Average order value (AOV)

Average order value (AOV) is a key ecommerce metric. It represents the average monetary value of each transaction or order made on your website within a specific period.

How do you calculate AOV?

Let's say an online houseplant brand, Planto, is generating $7million worth of sales each year from 35,435 orders.

The formula for this is online sales revenue ÷ by number of orders. So in Planto's case that's 7,0000 ÷ 35,435.

That means the brand's AOV is $198.09.

Why AOV is an important ecommerce metric

Knowing your AOV unlocks a load of useful data for your brand, and can give you pointers on where to best focus your energies. Here's the 7 key benefits of calculating your AOV.

  1. Boost your revenue: AOV can help your ecommerce brand increase revenue by encouraging customers to spend more per transaction. You could try to upsell or cross-sell products, or offer bundle savings at checkout.
  2. Understand your customers: Some customers will have a higher value than others, so it's a good idea to break out your customer profiles by AOV. High AOV customers may be targeted differently than those with lower AOV.
  3. Optimising your marketing: Talking of which, understanding your AOV can provide a different focus to your marketing campaigns. For example, when you understand which types of customers have a higher AOV, you could tailor your advertising campaigns to target them.
  4. Enhance your customer retention: AOV can inform the design and optimisation of loyalty programs. By offering rewards or incentives that encourage customers to increase their order value, businesses can enhance customer loyalty and retention.
  5. Analyse your profitability: Understanding the AOV of your brand is crucial for assessing the profitability of each transaction. By factoring in costs associated with fulfilling orders, businesses can determine whether certain products or customer segments are more profitable than others.
  6. Know where to allocate resources: Ecommerce brands can allocate resources effectively by focusing on customer segments or products that contribute most significantly to AOV. This targeted approach allows for efficient use of marketing budgets and operational resources.

There you have it. AOV not only reflects the financial health of your DTC business but it can guide your marketing efforts and customer retention.