Ecommerce Encyclopedia

‟Ecommerce is a powerful means to connect the unconnected to global trade” - Arancha Gonzalez

Why average order value matters and how to improve it?

What Is Average Order Value (AOV)?

Average order value (AOV) is the average amount of money your customers spend on each order when purchasing from your website. 

Knowing the average order value can help you to improve your marketing and pricing strategies. Increasing the average order value is critical to growing your business’s revenue.

How To Calculate Average Order Value

Average order value is easily calculated by the formula: (total revenue) / (total number of orders) over a given period.

Why You Need to Know Average Order Value

Being aware of the average order value is equal to being aware of your customers’ shopping behaviors.

By learning how much your customers are spending on each order, sellers can evaluate how well pricing strategy, up-sell, and cross-sell techniques are working. Based on that, retailers can come up with a better pricing and marketing strategy to improve profit and revenue growth.

How to Improve Average Order Value

Below are a few simple techniques to increase your AOV figure:

  1. Pricing

Pricing control is efficient in increasing average order value. However, you should do it in a clever way to avoid losing customers. To optimize your pricing, keep in mind the pricing sensitivity of your customer and compare your prices to other stores that offer the same products.

  1. Cross-sell & Upsell

Cross-selling and upselling are efficient behavioral marketing methods that can improve average order value.

Suggesting your customer bundle of related products can have a quick impact on your AOV. Upsize deals, quantity discounts, and related product recommendations help to boost your average order value.

  1. Offer Discounts

Offering customers an incentive such as discounts or promotions is another simple way to boost sales.

For example, offering a 20% discount code by adding one more item into cart is an effective way to increase average order value before customers leave and possibly not return to your site.
  1. Offer Free Shipping & Returns

You may see this often on eCommerce websites: “orders over $50 qualify for free shipping!”

Most customers will find all ways to avoid shipping costs, including buying more to reach the minimum order value for free shipping. Therefore, offering free shipping is undoubtedly an effective way to increase AOV.

  1. Increase AOV with Social Proof

Social proof is a great way for marketers to build credibility and create a sense of FOMO for customers.