Maximizing your Average Order Value is one of the best ways to improve your sales and marketing strategy. By definition, Average Order Value (AOV) is exactly how it sounds; it’s the average amount spent per order. This gives your business the ability to better understand your pricing and revenue strategies. While the metric seems simple on the surface, it offers valuable insights into areas of future growth and improvement. We'll take you through how to calculate this metric, how to understand it in the context of your industry, and how to apply it to the platforms you're using now.
You can calculate AOV by dividing total revenue by total number of orders. AOV can be assessed for various time-periods (i.e. day, week, month, year) and, if your sales are tied to certain products or platforms, you can assign a specific AOV for each.
If you’re confused about how to define total revenue and total number of orders, we’ve included some nifty definitions and examples below:
When choosing what to include in your calculations, remember: consistency is key! That means, if you decide to include XYZ in your AOV for the month, you should include it in the next month’s AOV as well. Having consistent metrics will allow you to better identify the causes of good or bad performance. For instance, if, over the past few months, you’ve started cross-selling related products at check-out and your AOV increased, then you’ll know that action was productive in expanding order size!
Again, as you begin (consistently) monitoring AOV, you’ll be able to find insights specific to your strategy. Of course, it’s also important to understand your AOV in relation to your broader industry. To help you know what to expect, we’ve included a list of average AOV per industry (shoutout to Little Data for the stats):
Further, while you can find revenue and order numbers from many channels, we’ve identified popular platforms that are particularly relevant to AOV. These may be good places to begin if you’re getting started with this metric:
While AOV is easy to calculate, it’s important to keep in mind that AOV is one of many valuable metrics to track your performance. If you don’t want to spend hours at the end of the month juggling numbers from your Shopify, Stripe, and Google Analytics accounts, consider trying Lido. Lido can help you build a dashboard to monitor your data and give a look into how your key metrics (such as AOV) change over time.
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