What is average order value (AOV)?

Posted by Nicolas Clary
— 10 min read
What is average order value (AOV)?
What is average order value (AOV)

When running an online store, your focus could be on multiple things. It could be converting site visitors to customers, reducing churn rate, or getting more traffic to your store. But one key aspect many online store owners overlook at the beginning of their eCommerce journey is increasing the average order value. Average order value is an important metric that requires constant monitoring as the business grows.

Having a good number of customers but with low order value can affect your revenue in the long run. But again, how can you determine the correct value for an order? The first thought will be to simply get customers to purchase items of more value, right? Well, if only things could be that easy.

Average Order Value Definition

The AOV or average order value, as the name suggests, is the average amount your customers spend at your eCommerce store over a period of time. The average value of each order placed at your store can help you determine your pricing and marketing strategies, in turn helping you reach your growth goals.

AOV is also a benchmark for defining your customer behavior a little more closely by analyzing the most frequently bought products and their value.

Why does average order value matter ?

But is AOV that important for an eCommerce store? Apart from the fact that it helps you tap into customers’ buying patterns, recognize the most in-demand products, and understand the average dollar spent for every order, AOV also helps in:

  • Streamlining your marketing efforts to products that require additional attention.
  • Achieve higher revenue at the same cost of acquiring the customer.
  • Develop products and services based on customer behavior for improved sales.
  • Management of overall advertisement expenditure.
  • Increasing the lifetime value of customers.

To understand this a little better, let’s take an example.

Say you run a cosmetic brand that sells different types of skin foundations.

  • Liquid foundation - $20
  • Cream foundation - $16
  • Powder foundation - $18
  • Stick foundation - $25

Based on the number of orders for each foundation and the total sales revenue you have gained from it, you can easily calculate the AOV. Let’s say your AOV in this particular scenario is $19. This means the sale of cream and powder foundation represents a significant chunk of your revenue. You can leverage this insight by marketing your liquid and stick foundations through ultimate special offers or by simply persuading the customers by highlighting its benefits.

As an eCommerce store owner, you must monitor (daily or weekly) and increase AOV for the best results. You can do this in two ways:

  1. By increasing the price of the most frequently purchased item.
  2. Improving the number of products purchased in a single order.

The average order value can fluctuate from time to time. A close examination of this by comparing it to the past AOVs can easily highlight the changes in trend for you to take action relatively quickly.

Furthermore, comparing your AOV with the cost per order can give you an idea of the profits you make on each order. Let’s say you incur $3 as the cost for each order (this includes your shipping, packaging, etc.), and your AOV is $12. You are getting a $9 profit for each order. You can also increase your AOV depending on your revenue and profit goals.

How To Calculate AOV ?

AOV is a direct indicator of your profits. You can calculate the average order value by dividing the total revenue over a given period of time by the number of orders.

Average order value (AOV) = Total revenue/Number of orders

This average amount spent by the customer on your store could be through your website or through the app. Say your store made a total revenue of $80,000 in March through 1602 orders. In this case, your AOV is 80000/1602 = 49.93.

With the increase in customer acquisition costs, a higher AOV can help tackle competition better.

How to improve Average Order Value ?

Average order value is often combined with other vital metrics for best results. This includes Conversion Rate (CR) and Revenue Per Visit (RPV) to evaluate the performance of your store as well as aid in the revenue growth of the business.

  • The conversion rate is the total number of site visitors to your store divided by the number of conversions (site visitors converted to customers).
  • Revenue per visit is calculated by dividing the total revenue by the total number of visitors.

Increase your AOV with PageFly

Increasing your AOV means more revenue without incurring any additional marketing or sales costs. A high conversion rate indicates a higher multiplier of your AOV. Similarly, a higher revenue per visit indicates that your store is receiving qualified traffic.

Most of the time, your eCommerce platform saves you the burden of manually calculating all these crucial metrics and provides your customers with a good user experience. Through actionable insights from your eCommerce platform, you can worry less about losing customers due to poor features.

Improve Average Order Value

A good eCommerce platform such as Shopify will provide your users with a good surfing experience and insights into your store's performance. If your store is on Shopify already, then using a page builder like PageFly can guarantee better conversions as well as optimize your store. PageFly offers conversion boosting elements such as a profit margin calculator, among many others, so you are always a step ahead on your business goals.

7 tips to improve your average order value (AOV) For Your ECommerce Store

There are several proven strategies that can help you increase your AOV, such as upselling and cross-selling, free shipping, etc. But all these strategies can only be effective if your store supports such features and prompts customers to make a smooth purchase. If you are looking to increase the AOV of your store with PageFly, here are 7 tips and strategies to try out:

Free Shipping Threshold

Most customers enjoy the thought of having free shipping for their purchases. Saving even $10 on shipping is considered a ‘good deal.’ This trick requires your customers to be aware of the minimum spend threshold.

You can nudge your customers to add products worth a certain amount to get free shipping by simply mentioning it at the checkout or through a pop-up telling them they are $$ away from free delivery. PageFly offers click action features with open pop-up click action to increase customer engagement and user experience.

How to calculate AOV ?

You can calculate your minimum order value from the most common order values. If most of your orders are in the range of $30, then you can offer free shipping for orders above $50. Keep in mind that your modal order value should be attainable. In this case, where the common order value is $30, keeping free shipping at $100 can result in cart abandonments.

Use Upselling and Cross-selling Tactics

Increase AOV with PageFly

This is one of the most common yet effective methods used by online stores. Upselling here means persuading your customers to buy an upgraded version of the product they intended to purchase. Cross-selling would include selling a product that compliments or relates to the customer's product in the cart.

Here's how you can implement these tactics effectively:

  • When upselling or cross-selling, remember to take a subtle approach. Don't force your customers to purchase the higher-priced product. Instead, you can show them as similar products in demand or products other customers also bought at the time when the customer adds a product to the cart. This can be easily done with PageFly's 100+ fully responsive templates and product recommendation features.
  • Don't upsell products with high price gaps. For example, if the customer added a moisturizer for $50, you can recommend products in the range of $60. Anything higher than that can be hard to convince the customers.
  • You can also enable complementary addition of products to the customer's cart automatically that they can choose to remove during checkout. This nudges the customer to check the add-on products and purchase them.

Implement Bundling or Bulk Options

Enticing customers by bundling 2 or more products together at a special price always presents great opportunities for increasing AOV. The key is to bundle products of interest to customers to improve the chances of purchase, in turn increasing the overall average order value of your store. A bundle of products to the customers’ liking represents high value. But how do you come up with these bundles?

  • Order history of customers can give you insights into product combinations that you might not have thought of. These buying patterns can show your product combinations that customers are more likely to purchase from you if they are sold as bundles.
  • Bundles can also serve as a complete package. For example, you can bundle cleanser, toner, and moisturizer for a single price. This way, your customers don’t miss out on any products while buying from your store, and you can amp up your AOV easily.

You can also offer bulk products at a discounted rate to increase sales. Customers can purchase a single product on a subscription basis, where they’ll receive the product repeatedly over a period of time, at a lesser price than the actual one. This motivates customers to go for a subscription, where you can sell the products in bulk consistently. You can sell products in bulk in one go, also for a discounted price.

With Shopify’s third-party apps, you can easily bundle products, sell them on a subscription basis, and cross-sell products of your choice with easy integration with PageFly to ultimately increase your AOV and conversion rates. For instance, WideBundle is certainly a good choice if you are building your page with PageFly. The app helps to change the way your variants look to create amazing offers for your products such as discounts, bundles, upsells or quantity breaks, which contribute to increasing AOV and improve your conversion rate.

Average order value with Shopify

Leverage Customer Loyalty Programs

Customer loyalty programs are a powerful tool to boost revenue and brand image for eCommerce stores. Segmenting customers based on their spending and offering loyalty reward points with each purchase is a great strategy to retain customers and increase customer lifetime value.

Leveraging customer preferences for loyalty programs can result in more personalized offerings. These reward points should convert to an incentive for the customer that’ll motivate them to make more purchases in return for the reward, leading to an increase in average order value. The points can convert to cashback, complimentary gifts, etc. For the best loyalty experience for your customers, combine PageFly features with a loyalty program app from Shopify.

Explore Limited-Time Promotions

Limited-time offers are a simple sales tool and can do wonders for your store. Let’s say your higher-priced products are not getting the sales that they should, and you can see that your site visitors are constantly adding those products to their carts or wishlists. To seal the deal, you offer 30% off on all high-priced products in demand as a limited-time offer, and there is a sudden peak in the orders.

Customers need a little push sometimes to complete an order, and offering discounts on the products they wish to buy will do the trick! Even though the sale is happening at a discounted price, your AOV will still go up. With pageFly’s price anchoring effect, you can easily sell products at a discounted rate, increase conversions, and drive sales hassle-free.

Here are some methods you can utilize to increase AOV through limited-time offers:

  • Leverage the price anchoring effect by simply showing a similar and higher-priced product alongside the discounted item to show that the offer is sort of a steal deal. This comparison can urge the customer to believe that they are saving money.
  • Set your free shipping order value above your AOV.
  • Use countdown timers to build urgency. For example, offer a no minimum order value for free shipping for a certain number of hours or offer products at a slashed price for the next 8 hours.

Amplify Conversions With Social Proof

Conversion with AOV

Image Credits

Positive customer reviews and testimonials are proof of loyal customers and excellent customer service. Having this social proof on your website can build trust among potential customers and lead to successful sales. With the review and testimonial element of PageFly, you can grow your brand trust and build credibility with pre-made testimonials and product reviews.

You can take advantage of social proof to increase the average order value by

  • Requesting testimonials and reviews from customers.
  • Make use of them on your page, preferably the home page.

You can always request a quick review through an email after several days of purchase. This serves two purposes: feedback that can help you improve your product delivery and social proof to increase conversions and AOV.

Flexible Payment Plans for Higher-Priced Products

It is not unknown to us that offering flexible payment plans for orders above a certain amount can motivate customers to make purchases without thinking twice. This is because they don’t have to pay a huge sum upfront or the total price and have the convenience of paying based on their chosen plan.

When customers purchase with the plan of their choice, it increases your conversions. At the same time, due to the higher price, your average order value also increases.

Apart from these tips, the visual elements present on your store’s website also motivate customers to buy from you. For example, if you want to highlight a particular product(s) for sale, it needs to stand out from the other products, so your customer can view them to make a decision. When you use a page builder like PageFly, you benefit from a pleasing visual display with a compact view where you can highlight your best sellers, trending products, and recommended products by other customers as a part of your sales campaigns.

Improve average order value with a solid strategy

The average order value focuses on selling to buyers who are already interested. When the intent is high, and they have already added products of their liking to the cart or have spent a considerable amount of time on your website, all you are required to do is direct them in the right way. Increasing average order value is easy as the customers are already engaging with your business in one way or the other.

The kind of strategy that you have to use for the best results comes from analyzing data and customer behavior, and these insights won’t be hard to get with an app like PageFly. Since achieving the desired results does not require additional costs, AOV is considered an essential lever in driving revenue. There are many more ways to increase the average dollar spent at your store, and these essential tips can get you there.