Average Order Value (AOV)

The Average Order Value is an important metric that’s used by companies and businesses that have a functional website or e-commerce platform. This metric tracks the amount of money that is spent by customers who visit your website to place an order for your products or services. This figure is considered to be one of the most important KPIs in the e-commerce industry.

Most businesses use the average order value to gain insight into customer buying behaviour. They want to know how much goods each customer is spending on the platform. This would give you a good idea of the type of goods you should focus more on. For instance, a low AOV means that your customers prefer to make smaller purchases. You may enjoy more success from your marketing campaign by advertising small household items that are not expensive.

Also, the AOV will influence the company’s decision-making. As a result, every company has to monitor its AOV. E-commerce is rapidly becoming an essential aspect of every business and you may benefit from paying it due attention. You may even make provisions to analyze the value of your AOV daily, weekly, bi-weekly or monthly. Every business and e-commerce store is solely interested in boosting the value of its AOV. They feel that a greater AOV will lead to revenue growth. In the long run, it may also provide the information that a company needs to boost its profits.

To get your average order value, you’ll need to divide the total revenue you make from customer orders by the number of orders that you’ve had. While this does not create an accurate representation of what each customer has bought, you’ll get an average value of the purchase capacity of each person that patronises you. The Average Order Value can be gotten through this formula;

Average Order Value = Revenue/No of. Orders

However, you need to note that the Average Order Value is denoted as revenue per order and not revenue per customer.