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.
The What, Why and How
Average Order Value
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:
- 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.
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
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.
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.
Once we got the channel data (how people came to the website), we could tailor our marketing activities to the right price point (and products) and the offers we used.
On the go?
Learn how to diagnose your spend per transaction in our 5 minute audio.
90 Days to higher conversions using your data
People also ask . . .
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.
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 Average Order Value 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 Average Order Value is being created. Is it one or two expensive items in a transaction or multiple items in a transaction?
TOP TIP 3: Using Average Order value 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 Average Order Value 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.
The best source of information for this is your website. However it is good to understand how others are performing.
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.