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AOV: how to calculate it and what you can learn from it
Average order value (AOV) is the average amount a customer spends when shopping in your ecommerce store. To determine AOV, you need to know two basic metrics: total revenue for a given period and total sales for the same period. Mathematically, this metric is calculated using the formula: Average order value = total revenue/number of orders.
When analysing AOV, it is important to take into account the seasonality of the niche, the range of products/services you sell, and the segments of your target audience. If your business's sales statistics depend directly on the time of year and specific periods, it makes sense to calculate the average cheque for the high and low seasons.
There are no normative figures for the average cheque. The higher the figure, the more profit the business is making. It can be improved by making attractive and favourable offers to customers. These should be properly analysed in terms of customer value. The products should not just be imposed on the customer. They should help them solve some problems.
When analysing AOV, it is important to take into account the seasonality of the niche, the range of products/services you sell, and the segments of your target audience. If your business's sales statistics depend directly on the time of year and specific periods, it makes sense to calculate the average cheque for the high and low seasons.
There are no normative figures for the average cheque. The higher the figure, the more profit the business is making. It can be improved by making attractive and favourable offers to customers. These should be properly analysed in terms of customer value. The products should not just be imposed on the customer. They should help them solve some problems.
What conclusions can be drawn from AOV?
AOV is always a consideration when evaluating marketing effectiveness. Companies that want to grow and scale work to constantly increase this metric. Using AOV analysis, you can determine
How to increase your average order value
If your customers spend an average of $50 in your store, it would be great to get them to spend $100. Here are a few simple ways to increase your average order value:
AOV is always a consideration when evaluating marketing effectiveness. Companies that want to grow and scale work to constantly increase this metric. Using AOV analysis, you can determine
- How loyal customers are to your brand and products, and whether they are willing to choose you over your competitors;
- How satisfied customers are with your service, product range and quality, and the convenience of their shopping experience;
- Whether your pricing policy is appropriate and whether your prices are competitive in the marketplace;
- whether your marketing strategy (if the average cheque is increasing, then you are doing everything right) and the work of your sales managers are effective.
- the time of year or period when you get more or less money from customers. Based on this information, you'll be able to work out when to run promotions. For example, if you have a lot of sales in August, don't offer extra discounts in that month. It is better to do this when the average order value drops significantly.
How to increase your average order value
If your customers spend an average of $50 in your store, it would be great to get them to spend $100. Here are a few simple ways to increase your average order value:
- Cross-sell. When someone buys a mobile phone, they will most likely need a screen protector and a case. Your offer to purchase additional items should look like a solution to a problem, not an imposition. Identify the problem and offer a solution. Not only will you increase the average cheque, you will also increase customer loyalty. Another way to presell is to offer a more expensive product with better features than the one the customer was planning to buy. This technique is called upselling.
- Combine products. If someone buys a camera, why not let them buy a camera and lens together? Combining is an easy way to get people to spend more. Of course, this purchase option must be beneficial to both the customer and you.
- Display similar and related products on the product card pages of your website. This is a great way to increase your sales.
- Make the customer a super advantageous offer. But the time to use it should be limited. For example, it is necessary to have time to buy a product or service within an hour or until the end of the day. You should only make this offer if the customer has already bought something from you.
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