Average Order Value

The traffic on your website is high. The conversion rates are good. But are your order values as well? The Average Order Value (AOV) is a useful metric that you should monitor as your business grows. Typically, this is one of the first measures you should try to improve to increase your revenue or optimize the return on your marketing efforts.

In addition, it is important to track if your AOV is enduring in your customer's repeat purchases as a sign of the quality of customers that you are attracting. So let's take a look:

Definitions

Before you dive into data analysis, let's ensure that we are on the same page with some definitions:

AOV = ∑ Sum of Gross Revenue / Number of Orders

The average order value is shown as a color-coded line chart followed by absolute figures. Trends get even more clear by the growth rate by comparing each data point with the previous period.

With the activation of RX Forecast™ you will additionally receive three forecast scenarios for the coming months. To enable predictions, simply book the add-on Forecast Plus.

Use Cases

The great part of focusing on the average order value is that you concentrate on customers who already want to buy. They have come to your website with great intent; they may even have items in their shopping cart. All you have to do is help them to discover and purchase other items relevant to them.

If you focus on attracting and activating those who already shop with you, you will have fewer obstacles to overcome. Instead of spinning the wheels on the customer acquisition treadmill, the goal is to create a greater exchange of value - customers who spend more get more. Here are a few ideas on how to do so:

• Cross-Selling: Selling of a different product or bundling of complementary products to provide an additional benefit to the customer and an increase in revenue for you.
• Upselling: Encouraging your customers to purchase a more expensive but related product before checking out. 
• Packs: Creating packs of items instead of selling multiple products separately; e.g. promoting a 3-in-1 pack of coffee beans that highlights 20% savings when compared to the price of one single package.
• Volume Discounts: Offering products at a reduced price per item when purchasing more. For example, 50% off the purchase price of a second coffee.
• Free Shipping: Introducing a policy of free shipping above a minimum purchase quantity to encourage your customers to fill their shopping basket to the extent that they receive the benefit. 
• Return Policy: Rolling out a forgiving return policy, at least for the priciest items to reassure customers and boost sales.
• VIP Program: Setting up a customer loyalty program for your Top Customers to give your top customers special treatment and thereby encourage them to buy more.
• Live Chat: Offering live chat support for quick questions to eliminate any potential purchase barriers.

Also, analyzing AOV performance is a good indicator of Lifetime Value for those businesses that are starting and do not have enough data to perform an LTV calculation.

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