Average Order Value
What is Average Order Value?
Average Order Value (AOV) indicates the average amount of money spent on an order, either over a set period or over the lifetime of an e-commerce store. This is calculated by taking the total revenue and dividing it by the number of orders placed within the determined period.
How to calculate Average Order Value
Example 1: From Nov 1, 2020 to Nov 30, 2020 Company ABC had $45,000 in Revenue over 450 orders. For this customer, the average order value in November is $100 per order. Since the end of November is the typical busy season for an e-commerce business, This company can also look at the average order value over the month or compare weeks 1-3 with the last week in November. Example 2: Nov 1, 2020 - Nov 25, 2020 Company ABC had $35,000 in Revenue over 400 orders. The average order value over this period is $87.50 per order. After the holiday season started on Nov 26, 2021 - Nov 30, 2021, Company ABC had $10,000 in revenue over 50 orders. The Average Order value over this period was $200 per order. This means that Company ABC each year can expect a significant increase in average order value over the holiday period.
More about this metric
This stat informs users what they can expect in terms of revenue when an order comes in. It is typically used as a benchmark and can be used to see if any marketing or up-sell strategies are effective. It can be calculated yearly, weekly, daily, or for a lifetime of a store. Tracking this metric helps you understand shopper buying patterns, which in turn helps you improve your pricing strategy.
Fluctuations in AOV can be explained by analyzing this metric alongside Average Basket Size. Steady growth in this number could be a possible indicator that customers increasingly trust and use your e-commerce site. However, it is important to keep context in mind when analyzing trends in AOV. For example, a seasonal sale can temporarily increase AOV.
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