AOV – What is Average Order Value?

Aug 6, 2020
7 minute read

AOV is a useful metric for looking at your customers’ buying habits. It can help you identify trends, find ways to improve your sales and gauge the success of your efforts.

If you’re an entrepreneur and want to refine your business plan, this guide will tell you everything you need to know to get the most out of this metric. That includes how to calculate your AOV, how to improve it, and some ways to avoid common pitfalls.

What is AOV?

AOV stands for Average Order Value. It’s a business metric that measures how much your customers typically spend per order.

How to calculate AOV

Calculating your AOV is simple. All you need to do is choose a time period and then divide your total revenue by the number of orders. The answer is your AOV.

For example, if last month you made $10,000 in revenue, and had 200 orders, your AOV is $50.

10,000 / 200 = 50

Typically, businesses will calculate their AOV for each month so they can monitor changes, but you can use it to look at any time period.

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Why is AOV important?

Knowing your business’s Average Order Value can be useful in many ways. Firstly, it can give you a way to learn about your customers’ buying habits. This can help when you want to gauge the success of your business in many areas, including:

When you’re making changes to these aspects of your business, AOV gives you a simple way to see how they can affect your customers’ purchases.

Secondly, when you use AOV in combination with several other business metrics, it can help you get a more complete picture of the profitability of your business and ways to improve.

How to improve your average order value

If you’ve calculated your Average Order Value and aren’t satisfied with the results, there are a number of ways you can increase it. They include various promotions and marketing strategies that will encourage customers to spend more on every order.

Bundles

One way to encourage customers to place larger orders is to offer them a discounted price when buying multiple items. One example of this is how telecom companies like Bell encourage customers to sign up for phone, internet, and TV packages at the same time.

Businesses that offer subscription-based services can benefit greatly from this,