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What is Average Order Value?

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Average Order Value

Average order value (or AOV) is an ecommerce metric, which shows how much money customers spend on their orders from a website over a certain period of time. It is usually calculated by the division of total revenue by the number of orders.

AOV is an important metric because it gives insights to business owners on what interests their audience the most. For example, your ecommerce shop is selling sneakers of multiple brands. You’ve sold three pairs of sneakers pricing 49$, 65$, and 87$, which means your AOV is 67$. This shows you that your customers are willing to buy sneakers under 70$ and therefore you can build your marketing and pricing strategy based on your clients’ purchasing habits. 

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Average order value, customer lifetime value, and revenue per visitor

Apart from AOV, there are also two other ecommerce metrics that you need to keep in mind, which are customer lifetime value (also known as CLV) and revenue per visitor (or RPV). The difference between these two metrics is that customer lifetime value is the total sum of money an ecommerce business can expect from one particular customer whereas revenue per visitor is your total revenue divided by the number of visitors. If your customers don’t make multiple purchases on your website, your return on investment in advertising will be significantly lower because you can have a lot of people visiting your website but from a long perspective, it won’t be worth it if you can’t convert them into your regular customers.

Read also: Top 9 Ecommerce Metrics To Grow Your Ecommerce Business

Ways to improve your AOV

There are multiple ways to increase your AOV. They include:

  • Upselling. For example, if your customer buys a smartphone, why not ask him/her to additionally purchase a phone case?
  • Free shipping. By offering free shipping for a higher minimum purchase, you will have more chances for customers to pay some extra money.
  • Coupons on the next purchase. For example, AliExpress, a global ecommerce platform, offers clients discount coupons for their orders when they pay more on certain products.
  • Volume discounts. Customers can think of buying everyday goods in bulk if they can get a discount for that.

 

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