Mastering eCommerce Metrics: Average Order Value (AOV)

As an online merchant, you've got more metrics at your fingertips than you know what to do with.

But here's the thing: not all metrics are created equal. Some are game-changers, and Average Order Value (AOV) is one of them. In this blog, we're going to unpack everything you need to know about AOV. From what it is and how to calculate it, to why it matters and how to boost it. So let's demystify this powerhouse metric that could be the key to leveling up your eCommerce game together.

What is Average Order Value (AOV)?

Average Order Value (AOV) measures the average amount spent by customers per transaction on your eCommerce site. It's a key metric that shows how well you're able to maximize revenue from each buyer. A higher AOV means more revenue from the same number of orders—increasing profits without needing more customers.

Why AOV Matters

A higher AOV means more revenue without needing extra site traffic. Boosting it even slightly can lead to major profit gains over time.

A higher AOV is crucial for eCommerce businesses for several reasons:

• It increases total revenue without requiring more traffic. Even a small AOV increase of a few dollars per order can make a big difference to your bottom line over thousands of orders.
• It improves profit margins since most costs are fixed. The more revenue you generate from each customer, the higher your profits will be.
• It indicates customers are finding valuable and relevant products on your site. When customers buy more per order, that shows they're satisfied and engaged with what you offer.

For example, an eCommerce store selling electronics could increase AOV by offering bundled deals on accessories with device purchases. Customers buying a new phone might also pick up a phone case, earbuds and charging cable as part of a bundle for a lower combined price.

Increasing Your AOV

There are a few main ways to increase your Average Order Value:

• Upsell and cross-sell related products. When customers check out, recommend complementary or add-on items that can boost the total order amount. Studies show upsells and cross-sells can increase AOV by 20-30%.
• Offer bundle deals and discounts for multiple items. Customers love a good deal, so offer discounts when they purchase two or more of a certain type of product. This encourages them to buy more in one order.
• Provide free shipping thresholds. Offer free shipping for orders over a certain amount to incentivize customers to reach that threshold and increase their purchase total.
• Bundle products together. Create bundles of complementary products and sell them at a discount. This will encourage customers to buy the whole bundle at once.
• Create customer loyalty programs. Reward repeat customers with points, cash back, or discounts that they can use for future orders. This will motivate them to spend more during each purchase.

The key is to incentivize customers to spend more per purchase. Even small tweaks can pay off big.

Finding Your True AOV

When calculating AOV, look beyond just the average. The median and mode order values also provide helpful insights. Segment by customer groups too—AOV can vary widely based on factors like demographics or purchase history.

How Do You Calculate Average Order Value?

To calculate your store's AOV, you'll need two key metrics—total revenue and total orders over a set time period.

The Simple Math

AOV = Total Revenue / Total Orders

For example, if you made $50,000 from 1,000 orders last month, your AOV would be:

$50,000 / 1,000 orders = $50 AOV

Why It Matters

AOV is a crucial eCommerce KPI. A higher AOV means more revenue per transaction—without driving more traffic or acquiring new customers. Increasing it by just 10% can seriously boost profits.

Tracking AOV over time also reveals insights into your marketing efforts, product pricing strategy, and customer purchasing behavior. If you see a steady increase, it likely means your initiatives to drive bigger orders are working.

Optimize for Higher AOVs

By crunching the numbers and focusing on AOV, you can supercharge your online business. Just remember—it's one of many important metrics to monitor alongside conversion rates, customer acquisition costs, and more.

For example, you could increase the AOV for clothing shoppers through bundle deals and free shipping thresholds. You could offer a 20% discount for customers who buy two or more items of clothing. This encourages them to buy an extra top, pants or accessory to qualify for the deal.

You could also set a $100 free shipping threshold for clothing orders. Customers would need to spend at least $100 to qualify for free shipping, motivating them to add one or two extra items to their cart to reach that threshold. Between the bundle discount and free shipping incentive, you might reasonably expect clothing AOV to increase by 15-20%.

For online electronics retailers, bundling complementary products together can be very effective. Bundle deals for certain types of products, like TVs with sound bars or laptops with accessories, make it easy for customers to buy everything they need in one order. Offering the bundle for 5-10% off the individual product prices could drive higher AOVs for electronics shoppers.

Why Average Order Value Is an Important Metric

Revealing Purchasing Behavior

Average order value (AOV) is the key metric that unlocks insights into your customers' purchasing habits. It shows you the average amount they're spending per order on your site. This data is pure gold—letting you peek behind the curtain to understand exactly how much revenue you're generating from each buyer.

Boost Revenue Without Extra Traffic

Here's the best part—increasing your AOV is one of the most cost-effective ways to grow your bottom line. Unlike spending big on ads for new customers, optimizing AOV allows you to make more money from the traffic you already have. It's like a hidden lever you can pull to extract more value from each visitor.

Maximize Customer Lifetime Value

Don't forget—retaining customers is far cheaper than acquiring new ones. By lifting your AOV, you're boosting the customer lifetime value of each buyer. Those are the dream customers who keep coming back to spend more over time. So AOV is a metric that pays dividends by revealing opportunities to upsell, cross-sell, and delight your biggest fans.

The higher your average order value, the healthier your eCommerce business. It tells you that customers see value in your products and are willing to spend. That's why tracking and improving AOV should be a top priority for savvy online merchants.

To go one step further, analyze your LTV-to-CAC ratios to see the returns on your acquisition efforts.

If you want to calculate LTV for your brand now, use Fairing's free-to-use LTV Calculator now!

The impact of AOV on eCommerce Growth

As an eCommerce store's Average Order Value (AOV) increases, so does its overall revenue growth rate. Higher AOV means customers are spending more money on each purchase, directly translating to higher revenues and sales. The impact of even small AOV improvements can be significant for an eCommerce business, particularly when compounded over many transactions.

A key driver of AOV is a store's product assortment and prices. Ensuring the right products at the right prices tailored to customer needs can boost AOV and therefore revenue growth.

What Is a Good Average Order Value?

A good AOV shows your products resonate with customers and your strategies are working. It indicates you have optimized areas like product pricing, upselling, and promotions. A rising AOV can offset costs for customer acquisition and retention over time.

Benchmarking Your AOV

There's no one-size-fits-all "good" AOV, as it varies by industry and business model. However, most eCommerce experts suggest aiming for incremental annual increases of 5-10%. Reviewing your AOV trends over time and comparing to direct competitors is wise.

Monitor related metrics like conversion rate and revenue per visitor too. A high AOV coupled with low conversions may signal pricing issues. Take a holistic view of your key performance indicators.

Strategies for Increasing Your Average Order Value

Offer Product Bundles

One surefire way to boost your AOV is by bundling complementary products together. Instead of customers buying just one item, you can entice them to purchase multiple products packaged as a discounted bundle. This tactic works great for things like skincare routines, meal kits or tech accessories.

Implement Upselling and Cross-Selling

When customers are already in buying mode, it's the perfect time to gently suggest complementary products through upselling or cross-selling. You can display these relevant add-ons on product pages or during checkout. Just be careful not to come across as too pushy.

Run Promotions and Discounts

Who doesn't love a good deal? Offering limited-time promotions or volume discounts can persuade shoppers to spend more to take advantage of the savings. You could try free shipping thresholds, percentages off at certain order values, or BOGO offers.

Enhance the User Experience

Making the shopping experience seamless and enjoyable goes a long way too. Things like streamlined checkout, transparent pricing/fees, flexible payment options and robust customer support all build trust—and can lead to higher cart values as a result.

Offer Free Shipping Thresholds

Everyone loves free shipping. Set an order minimum to qualify for free shipping. This incentivizes customers to add just a bit more to their cart to reach that threshold and save on shipping fees. Test different free shipping minimums to optimize for your target AOV.

Promote Smart Loyalty Programs

Reward your most loyal shoppers through a points or membership program. Offer special discounts, early access, or free gifts for reaching spend tiers. Loyal customers tend to have higher AOVs, so incentivizing them pays off for your bottom line.

We go into greater detail on how to improve your AOV below.

Main Challenges in Increasing AOV

Getting people to add more to their cart

One of the biggest hurdles is simply convincing shoppers to buy more than their initial purchase intent. You need strategies to upsell or cross-sell additional relevant products. Offering volume discounts or free shipping thresholds can incentivize adding items. But you have to strike a balance—getting too pushy with upsells can backfire.

Overcoming objections and friction

Customers may hesitate on a bigger order due to shipping costs, return policies, or payment methods accepted. Addressing these upfront with clear policies and flexible options removes friction. But be transparent—hidden fees discovered at checkout are a sure-fire way to abandon carts.

Analyzing data to optimize

Boosting AOV isn't just about tactics—you need to analyze customer data on purchase history, browsing behavior, etc. to personalize recommendations and offers.

There are various forms of data available for you to gather, process, and analyze. This includes third, second, first, and zero-party data. There is often large debate between zero-party data vs first-party data. While there's a case for both, we believe that the former trumps the latter (no bias).

What data you use is dependent on your respective goals, but due to the digital age we live in amidst rising security concerns, zero-party data is recommended where possible.

Testing different promotions and tracking AOV over time is key to refining your approach. It's an ongoing process of optimizing the customer experience.

Leveraging Website Testing to Optimize Average Order Value

Identify Key Levers

First, pinpoint the areas of your website that could impact AOV. These "levers" might include product recommendations, checkout flow, shipping options, or promotions. Analyze your data to identify potential growth opportunities.

Run A/B Tests

Once you've identified promising levers, run A/B tests to evaluate changes. For example, test different product bundle offers or tweak the shipping fee threshold for free delivery. Carefully track AOV metrics across test groups.

Optimize & Iterate

Review the test results and implement the winning variations that boosted AOV. But don't stop there—continue to optimize through further rounds of testing. As customer behaviors evolve, keep refining your approach.

By methodically testing and optimizing these key areas of your online store, you can systematically increase average order values over time. Let the data guide you towards a better customer experience and higher profits.

Maximizing AOV through Customer Segmentation

Customer segmentation, or dividing customers into meaningful groups, allows stores to personalize and optimize the experience for each segment to maximize AOV. Different customer segments often have different needs, preferences and budgets.

By segmenting customers based on factors like purchase history, demographics and psychographics, stores can:

• Offer tailored product recommendations and bundles that appeal specifically to that segment
• Highlight products with the highest potential AOV for that segment
• Send targeted promotions and discounts geared for each segment's willingness to spend

All of this helps increase AOV for each customer segment, and therefore the store's overall AOV.

Increasing AOV with Personalization

Personalizing the shopping experience througheCommerce personalization for customers based on their past purchases and browsing behavior can be an effective way to increase average order value. By understanding customers' preferences and interests, you can recommend and upsell complementary products that they're likely to buy. Tailored product recommendations, personalized discounts and loyalty rewards can all motivate buyers to spend more per transaction.

There are variouseCommerce personalization applications that your business can utilize. One example is Fairing's personalization questions, you can easily dig into these behaviors and learn all about your customers. Use theseTop 6 Post-Purchase Survey Questions For Personalization to get started!

For example, a customer who has purchased running shoes in the past may benefit from recommendations for socks, sports bras, or running earbuds. These personalized suggestions, displayed prominently on product pages and during checkout, can drive additional spending and boost average order value.

So test personalization strategies that leverage customer data to show the right products to the right people at the right time. The result could be a significant lift in how much your customers spend on each purchase.

The Role of Product Data in Boosting AOV

Product data—including detailed product descriptions, high-quality images, and rich specifications—plays an important role in helping customers make meaningful purchase decisions and add more items to their cart. Here are a few ways accurate product data can boost your AOV:

• Better discovery. Thorough product information makes it easier for customers to find products they actually need and will get value from. This leads to more relevant matches and higher conversion.
• Increased consideration. Images and specs that accurately portray a product increase the likelihood customers will consider it as a viable option. This can open the door to adding complementary or accessory products to their order.
• More effective upsells and cross-sells. With a robust understanding of each product's features and attributes, your business can more intelligently recommend related products that truly complement what a customer is already buying.
• Higher customer satisfaction. Customers who have all the information they need to make an informed purchase decision are more likely to be satisfied with their selections. This increases the chances they'll buy from you again in the future.

By investing in complete and accurate product data, you give customers what they want to make the best purchase decisions for their needs. And the end result is often more items in each customer's cart, translating directly to a higher average order value for your business.

How Payment Options affect AOV

Payment options can have a significant impact on a customer's ability and willingness to purchase from an eCommerce store, which in turn affects average order value. Here are some ways payment options influence AOV:

• Credit card acceptance: Allowing customers to pay with credit cards makes purchases more convenient and accessible. Customers are more likely to spend more when using a credit card versus other payment methods.
• Installment payments: Offering payment plans that break up large purchases into smaller, interest-free installments can increase AOV by making expensive items more affordable for customers.
• Gift cards: Allowing customers to pay with gift cards they received encourages them to spend the full balance, often resulting in higher order amounts.
• Alternative payments: Including popular payment methods like PayPal, Venmo, Apple Pay, and Afterpay can boost AOV by appealing to a wider customer base and reducing friction for higher-value purchases.
• Fraud prevention: Ensuring payment security and reducing the risk of fraud gives customers confidence to spend more freely on your site.

In summary, providing customers with a wide range of convenient and secure payment options helps remove barriers that may be holding them back from spending more. Consider expanding your payment methods to include credit cards, installments, gift cards, and alternative payments to boost your average order value.

Using Social Proof to Lift AOV

Social proof refers to the psychological phenomenon where people copy the actions of others to determine appropriate behavior. On eCommerce sites, social proof cues like user reviews, star ratings, and purchase counters can significantly influence customer spending and boost average order value. Here are some ways to leverage social proof to increase AOV:

• User reviews: Displaying positive user reviews and testimonials near product listings encourages customers to spend more by making products seem more trustworthy and desirable. Consider integrating user-generated content prominently on product pages.
• Star ratings: Showing the average star rating for products out of 5 stars gives customers a quick sense of how well liked the item is. Higher ratings imply the product is of higher value and quality, nudging customers to spend more.
• Purchase counters: Indicating how many customers have purchased a product acts as a social signal that the item is popular and worth buying. Customers tend to match the purchases of others, often increasing their own spending as a result.
• Social proof ad copy: Include phrases like "Best Seller", "Top Rated", and "Customers Who Bought This Also Bought" in your product listings and ads to leverage the psychological influence of social proof. Test different social proof ad copy variants to maximize AOV lift.

In summary, by incorporating social proof elements that show the positive experiences and purchases of other customers, you can create a "bandwagon effect" that nudges site visitors to spend more in order to match the actions of others. Experiment with user reviews, ratings, purchase counters, and social proof ad copy to determine which techniques provide the greatest increase in average order value for your store.

Optimizing Mobile AOV

Mobile commerce is becoming increasingly important for eCommerce stores, yet mobile AOV typically lags behind desktop AOV. Here are a few strategies you can implement to optimize your mobile average order value:

• Improve product pages: Ensure product pages on mobile have all essential information like pricing, description, images and reviews. Make key actions like 'Add to Cart' and 'Buy Now' big and easy to tap.
• Offer mobile-only deals: Run exclusive promotions, discount codes and limited time offers targeted at mobile users to incentivize higher spending.
• Promote upsells and cross-sells: Show related product recommendations and bundled offers prominently on mobile product pages to encourage accessory and add-on purchases.
• Optimize checkout: Streamline your mobile checkout process to reduce friction. Make sure fields are large enough to easily fill out on a phone screen. Consider offering 'Express Checkout' for registered users.
• Enable one-click checkout: Allowing registered customers to make purchases with one tap can significantly boost conversion rates and spending on mobile.
• Personalize recommendations: Deliver personalized product recommendations and targeted mobile push notifications based on a customer's purchase history, browse behavior and profile.

In summary, by optimizing aspects like product pages, promotions, recommendations and checkout for the mobile experience, you can make it easier for customers to find reasons and ways to spend more when shopping on their phones. Testing out these mobile-focused strategies can help narrow the gap between desktop and mobile AOV for your eCommerce store.

FAQs about Average Order Value

What is Average Order Value (AOV)?

Average Order Value (AOV) tracks the average amount spent by customers each time they place an order on your eCommerce site or app. It's calculated by dividing your total revenue over a period by the number of orders received in that same timeframe.

Why is AOV Important?

Increasing your AOV can drive direct revenue growth and boost profits—since you're getting existing customers to spend more per purchase. It's often more cost-effective than acquiring new customers, who require extra marketing spend.

A higher AOV also increases your store's customer lifetime value (CLV). With each buyer spending more per transaction, their total lifetime revenue potential rises.

How Can I Improve My AOV?

There are several proven tactics to increase AOV:

• Upselling and cross-selling related products
• Offering volume discounts for bulk purchases
• Providing free shipping thresholds
• Launching loyalty programs for frequent buyers
• Testing different pricing and promotion strategies

The key is understanding what motivates your particular audience to spend more. Leverage data to identify high-value customer segments and target them strategically.

Conclusion

So there you have it—the lowdown on Average Order Value and why it's such a game-changer for your eCommerce biz. Remember, boosting your AOV isn't just about making more money (though that's pretty sweet). It's about understanding your customers better and giving them exactly what they want. So go ahead, dive into those numbers, and start experimenting with ways to bump up that AOV. Whether it's through killer product bundles or irresistible upsells, you've got this! Keep an eye out for our next deep dive into eCommerce metrics—we've got plenty more tricks up our sleeve to help you crush it in the online retail world.

Explore Fairing's B2B SaaS solutions for eCommerce to see how we can help your business thrive. Book a demo today, or check out our 1-minute product demo to learn more!