{"id":196,"date":"2021-11-10T13:30:00","date_gmt":"2021-11-10T13:30:00","guid":{"rendered":"https:\/\/chatsupport.co\/blog\/?p=196"},"modified":"2024-07-08T10:34:40","modified_gmt":"2024-07-08T10:34:40","slug":"average-order-value","status":"publish","type":"post","link":"https:\/\/chatsupport.co\/blog\/how-to\/average-order-value\/","title":{"rendered":"What is Average Order Value (AOV)? Definition, How to Calculate & Essential Tips"},"content":{"rendered":"\n
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What is Average Order Value (AOV)?<\/h2>\n\n\n\n

Average order value indicates the average amount a customer spends every time they place an order. Your company’s AOV is a key performance indicator (KPI) that helps you understand your customers’ purchasing habits. You can track it over any period of time, but many online businesses track the monthly average. <\/p>\n\n\n\n

While AOV is an important metric to track, it’s important to remember that your AOV doesn’t always correlate with your sales volume. A high volume of orders during your busiest sales period may bring down your average. <\/p>\n\n\n\n

With that said, this article will teach you how to calculate your average order value, other metrics to look at alongside it, and ways eCommerce businesses<\/a> can optimize its AOV.<\/p>\n\n\n\n

How to calculate your AOV<\/h2>\n\n\n\n

Calculating your AOV is simple. <\/p>\n\n\n\n

AOV = Revenue \/ total number of orders<\/strong><\/p>\n\n\n\n

For example, let’s say your company received 3,000 orders in the last quarter, and those orders brought in $50K in revenue. <\/p>\n\n\n\n

AOV = $50,000 revenue \/ 3,000 total number of orders<\/p>\n\n\n\n

AOV = $16.67<\/p>\n\n\n\n

Now, let’s look at an entire year\u2019s worth. Let’s say your company received 25K orders over the last year, and those orders brought in $750K in revenue.<\/p>\n\n\n\n

In this case: AOV = $750,000 revenue \/ 25,000 total orders <\/p>\n\n\n\n

AOV = $30.00<\/p>\n\n\n\n

There could be various reasons for the change from the last quarter to the year\u2014from seasonal changes to your sales and promotions. That’s why it’s also important to consider other key metrics.<\/p>\n\n\n\n

Pro-tip: <\/strong>Make sure to align the AOV to the exact time period. If you want to use your revenue from the last quarter, you must also use the number of orders you received over the same time period. Failure to match these will skew your results.<\/p>\n\n\n\n

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Other key metrics to keep in mind<\/h2>\n\n\n\n

Since so many things can influence your AOV, such as your sales volume, sales on certain products, seasonal sales, etc., it’s not the best standalone metric.<\/p>\n\n\n\n

However, when combined with other metrics, it can help you make business decisions around your marketing efforts<\/a>, advertising spend, and product pricing. With all of these metrics in mind, you\u2019ll get more context around how<\/em> your company achieved your AOV. It\u2019ll also guide you in any future marketing plans you take as you seek to improve your AOV.<\/p>\n\n\n\n

Lifetime revenue per customer<\/h3>\n\n\n\n

This refers to the total revenue you can expect to receive from any given customer. It measures the profit you earn from any customer. It’s the most important metric for understanding your consumers. Analyzing customer lifetime revenue provides the following business insight:<\/p>\n\n\n\n