Average Order Value, sometimes called AOV, is the average spend per transaction on your website.
Average order value is a valuable metric for understanding how much your transactions are worth to your business. It is however one half of the coin, with the other being how much you paid to acquire those customers.
This will allow you to know if your transactional value is higher than your Cost Per Acquisition (CPA).
If your Average Order Value is higher than your Cost Per Acquisition, your website is at least making a profit before the cost of goods.
Key takeaways- Average Order Value
Top 3 tips for Average Order Value
See our checklist
1. Use average order value with cost per acquisition to understand the profit of your campaigns. Make sure you know your maximum cost per acquisition.
2. Look at Average Order Value against items per basket. Break this down by channel (or campaign) to understand the behaviour of these channel and to help you work out the right price point and if bundles are worth promoting.
3. Try to use Revenue per user with Average Order Value. This will unearth if you customers are purchasing more than once in a given time period. If the revenue per user is higher than the average order value these customers are coming back and are therefore valuable customers.
Average Order Value
The What, Why and How
What is it?
Average Order Value is the amount of money which is spent per transaction.
However this will only show the spend per transaction NOT the spend per customer. To understand Spend per customer there is a different metric available called Revenue Per User or RPU.
Using both of these will allow you to understand if purchases are being made by a number of loyal customers (Higher RPU than AOV) or new customers (similar AOV to RPU).
Why measure it?
Using Average Order Value (AOV) will give you a good idea on how much your transactions are worth to you.
It will also provide you with a picture of your typical order profile. For example do you usually have a high or low order value.
Looking at conversion rate combined with AOV will provide you a good picture of your Ecommerce performance.
Combining AOV against Cost Per Acquisition will allow you to understand if your orders are profitable (after the cost of media/marketing spend).
How to diagnose it
To carry out the diagnosis you will need:
- Revenue
- Number of transactions
- Items per basket
- Cost Per Acquisition
- Across all channels where you can track the purchase
Step 1: Look at the total revenue based on a campaign or a time period. Break the revenue down by channel. Look at the total number of transactions for each channel.
Step 2: Divide revenue by the number of transactions. This will provide you with the Average Order Value. Next apply the same calculation by channel to the get the Average order value by channel.
Step 3: Compare at the Revenue per user (RPU) or Average order value to the Cost per acquisition. If the Average order value is lower than the Cost per acquisition is this is an unprofitable campaign and needs to be resolved.
Step 4: Finally map out the Average order value against Items per basket. Do this for each of the channels to understand the profile of spend.
Want to learn more?
See our quick video guide to Average Order Value.
Where can I see it?
The screenshot is from Google Analytics and shows where you can find Average Order Value (AOV) overall for a given time period and for your campaigns.
It might quicker for you to extract the data and calculate it yourself, if you want to AOV for each channel.
1
This is the overall Average Order Value based on the time period you have set. If you set filters (see 3) you can see the Average Order Value per channel or device. However it might be quicker for channel and device Average Order Value to calculate this, from revenue and transactions on the channels or device pages in Google Analytics.
2
This is the Average Order Value which has come from Campaigns. Typically this will be Paid Search Campaigns. This number will be different from the overall average in number 1.
3
This is called Segments. It allows you to filter your results below. For example you could compare Average Order Value for Mobile vs Desktop customers.
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On the go?
Learn about Average Order Value, in our 1 minute audio.
Best ways to Diagnose Average Order Value to generate growth
See our video how to guide to get our 4 top tips to analysing average order value
Need to understand more about average order value?
Download our average order value guide to learn more on:
- How to calculate Average Order value
- Where to find it in Google Analytics and Google Analytics Ecommerce
- 4 steps to diagnosing your Average Order Value and how to segment your audience to target your channels with the right price point
4 top tips to analysing average order value
In the graphic we looked at how Average Order Value is impacted by Items per baskets.
We wanted to see the price point and if bundling was needed for specific channels.
Using a combination of items per basket with Average order value we can see how the different channels behaved. We can then tailor marketing activities to so the right price, offers and bundles in the right marketing channel.
1
Use this line to compare the spend per transactions. Above the line is above the average and below the line, below the average.
2
Use this line to understand the number of items included in the transaction. To the left of the middle is above the average and to the right of the middle is below the average number of items per transaction.
3
Here we have high spend and items. This could be the bundling and higher spending audiences. Aim to target channels here with bundles or higher value items.
4
Here is the high spend but fewer items. These could be the hero products or the ones which cost a lot. They might be one off purchases, so be mindful of marketing anything other than these products, but it is still a premium or higher value sell.
5
This is low number of items and spend. Not likely to be your most profitable group, but might be an entry level purchase. Ensure you do not lose too much profit but advertising this too heavily.
6
This is low spend, but higher number of items. On the face of it, it might seem crazy. However this is quite often the sampling group or free products with purchase. This can be hugely profitable so measure returning purchasers from this group.
On the go?
Learn how to diagnose your spend per transaction in our 5 minute audio.
People also ask . . .
How can I calculate Average Order Value (AoV)?
You can calculate the Average Order Value (AOV) on any channel or device as long as you have revenue and number of transactions for channels or devices.
AOV is calculated as the amount of revenue of divided by the number of transactions.
For example: AOV = revenue by channel / transactions by channel.
What are you Top Tips for AoV?
Average Order Value is reliable, in that it tells you how much each transaction is worth to your business. Here are our 3 Top Tips:
TOP TIP 1: However looking at the overall average can hide what is happening. Look at your AoV by channel and device to see if any of these are really bringing down the average.
TOP TIP 2: Look at the items per basket to see how the AoV is being created. Is it one or two expensive items in a transaction or multiple items in a transaction?
TOP TIP 3: Using AoV by channel and device will allow you to compare it against Cost Per Acquisition.
If it is higher than Cost Per Acquisition that channel is making money against the cost of acquiring that visitor. If you drill down even further down to a campaign (within a channel and device) you might some horrors!
TOP TIP 4: Ensure your technical teams are capturing the correct information in AoV for your business.
For example do you want to include delivery costs in your order value? Do you want to include tax in your order value?
Our recommendation is to not include these and treat these as separate pieces of information. The order value, should be the amount of money paid by a customer at the time of they made their purchase with you.
What does a good AoV look like?
The best source of information for this is your website. However it is good to understand how others are performing.
Growcode has carried out some research to collate the data from a variety of sources which includes Monetate (who publish a report from the data collected by their software).
The range however is large, across industries, sources of traffic and devices used for purchasing.
For example Cars and Motorcyling was high at £131, but Health and Wellbeing was only £38.
Looking at devices Monetate published traditional (desktop) at $180, while mobile (smartphone) was $79.
Is AoV different from items per basket?
Yes.
AoV is how much was spend in a given transaction, typically this is averaged to understand how much your visitors are spending when they buy from you.
Items per basket describes how many items that visitor had when they made a purchase. By looking at the combination of both, you will be able to start to group or segment your visitors.
Some will spend a lot (high average order value) with a large number of items. Suggesting they have purchased bundles.
Some will spend a lot, but with 1 or very few items. This would suggest higher value one off purchases.
Recommended Reading
Below is some recommended content to help you with your analysis in marketing. This content is mixture of content, tools or our book to help you get more out of your digital marketing and data in your business.
Read our book Your Number’s up! – Getting a grip on Data and Measurement to accelerate your Direct to Consumer ecommerce sales
Learn how you can measure and grow your ecommerce business. Theory and practice all in one book.
Define: Budgeting for Marketing – Read how to define your marketing budget and determine where it is best to spend your budget for the highest return. Use our 5 step plan to use your data to build your forecast.
Discover: Resource for senior marketers – See our latest research or white papers to help you get ahead. Alternatively, read our digital marketing glossary for senior leaders to understand the jargon and acronyms of digital.
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