AOV – Average Order Value
What is AOV (Average Order Value)?
Average Order Value in eCommerce describes the average amount spent by every customer on an order. It can explain how customers usually make their decisions, what kind of purchases they make and how much each transaction adds up to the purchase overall.
How do you Calculate AOV?
Knowing the average order value enables you to understand how well your business is doing. This formula is most commonly used per month but can be used for any period of time.
(AOV) Average Order Value is equal to the
Total Sales Revenue divided by the Number of Orders Taken
In order to illustrate, let’s say you sell luxury chairs. Last month your total sales were $200,000 and you had 100 total orders. Your average revenue per unit was $2,000.
Find out how your business your competitors by exploring average order value benchmarks.
When determining the Average Order Value, it is important to understand that the Average order value is determined by sales per order rather than sales per customer.
Some businesses use segmenting techniques to attract the highest value customers and then show them differentiated products that encourage more purchases.
Retailers everywhere use product recommendations to generate more revenue. Marketing one or two SEO-friendly, high-value products and redirecting traffic through multiple marketing strategies produce a much higher average order value.
When evaluating the impacts of customers on revenue, strategists must consider several metrics. Customer Lifetime Value and Cost Per Conversion are two key metrics to consider along with any AOV consideration.