Average order value (AOV): calculation, benchmarks & boosters

Ever feel like you're constantly chasing new customers just to keep your business growing? What if there was a way to boost your revenue without spending a fortune on customer acquisition? Average Order Value (AOV) might just be the key you've been overlooking.

In this blog, we'll dive into what AOV is, why it matters, and how you can leverage it to maximize your profits. We'll explore practical strategies, industry benchmarks, and tips to help you get the most out of each customer transaction. Let's get started!

Understanding average order value (AOV)

So, what exactly is Average Order Value (AOV)? Simply put, it's the average amount your customers spend each time they place an order. By focusing on increasing AOV, businesses can boost revenue without costly customer acquisition. Analyzing AOV gives you valuable insights into your customers' purchasing behaviors and preferences.

Calculating AOV is straightforward: divide your total revenue by the number of orders. A high AOV means customers are spending more with each transaction, while a low AOV suggests there's room to encourage them to spend a bit more. Monitoring AOV helps assess the health of your e-commerce business, guiding your strategies moving forward.

By increasing AOV, you can generate more income without constantly seeking new customers. Through optimizing pricing strategies, cross-selling, upselling, and offering incentives, you can encourage customers to add more to their carts. This approach is often more cost-effective than focusing solely on customer acquisition.

Understanding the factors that influence AOV is crucial for making informed decisions. By analyzing customer behavior and purchasing patterns, you can spot opportunities to enhance your product offerings and pricing. This knowledge helps you develop targeted strategies to increase average order value and boost your overall profitability.

At Statsig, we leverage data-driven insights to help businesses understand key metrics like AOV, enabling them to make informed decisions that drive growth.

How to calculate average order value

Calculating AOV is as easy as pie: just divide your total revenue by the number of orders. For example, if your store generated $10,000 in revenue from 100 orders, your AOV would be $100 ($10,000 ÷ 100 = $100). This simple formula gives you a quick snapshot of your customers' spending habits.

Let's break it down with an example. Imagine your e-commerce store sells three products: Product A for $50, Product B for $100, and Product C for $150. If you sell 10 units of each, your total revenue is $3,000 (($50 × 10) + ($100 × 10) + ($150 × 10)). With 30 orders, your AOV is $100 ($3,000 ÷ 30).

But remember, various factors can influence AOV, like pricing strategies, product mix, and customer behavior. If you bump up the price of Product A to $75, your total revenue climbs to $3,500, and your AOV increases to approximately $116.67 ($3,500 ÷ 30). Similarly, if customers start favoring higher-priced items like Product C, your AOV naturally goes up.

It's important to monitor AOV regularly and watch for trends over time. A sudden drop in AOV might signal issues with pricing, product quality, or customer satisfaction. On the flip side, a steady increase in AOV suggests your strategies to boost sales are hitting the mark.

By understanding how to calculate and interpret AOV, you can make smart decisions to optimize your pricing, product offerings, and marketing efforts. Tools like Peel Insights can automate AOV calculations, allowing you to focus on strategizing instead of number-crunching.

At Statsig, we provide analytics tools that help you monitor metrics like AOV in real-time, so you can act quickly when you spot trends or changes.

Benchmarking AOV across industries

Now, let's talk about how AOV stacks up across different industries. AOV benchmarks vary significantly by industry. In 2023, Home & Furniture leads the pack with an average of $248. Luxury & Jewelry comes next at $163, while Fashion, Accessories, and Apparel average $139. Consumer Goods sit around $123.

But it's not just about the industry—regional differences also impact AOV. The EMEA region boasts an impressive $195 average AOV, while the Americas and APAC average $106 and $102, respectively. Device type plays a role too: desktops dominate at $121, mobile devices average $104, and tablets come in at $80.

Keeping track of AOV trends over time is vital for making strategic decisions. Analyzing historical data reveals evolving consumer behaviors—for example, the impact of the COVID-19 pandemic on e-commerce spending patterns. Regularly monitoring these shifts allows you to adapt your strategies accordingly.

Strategies to boost average order value

So, how can you actually increase your AOV? Let's dive into some practical strategies.

First up, upselling and cross-selling are powerful tactics. By suggesting complementary or higher-value products during the purchasing process, you encourage customers to spend more per transaction. This discussion on Reddit highlights the importance of segmenting customers based on their purchase history and targeting them with personalized offers to boost AOV.

Another effective strategy is offering free shipping thresholds. Set a minimum order value for free shipping, and you'll incentivize customers to add more items to their cart to qualify. Cogsy's blog post emphasizes how offering free shipping can be a powerful motivator for customers to increase their order size.

Don't underestimate the power of product bundling. By grouping related products together and offering them at a discounted price, you encourage customers to purchase multiple items in one go. Peel Insights suggests creating customizable bundles and offering limited-time upgrades to further incentivize larger purchases.

Implementing loyalty programs that reward customers for higher spending can also contribute to increased AOV. By recognizing and incentivizing higher spending tiers, you encourage customers to aim for larger purchases to unlock exclusive benefits. Capturly's article highlights the importance of understanding AOV patterns across different customer segments to tailor your loyalty program effectively.

At the end of the day, tools like Statsig can help you experiment with different strategies, measure their impact on AOV, and quickly iterate to find what works best for your business.

Closing thoughts

Boosting your Average Order Value isn't just about numbers—it's about understanding your customers and offering them value that encourages them to spend more with you. By focusing on AOV, you can enhance your revenue without constantly seeking new customers. We hope these insights and strategies help you on your journey to higher profitability.

If you're interested in learning more about leveraging metrics like AOV, or how Statsig can support your growth, feel free to check out our other resources. Let's work together to make data-driven decisions that propel your business forward. Happy selling!