What is Average Order Value (AOV)?
The Short Answer
Average Order Value (AOV) explained simply
Average Order Value (AOV) tells you the average amount of money a customer spends each time they buy something from your business. It is a key metric for understanding customer behavior and the effectiveness of your pricing and marketing strategies. Knowing your AOV helps you make decisions about how to increase revenue, such as encouraging customers to buy more items or higher-priced products.
Real-World Example
The Online T-Shirt Shop
Let's say an online t-shirt shop made $10,000 in sales last month from 500 orders.
To calculate the AOV, you divide the total revenue by the number of orders:
$10,000 (Total Revenue) / 500 (Number of Orders) = $20 AOV
This means, on average, each customer spent $20 per order.
Why this matters
A higher AOV means more revenue without needing more customers. You can increase your AOV by offering product bundles, upselling higher-priced items, or setting a minimum order value for free shipping. This helps you grow your business more efficiently.
Focus on increasing your AOV. It's often easier and cheaper to get existing customers to spend a little more than to find a whole new customer.
Focus on increasing your AOV. It's often easier and cheaper to get existing customers to spend a little more than to find a whole new customer.
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