AOV is a useful metric for business owners that shows how well their sales are performing and helps them know when it’s time for a change.
In the next sections, we’ll go over the meaning of AOV, as well as the formula you can use to calculate it.
Average Order Value Meaning
AOV is an e-commerce performance metric typically measured monthly that shows a business what its customers’ purchasing habits are.
AOV tracks the average amount spent per order placed. At its core, AOV is simply a way to track customer behavior and make informed decisions based on that behavior.
In the next sections, we’ll talk about the implications of this and why it is important for you to understand.
Average Order Value Formula
The formula for Average Order Value is Total Revenue divided by Total Orders:
Total Revenue/Total Orders = Average Order Value
For example, if a business had $7,000 in revenue from 80 orders, the average order value would be $87.50.
What Does Average Order Value Tell You
AOV is the average amount customers pay per order over a period of time. This shows the typical order size for your business, which can help you decide whether to change your pricing or other aspects of your product/service.
AOV helps evaluate how well existing strategies are working and provides a benchmark, and lets you track the effectiveness of new implementations.
Sometimes, businesses are overly concerned with increasing website traffic rather than optimizing the traffic they already have using AOV analytics. Doing this instead can often make a greater impact, and sometimes it’s even easier.
How to Increase Average Order Value
There are many different strategies to increase order value, but they all revolve around the same few principles: making products more expensive or motivating customers to purchase more in general.
More often than not, increasing AOV just requires a few small changes to the website, with some suggestions and calls to action for customers in order to motivate them to purchase more.
Specifically, social proof is an important strategy to use, as shoppers will always be more likely to buy something if they see that other people have and think it is a good product.
Successful approaches to raising Average Order Value (AOV) include:
- Cross-selling: “Why not add a stylish water bottle to go with that yoga mat you just picked?”
- Upselling: “For just $15 more, you can upgrade to a premium smartwatch with additional features.”
- Free Shipping: (on orders over $75)
- Volume Discounts: “This facial cleanser is $18, but you’ll get 20% off if you purchase two or more.”
- Charity Contributions: (donate a portion of your order total to a local animal shelter when you spend $30 or more)
- Exclusive Offers: “Spend $40 today and unlock a $10 gift card for your next purchase!”
- Flexible Returns: “Not completely happy with your purchase? Return it within 30 days for a full refund.”
Monitoring the kinds of shoppers you have for your business is important as well, noting the different groups of low vs high frequency and small vs large spenders. Marketing specific things to each group, such as a membership program to the frequent spenders, will likely raise your AOV more than marketing it to the other groups.