations happen within AOV occasionally and are mostly due to new campaigns or the buying season.
As described in its definition AOV measures the average total of all purchases over a defined range of time. It’s crucial that the metric is found weekly or even daily, it must be closely monitored in order to make efficient changes to increase sales. To solve for AOV you should take your total revenue and divide it by the number of orders.
To improve your AOV there are multiple options:
Offering loyalty programs to high spenders and high-frequency customers
Offering cross-sells and offers to lower spenders and less-frequency customers
Bundling, cross-selling, and upselling products and services
Add free shipping options
Set discounts for minimum orders
*These are all great improvements that can be made to AOV, but it’s extremely important that you take each improvement one at a time. *
AOV is a crucial metric for your business. Make sure you are regularly checking it’s value and making necessary changes for improvement.
How is AOV calculated?
AOV is calculated by dividing total revenue by the number of orders.
What does a high AOV indicate?
A high AOV indicates that customers are spending more money on each purchase, which can be a sign of increased customer loyalty and satisfaction.
What does a low AOV indicate?
A low AOV indicates that customers are not spending as much money on each purchase, which could be an indication of poor customer service or product quality.
How to Increase Average Order Value
Upselling and Cross-Selling: Offer customers related products or premium versions during checkout to encourage higher-value purchases.
Product Bundling: Create bundles or packages of products that offer a discount when purchased together, incentivizing customers to spend more.
Minimum Free Shipping Threshold: Set a minimum order value for free shipping, motivating customers to add more items to their cart to qualify for the offer.
Loyalty Programs: Implement loyalty programs that reward customers with discounts or points based on their order value, encouraging repeat purchases.
Limited-Time Offers: Create time-sensitive promotions, like "spend $100, get 20% off," to urge customers to increase their order value to avail of the discount.
AOV vs. ACV
AOV (Average Order Value): Measures the average value of each customer order.
ACV (Average Customer Value): Represents the average value of a customer's purchases over a specific period, including repeat purchases.
AOV vs. Conversion Rate
AOV (Average Order Value): Focuses on the monetary value of individual orders.
Conversion Rate: Measures the percentage of website visitors who complete a specific goal, such as purchasing or filling out a form.
Fun Fact:
According to a study by BigCommerce, the average order value (AOV) for online stores is $81.76 (BigCommerce, 2020).
