Average Order Value (AOV): Definition, Calculation, and 9 Proven Tips to Increase It

1. What is average order value (AOV)?

Average Order Value (AOV) is the average amount of money customers spend on a single purchase. 

Calculating and analyzing AOV is crucial for businesses to evaluate marketing effectiveness, optimize financial resources, and develop growth strategies. 

Marketers need to analyze AOV changes to understand what drives these changes and how to increase it.

AOV, as a key performance indicator for advertising and sales, helps determine:

• Customer purchasing power
• Seasonality of demand—identifying which time of year sees the most sales
• Customer willingness to make expensive purchases and accept price increases
• The need to update the product range
• The effectiveness of promotions and loyalty programs
• The success of upselling, cross-selling, and add-on sales efforts

AOV is a metric that requires consistent monitoring. A single calculation isn't enough — it's essential to observe AOV trends over time, compare it across different periods, and suggest strategies to enhance it.

2. How to calculate average order value (AOV)

To calculate the Average Order Value, first, determine the time period for analysis (month, quarter, year) and then divide the total revenue (all the money received from customers during that period) by the number of transactions. It’s important to note that in this calculation, we consider transactions, meaning the actual orders, not all the items sold.

Formula:

Average Order Value (AOV) = Total sales revenue / Number of transactions (sales)

Example: A flower shop sold 1,000 bouquets totaling $20,000 in a month. During this time, 800 orders were completed—some customers purchased more than one bouquet. How do you calculate the Average Order Value in this case?

Since we're interested not in the average price of a single item, but in how much money customers spent on average in the store, the calculation should be based on the number of orders, not the number of items sold. Therefore, the formula to calculate the Average Order Value is: $20,000 / 800 orders = $25.

The Average Order Value is $25.

3. Calculating aov: what influences the average order value

Before calculating the Average Order Value (AOV), make sure you have identified the customer group and product group for which you want to perform the calculation. 

The AOV is affected by:

1. Customer category. If your customers have varying levels of purchasing power, you should calculate the AOV for each category — such as economy and business class. This allows you to more accurately evaluate the effectiveness of advertising for different segments and forecast revenue from selling different types of products.
   
   
2. Seasonality. Depending on the season, AOV will fluctuate — decreasing in the off-season and increasing during peak demand periods.
   
   
3. Product range. Just as with customer categories, you should calculate AOV separately for each product or service category. A general AOV across all products won't give you insights into which items are most profitable to promote.
   
   
4. Product pricing. If your company offers products across different price ranges, it's better to calculate AOV separately for each category—such as high-end and budget items. For example, calculating an overall AOV might overlook the fact that lower-priced items generate more revenue.

 4. Why you should calculate average order value (AOV)

Overall, tracking the dynamics of AOV helps you understand who your customers are, what they like, and what works for them. It also shows how well you are meeting their needs and values. By observing AOV trends, you can:

1. Evaluate marketing effectiveness. If the AOV increases after a campaign, it likely means the campaign was successful and could be scaled. If a promotion, such as one using a promo code, results in a lower AOV than usual, it’s worth investigating the reasons and considering them in future efforts.
2. Plan marketing investments and manage promotional expenses. Knowing your AOV helps you understand how many customers you need to attract to achieve a satisfactory return on investment.
3. Analyze customer behavior and preferences. Information about what influences AOV growth or decline is crucial when segmenting your audience, creating personalized offers, and optimizing your product range.
4. Evaluate your business's financial performance and understand what drives its dynamics.
5. Develop growth strategies. Cross-selling, improving customer service, and other measures to increase AOV can boost revenue without the need to attract more customers.

5. Nine proven tips to increase average order value (AOV)

There are several ways to boost AOV and increase revenue. Try a few, or better yet, all of them:

• Cross-sell – offer additional products or services that complement the purchased item. For example, for a computer, this could be accessories, software, or an extended warranty.
• Upsell – encourage customers to buy a more advanced version of the product, an upgraded service or a bundled offer.
• Bundled solutions – create packages of several products and services that offer a combined discount.
• Volume discounts and special offers – offer promotions like "buy three for the price of two" or free shipping for orders over a certain amount.
• Loyalty programs – provide bonus points, discounts, or exclusive offers for repeat customers.
• Enhance customer service quality – satisfied customers are more likely to spend more and recommend your business to others.
• Sell in sets – this method is often used in the perfume industry. For example, you can buy a perfume for $100, but if you buy a set that includes lotion and mist, the perfume will cost $89, though the total bill will be $150.
• Marketing and communication campaigns – draw customers' attention to higher-end products or services. This can also include merchandising efforts if you sell offline.
• Data analysis and optimization – the better you understand your customers, the more personalized, relevant, and effective your offers will be.

6. Important things to know about AOV

1. Average Order Value (AOV) in marketing and sales is the average amount of money customers spend per purchase or transaction. 
2. To calculate your company's average order value, simply divide the total sales revenue by the number of sales.
3. It’s important to calculate AOV regularly. Its trends help you understand who your customers are, what they like, and what works for them, as well as how well you’re meeting their needs and values.
4. Increasing AOV can boost revenue without the need to attract new customers.
5. Some effective ways to increase AOV include cross-selling and upselling, bundled offers, volume discounts and special offers, loyalty programs, and selling in sets. AOV is also influenced by service quality, product assortment, communications and merchandising, as well as the depth of your data analysis and optimization.
6. You can’t just increase AOV once and stop there. Business, advertising, products, and customer needs are constantly changing—regularly improving your AOV is essential to maximizing profits.