Marketing Glossary

Average Order Value (AOV)

An estimate of the average dollar amount spent by a customer each time he or she orders something from a website or mobile app.

What is Average Order Value (AOV)?

The approximate dollar figure invested every time a consumer submits an order on a mobile app or website is tracked by the average order value (AOV). Simply divide total revenue by total orders to obtain the average order value for your business.

Average Order Value Formula

For instance, suppose your web store generated $50,000 in revenue during the month of September and received 1,000 orders. $50,000 divided by 1,000 equals $50, indicating that September’s AOV was $50.

AOV is a critical performance metric used by online merchants to ascertain their consumers’ purchasing behavior. As with other critical indicators, AOV can be tracked over any time frame, but the rolling monthly average is the most commonly used.

Why is the Average Order Value (AOV) Important?

If you know how much customers spend on average, you can better understand how much money you’re spending on your online marketing and pricing plan. As a barometer of customer behavior, the AOV enables you to create plans and goals and measure their effectiveness.

When it comes to generating website traffic, some marketers overlook the fact that raising AOV is more significant and profitable. Typically, increasing traffic costs money, whereas expanding AOV does not. Because each order incurs a transaction fee, raising your AOV is a technique to enhance direct revenue and profits.

How to Improve Your Average Order Value (AOV)

There are a few tactics you can use to boost your average order value. These strategies are fundamentally different techniques to induce your consumer to invest additional money, either by purchasing more things or purchasing more expensive items than they initially intended.

Increasing your AOV can be done at any point in the sales funnel. You can persuade your consumer to buy more items that are linked to what they already have in their shopping basket, such as light bulbs for a lamp or batteries for an electronic gadget. You might even recommend that they look into a more costly, possibly even bestseller, option.

Customers can be persuaded to spend more money by using clever marketing techniques, such as placing an intriguing variety of products in front of them and presenting them in such a manner which they are compelled to buy, or by offering personalized incentives, such as free delivery. The following are examples of effective AOV-increasing strategies:

  • Return policy: “If you’re not pleased, feel free to return the item.”
  • Donations: For a minimum purchase, offer donations to a non-profit organization (NGO).
  • Coupons: “Make a $100 purchase and receive a $10 discount on your next purchase!”
  • Free shipping: Offer free shipping if the customer spends an amount equal to the higher minimum purchase.
  • Volume discounts: “This bed sheet costs $9, but if you buy three or more, you’ll save 40%.”
  • Upselling: “How about this pair of Egyptian hand towels for only $10 more than the pair you have in your cart?”
  • Cross-selling: “How about a pair of socks to match with your new tennis shoes?”

Segmenting your client base into several categories based on purchase history, such as low vs. high frequency shoppers and small vs. big spenders, is a wonderful method to implement these techniques. Different offers should be made to each group. You can enroll your high-frequency buyers in loyalty program, for example, to enhance their AOV.

Key Metrics of eCommerce to Keep in Mind:

Concentrating solely on growing your average order value can be an excellent method to boost your net profit, but make sure you’re also monitoring a few other critical metrics:

  • Revenue Per Visitor: Revenue per Visitor (RPV) is a metric that indicates how much money is made when a consumer sees your website.
  • Conversion Rate: The number of visitors divided by the number of conversions is used to calculate the percentage of visitors who actually buy something. It’s not a good idea to raise your average order value (AOV) only to discover that your overall conversion rates have dropped.

Using A/B Testing to Boost your Average Order Value (AOV)

Each app and website has its own set of clients and products, and growing AOV can be done in a variety of ways. There are various options to test within each strategy, such as calls to action, headlines, and pictures.

As an example, consider cross-selling. To see if AOV increases, compare your initial shopping cart to a variation that contains a “Recommended products for you” statement and graphic. Then you might try a different message, such as “People who bought this also bought this”, to see which one gets the best AOV.

With so many options for increasing your AOV, you’ll need to create a systematic sequence of A/B testing that will allow you to gather enough data for each test to optimize for conversion.