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What is Average Order Value? AOV Formula and How to Increase AOV

  • 5 minutes
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How to increase AOV: Assessing a business’s performance is critical in making the right decisions. Without the right information, making good decisions can become difficult. Making decisions based on incomplete data may lead to subpar performance. Therefore, e-commerce business owners need to get the right information to boost their business performance. 

Average order value (AOV) allows e-commerce merchants to identify in which direction their businesses are trending. In particular, these data give business owners the input they need to make the right decisions based on individual needs and circumstances. 

In this article, we’re going to discuss what AOV is, and how to increase AOV. We’re also going to focus on how to boost AOV to give e-commerce sites the push they need to reach the next level.

What is Average Order Value?

AOV refers to the calculation of average sales during a specific period. This period can be measured in minutes, hours, days, weeks, months, and years. Nevertheless, the most common measures are hours and days. Some e-commerce sites have so much traffic they measure AOV in minutes.

But what is average order value?

Let’s consider this example:

A fashion e-commerce site records 10 transactions per hour. These transactions have different values ranging from $10 to $100. So, business managers determine the AOV during this period by averaging the value per order. This calculation states that customers averaged $50 per purchase during the one-hour period. Consequently, this e-commerce site’s AOV is $50.

Please bear in mind that AOV is never constant. There are various factors that could influence AOV. Here is a look at some of the most common factors influencing AOV:

  • Time of day
  • Day of the week
  • Special offers and promotions
  • Customer needs
  • Holidays and special occasions
  • Customer psyche and sentiment
  • Economic conditions

For example, sales generally spike during special occasions such as Black Friday. Or, an online flower boutique may expect an explosion in their AOV leading up to Valentine’s Day. Once Valentine’s Day has passed, the flower shop can expect a decline in its AOV.

However, e-commerce merchants can expect to find patterns in their site’s AOV. Thus, careful observation can help spot these trends and patterns.

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How to Calculate Average Order Value?

By now, you might be wondering how to calculate average order value. Here is how to calculate AOV, including the Average Value Order Formula.

First, let’s start with this scenario:

A beauty and cosmetics site measured their sales over a one-hour window. The site recorded 14 transactions, with values between $14.35 and $56.

To calculate AOV, we must use the Average Order Value Formula:

(Total dollar amount of sales in a period) / (Total sales in the period)

Here how’s to calculate AOV using the Average Order Value Formula:

  • Add the value of all sales in the period
  • In this example, adding all sales totals $437.30
  • Divide $437.30 by the 14 transactions recorded during the period
  • The total should be $31.24

Based on these calculations, this e-commerce site’s AOV is $31.24, meaning that customers spend $31.24 on average per transaction.

Consequently, the merchant can expect customers to spend approximately $31 per purchase, though actual values may fluctuate.

Why is AOV an Important Metric?

Here are four reasons why AOV is a crucial metric when evaluating an e-commerce site’s performance:

#1: Understanding customer behavior

AOV allows e-commerce sites to get a clearer picture of specific customer behaviors. For instance, AOV can reveal the day of the week and the time of day with the highest AOV. Also, e-commerce sites can glimpse into customer spending habits. For example, businesses can learn about preferred payment methods or platforms (i.e., mobile or desktop).

#2: Evaluating pricing strategies

AOV can help evaluate pricing strategies, particularly following significant shifts. For example, a clothing site runs a major discount sale. The e-commerce site offers a 15% sitewide discount. Upon reviewing AOV, the site’s administrators find that AOV increased by 10%. Moreover, AOV remained consistent throughout the sale’s duration. However, prices returned to the usual pre-sale parameters when the sale ended.

#3: Measuring marketing strategy effectiveness

Marketing strategies can be tricky to evaluate. While they may seem effective on the surface, determining their true effectiveness requires objective metrics. AOV can function as an objective metric to evaluate effective marketing strategies.

#4: Identify trends and patterns

AOV is a useful way of determining market patterns and trends. For instance, AOV can become an indicator of the market’s overall situation. When customers feel uncertain about the economy’s future, they tend to cut back on spending.

10 Easy Tips to Increase Average Order Value

When thinking about how to increase average order value, 10 easy-to-use tips come to mind.

#1: Upsell throughout your store

Upselling comprises getting customers to purchase more. Plain and simple. You can use any number of tactics to entice customers to spend more. A highly effective strategy is the power of bundles. 

Bundles are promotions in which two or more products joined together to offer greater value than the products bought separately.

Let’s check out an example using bundles to increase average order value:

aov best practices
Source: rhaikalondon.com

Here, we see a classic example of “shop the look.” Customers can purchase items separately. However, they can purchase the entire set to complete the look in the product ad. This approach aims to entice customers to purchase the entire set leading them to spend more.

#2: Offer free shipping

Who doesn’t love free shipping? Customers love getting something free. At least, customers love feeling that they are getting something for free. But how does free shipping help boost AOV? Free shipping is magic when you offer free shipping with a minimum purchase. For example, your site offers free shipping on orders totaling $60 and over. 

average order value formula
Source: pairofthieves.com

Of course, customers don’t have to spend $50. If they don’t, they’ll pay a shipping fee. However, the thought of paying for shipping generally compels customers to throw in some more items to their cart to qualify for free shipping.

A great tool is adding a free shipping progress bar. These bars move as customers add more items to their cart. Once they’ve added enough items to qualify for free shipping, the progress bar delivers a message. 

#3: Cross-sell with targeted products

Upselling’s equally pretty sister is cross-selling. Cross-selling consists of enticing customers to purchase seemingly unrelated products. But when put together, they make sense. For instance, a customer in hardware site shops for a hammer. Then, the customer realizes they could also use some shipping tape upon seeing an ad for it.

Here’s an example of cross-selling:

how to calculate aov
Source: zenbivy.com

In this example, the camping gear shown makes sense when put together in a set. However, customers may not necessarily know or think about these other items when purchasing a sleeping bag. But upon seeing all the products together, they realize this is an easier and more complete way to make a purchase.

#4: Recommend relevant products

If you’re wondering how to increase AOV, product recommendations such as “frequently bought together” can give a significant boost. Consider this example:

tips to increase aov
Source: oceantales.com.au

This example highlights how a helpful product suggestion can lead to increasing AOV. While customers don’t have to purchase the recommended items, a gentle nudge can lead to increasing AOV. 

When pondering how to increase average order value, think about frequently bought together items.

#5: Simplify the purchase process

Making life easier for customers is a surefire way of boosting AOV. In doing so, customers may feel compelled to spend more time selecting items than navigating product pages and checkouts. You can make it easier for customers to make a purchase by offering pre-built sets of products, ideal for new customers: 

how to increase average order value
Source: shop.epicgardening.com

As you can see, this product offers an image of how several products can be used together, and an outline of what’s included in this product pack. Importantly, the customer doesn’t have to visit several product pages to get these items added to the cart, it can be done in one click. 

#6: Create a flexible return policy

Customers may feel uncertain about purchasing certain items if they feel they can’t return them. This situation applies to fashion, clothing, and footwear.

Think about that for a moment.

If a customer feels it will be a hassle to return a pair of shoes, they might pass on the purchase. In contrast, offering a flexible return policy gives customers a psychological boost. 

aov for e-commerce
Source: allbirds.com

Customers can feel comfortable knowing they can return items without too much trouble. This peace of mind can lead customers to spend more money at your online store. After all, they have nothing to lose if the pants they ordered don’t fit, or if they changed their mind about the color they chose.

There is a caveat to this tactic: ensure transparency in your policies. Otherwise, you open the door to some folks who might want to take advantage of the situation. Transparency ensures you have the right policies in place to keep your customers happy and boost your AOV.

#7: Offer mix-and-match deals

Customization plays a huge role in jumpstarting AOV. Allowing customers to mix and match products gives them the freedom to do as they like. Consequently, mixing and matching products is a staple of effective AOV strategies. 

Here’s an example of a mix-and-match promotion:

why to measure aov
Source: nopalera.co

By encouraging customers to mix and match products, you can sell more items to each customer than you otherwise would. Consider this strategy if your products are sold in various scents, colors, flavors, etc.

#8: Display in-cart recommendations

Like frequently bought together, in-cart recommendations can go a long way toward giving your AOV extra power. The cart is a great place to offer additional products to your customers, as they are closest to completing their purchase, and you already have a good idea of the types of products they are looking to buy. Here’s an example: 

why is aov an important metric
Source: zillaboutique.com

#9: Use product galleries to drive AOV

Product galleries allow customers to see what your e-commerce site has to offer. In doing so, customers may become enticed to purchase more than they had originally thought. Galleries are also great because you can inspire customers with entire outfits or “looks”, giving each buyer an idea of how they can use multiple products together. 

how to increase aov
Source: caskata.com

This example highlights how shop-the-look galleries can be used to pique customer interest. Often, customers visit your site with one thing in mind but leave with far more than they had originally intended. This effect is possible thanks to the power of galleries. Using galleries provides a potentially unlimited number of potential purchase decisions.

#10: Use tiered discounts

Tiered discounts can work wonders to increase AOV. In essence, customers save more when they buy more. Tiered discounts are most effective when they are displayed on product pages, so that customers see them as they are preparing to add products to their cart. If you sell any type of consumable or product that your customers buy in bulk, tiered discounts are a great strategy for increasing AOV. Here’s an example: 

what is average order value
Source: dipalready.com

Increase your AOV with PickyStory

When thinking about how to increase AOV, think of PickyStory. PickyStory allows your e-commerce site to leverage the power of discounts, kits, bundles, shop the look, curated bundles, in short, every kind of marketing promotion you can think of. Whether you are looking to offer product recommendations in the cart, or sell one-click bundles, PickyStory has the tools you need. 

Grow your sales with high-performing deals.

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  • Topics: Sales and Conversions

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