What is AOV?
Average Order Value (AOV) is a key metric used to measure the success of e-commerce businesses. It is the average amount that customers spend per order on your website or mobile app. This statistic is important for understanding how profitable your business model is, and what areas could be improved in order to increase it. AOV can also be used to compare against cost per click (CPC) data, which measures how much it costs to acquire a customer through paid search or ads.
Formula:
Average Order Value (AOV) = Total Revenue ÷ Number of Orders Placed
In general, AOV should be high enough to offset costs associated with marketing and operating an online business, such as hosting fees, payment processing fees, shipping costs, etc. A higher AOV suggests that customers are purchasing more items at once and/or spending more on each individual item in total. To calculate your Average Order Value, you simply take the total revenue generated from orders over a certain period of time and divide it by the number of orders within that same timeframe.
As a business owner or marketer, focusing on increasing AOV should be one of your primary goals as it can have a tremendous impact on overall profitability. There are numerous strategies that can be implemented to increase this metric such as offering discounts based on order size and providing customers with incentives when they purchase multiple items in one order. Additionally, optimizing product page visuals and descriptions can help create an engaged buying experience where customers feel comfortable spending more money since they understand the value they’ll receive from their purchase.
Another important factor when considering Average Order Value is whether you’re tracking sales from repeat customers versus first-time buyers. If you find that repeat customers are spending significantly more than first-time visitors then it’s worth looking into ways to increase acquisition rates for new customers which will further drive up overall sales revenue numbers. By properly leveraging your existing customer base alongside aggressive growth tactics for acquiring new buyers, you will be able improve both sides of the equation which will result in a higher Average Order Value figure for your online business.
What is an example of AOV?
One example of AOV is Amazon’s “Frequently Bought Together” feature. This feature suggests complementary products to customers based on their current selection, encouraging them to add more items to their cart and increase their AOV. For instance, if a customer is buying a camera, Amazon may suggest a camera case, memory card, and tripod as complementary products. This feature has been successful in increasing Amazon’s AOV and has become a standard feature in many e-commerce websites
