Average Order Value

What Is Average Order Value?

Average order value (AOV) is an eCommerce metric that tracks the average total of every order placed on a website or application within a certain time frame.

Why Does Average Order Value Matter?

Business owners can use average order value to inform their pricing and marketing strategies. Brands that want to meet specific revenue goals can use AOV as a baseline metric to measure performance — e.g., increasing a starting AOV of $25 by 5% (resulting in an AOV of $26.25). Monitoring average order value can also help owners spot trends in customer behavior.

In addition, keeping an eye on AOV over time can help owners understand whether upselling and cross-selling efforts have been effective. If such efforts have been successful, the average order value will typically increase.

How to Calculate Average Order Value

Average Order Value Formula

Calculating the average order value is a straightforward process. First, you must decide what time frame you want to reference in your data. This could be a week, a month, a quarter, a year, etc.

Next, use this formula to calculate your AOV for that time frame:

Average order value = Total amount of revenue from sales ÷ total number of orders placed

The formula of average order value: (Total amount of revenue from sales / total number of orders placed) x 100
Formula for calculating average order value

An Example of AOV Calculation

Imagine that Company X sells clothing online. During April, they process 500 orders and make $3,500 in sales from those orders. Therefore, for April, their average order value would be $7.

Factors That Impact Average Order Value

1. Product Pricing

Products with high price points (including luxury items) will usually result in a high average order value. Conversely, lower-priced items will result in a low average order value.

2. Product Mix

If a brand offers both high-priced and low-priced products, the majority of customers may purchase the low-priced products. However, even a few high-value orders will skew the brand's AOV higher.

3. Promotions and Discounts

Offering promotions and special discounts may increase the total number of orders within a certain time frame. However, it may also decrease the individual value of each order. In some cases, promotions may result in a lower AOV but higher overall sales.

4. Order Size

Customers who make large orders that include multiple items will increase a company's average order value. If such large orders are irregular, it may be helpful for business owners to calculate AOV both with and without them, to gain a more accurate representation of their typical sales revenue.

For example, if an eCommerce store processes 200 orders in a week and makes $8,500, its AOV is $42.50. However, if one customer made an order that totaled $600, the store owner may choose to remove that order from his or her calculations. In that case, the AOV would come to $39.70 ($7,900 ÷ 199). 

5. Customer Lifetime Value

Customer lifetime value (CLTV) measures the revenue generated from one customer through their commitment to the company (or "lifetime").

Average order value and customer lifetime value could be considered "two sides of the same coin." If your average CLTV is high, then current customers will be more likely to do repeat business with your brand and may spend more on their purchases over time (thus raising your AOV). 

6. Shipping and Handling Cost

High shipping and handling costs may discourage customers from making larger purchases, thus reducing the brand's AOV. In contrast, offering free or reduced-cost shipping — perhaps once an order reaches a certain dollar amount threshold — may encourage larger purchases, thus raising the company's average order value.  

7. Consumer Behavior and Demographics

Customers from different demographics will often engage in different buying behavior. For example, older consumers may be more likely to make larger purchases; while younger consumers may be more price-sensitive. The makeup of a brand's core audience will play a large role in determining its average order value for any given time frame.

Note: Other metrics can be used in conjunction with average order value to gain a clearer picture of customer behavior. For example, business owners can also examine modal order value (MOV), or the most frequently occurring order value. To illustrate: imagine that a brand's AOV is $20 but it's MOV is $15. Instead of increasing AOV in general, the owner may decide to focus on upselling the $15 orders in particular, since those are the biggest revenue drivers for the business.

8. Seasonality or Special Events

Many brands see an upsurge in sales (and average order size) around holidays and special events. Online shoppers often have stronger intent to buy and may be more willing to bundle their purchases in large orders to save on individual items. For example, an eCommerce store that offers 20% off selected items and free shipping for orders of $50 or more may attract more customers during peak season.

9. Personalization and Targeting

Brands that personalize the shopping experience and target specific demographics with their marketing may enjoy a higher AOV. For example, customers may be more willing to make large purchases based on personalized recommendations.

10. Brand and Customer Loyalty

Customers that are loyal to and trust a brand will be more likely to purchase from the company, perhaps regularly. They will also be more likely to consider making a large purchase from the brand.

Team Storyly

Group of experts from Storyly's team who writes about their proficiency.

If you are interested in, you can find more content in our blogs
Dilayda Soylu
January 13, 2023

Introducing In-Story Checkout: The Fastest Path From Discovery to Conversion!

In-Story checkout solves this problem by creating a sleek, streamlined conversion solution directly within the internet’s most captivating format for content delivery.
Product News
Nurcin Turgut
January 17, 2023

February Inspiration Hub: Your Monthly Resource for eCommerce Content Ideas

Timing your promotions and content to line up with holidays and events is a great way for eCommerce businesses to boost engagement and conversions. Deal-savvy shoppers often know to expect sales around holidays and will likely be looking for the most exciting promotions. With time-sensitive Story content, you can help shoppers stay entertained and engaged while them opportunities to deepen their investment in your brand.
Marketing Tips
Deniz Tasyürek
January 10, 2023

Get to Know Your Customers Day: Captivate & Connect With Entertaining & Interactive Story Ideas

One size doesn’t fit all anymore. We live in the era of personalization. And it's more important than ever for brands to deliver the right messages to the right people at the right time. This is what your audience demands, and this is how you build a successful business. And it starts with one essential step: Get to know your customers!
Ideas in Action