What is AOV?
AOV (Average Order Value) is an indicator that shows the average value of each order placed in the online store in a certain period of time. Thanks to this indicator, every e-commerce owner will be able to make more informed and accurate business decisions regarding, for example, advertising expenditure or pricing policy.
How to calculate AOV?
average\: order\: value = \dfrac{revenue}{number\: of\: orders}
Importantly, the AOV takes into account sales in relation to the number of orders and not to a given customer. Thanks to this, it is possible to accurately determine the value of a single order, even if the same customer performs several purchases in your e-store.
How to interpret the AOV?
In general – the higher its value, the more you earn. However, this factor should be analysed in relation to:
- RPV (Revenue Per Visitor), or revenue per one person visiting your e-store. If this ratio stays low in your e-store, it means that customers do not make too many purchases, which in turn translates into a lower return on investment incurred in advertising.
- CPC (Cost per Conversion), i.e. the cost of conversion. This metric notes how much it costs to acquire one client. Subtracting this value from the average order value, you can accurately determine the actual profit.
How to improve the AOV?
If the analysis shows that the AOV ratio in your e-store is low, it is worth starting optimisation activities aimed at increasing revenues. How to do it?
- Introduce customer segmentation – take the shopping frequency or basket value as a criterion. Thanks to this, you perfectly match the promotion strategy to the needs of recipients. For those who regularly spend a lot of money in your e-store, prepare an interesting loyalty program. For those who spend only small amounts, suggest a coupon for further purchases.
- Take advantage of cross-selling and up-selling – try to maximise profit from one transaction using the cross-selling and additional method. In your e-shop, add a field with recommended products, point customers to products compatible with those they have just purchased.
- Offer free delivery – offer your customers free delivery from a specific order value.
