What is Average Order Value?
Average order value (AOV) measures the average amount one customer spends on a given purchase. This metric conveys how well you upsell/cross-sell products on your site, whether through product recommendations or based on how easy you make it to add products to your cart.
How to Calculate Average Order Value
Average Order Value is calculated by dividing your total revenue during a time period by the total number of orders you received.
This can also help you measure the effectiveness of your pricing model and cross-selling tactics. For example, if your AOV continuously decreases this could be a result of changes in consumer spending habits, or could suggest customers aren’t finding value in your cross-sell recommendations.
How to Increase Average Order Value
The most effective way to use AOV in your marketing efforts is to understand your average order size by each referring source of paid or organic traffic (e.g. organic search, direct visitors, SEO referred, programmatic referred, etc) so as to identify the channels most likely to deliver the greatest return.
The same analysis should be applied to each of your known audience segments (e.g. new visitors, returning visitors, persona groups, repeat customers, etc.) to help identify which audiences are likely to deliver the greatest return, and more importantly, areas of focus to lean into for improvement.
A few ideas for increasing average order value:
- Recommend relevant products to shoppers based on what they already have in their cart (or recommending items they have previously purchased - if applicable)
- Similarly, recommending items that other shoppers have purchased alongside whatever is in the current shopper’s cart
- Offer a tiered promotion, encouraging shoppers to spend more to save more (buying 2 items unlocks a 20% discount, buying 3+ items unlocks a 25% discount, etc.)
- Clearly display any customer loyalty benefits so it’s very clear to shoppers what points or status they have and how close they might be to an additional tier or level