Average Order Value (AOV) is a metric that helps retailers understand their customers’ purchasing behaviours. An average order value tracks the average dollar amount spent every time a customer places an order. Like with all other key metrics, AOVs can be tracked over any time period, but most companies prefer to monitor their AOVs as a moving monthly average.
What is Average Order Value (AOV)?
Average order value is a critical metric for all data-driven businesses to track if they want to scale their profits and revenue growth. Knowing the average dollar spent on each order placed across your business channels can help you plan pricing and marketing strategies to increase that value then — which can significantly impact your bottom line.
Benefits of Knowing Your AOV
Knowing your company’s average order value helps you to evaluate your pricing strategy and online marketing efforts by providing the metrics needed to…
measure the long-term value of individual customers. Businesses can directly impact their revenue growth by increasing their average order value. When you expand the average order value, you sell more inventory. Since customers are buying more products, your revenue increases.
Consolidating the same amount of units sold to an individual customer into a single sale cuts costs. “As customer acquisition costs continue to rise and competition becomes more fierce, you need the higher AOV for your unit economics to continue making sense,” says Casey Armstrong, CMO at ShipBob.
The formula for Calculating AOV You can easily calculate your average order value by dividing total revenue by the number of orders during a given period. For example: Your total revenue for October was $90,000. The total number of orders on your e-commerce channels for October was 1,437.
To calculate AOV = $90,000 / 1437 = $62.63 Based on this data, your average order value (AOV) during October was $62.63. Example Calculation of AOV Calculating your eCommerce businesses average order value is as simple as dividing total revenue by the total number of orders in a period. For example, if eCommerce sales for June…
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