Average Order Value is a metric that is used to measure the average total of every order placed with a seller over a specific period of time.
AOV is a key metric that is used by online businesses to understand the purchasing habits of their customers.
Formula to calculate average order value
AOV= Revenue/Total number of orders
For example, let’s say in the month of January your website store’s sales were $20,000 and you had a total of 500 orders. So by using the formula, your average order value in the month of January was $40.
Importance of average order value
- The average order value of a company helps you to evaluate your marketing strategies and measure the long-term value of your customers.
- It is more profitable to increase the average order value because it does not cost you anything. It’s all about the right strategies and offers that you can provide to the customers.
- It is a way to increase your profits and drive direct revenue
Strategies for increasing Average order value
- Upselling(“would you like this T-shirt for only $15 more than the pair in your cart?”)
- Cross-selling(“How about a T-shirt to go with the jeans you just ordered?”)
- Free shipping (“shop for $5 to get free shipping”)
- Volume discounts(“This soap costs $8, but you’ll save 20% if you buy 2 or more”)
- Coupons on minimum order(“spend $40 and get $10 off on your next order”)
- Donations(“to be given to non-profit organizations on minimum purchase”)
- Return policy(“you can send them back if you are not satisfied”)