What is the average order value?
The average order value (AOV) is an e-commerce metric that tracks the average dollar amount spent by a consumer each time he or she places orders on a computer or smartphone.
The company must closely monitor AOV as it shows essential information about the customers. Companies review their AOV daily or weekly because e-commerce is such a dynamic and competitive market.
The average order value is calculated by dividing a period’s income by the total number of orders placed during that time. The revenue per order, not the revenue per client, estimates the average order value.
The importance of average order value
The average order value may reveal information about client behavior. A lower AOV usually means that the seller’s clients prefer to make minor purchases with each order. AOV trends also impact the company’s critical business decisions, such as product price and marketing.
Considering your company’s average order value can help you assess your sales model and digital advertising efforts by giving you the numbers you need to evaluate individual customers’ long-term value.
How to improve average order value?
The AOV contributes to the development of goals and strategies and the evaluation of their effectiveness. Each retailer strives to increase its average order value (AOV).
The practices listed below can assist an e-commerce company in increasing its average order value:
- Upsell and cross-sell to enhance revenue from each order.
- Provide discounts based on a minimum purchase amount.
- Creating a free shipping threshold as an alternative to deals can be beneficial.