Why is average order value important?

What is average order value? The Average Order Value KPI is the average amount spent each time a customer orders. This can be measured to your overall performance or for specifics, for example to traffic sources, product categories, or campaigns.

AOV is a commonly used metric for online businesses to evaluate customer behavior and pricing strategy. AOV can be monitored for any time period, but most companies prefer the monthly AOV. Having the knowledge of your company’s average order value helps you set goals and strategies and see if those strategies are working. If combined with other metrics, such as RPU (Revenue per User) and channels, AOV provides some real insights into customer behavior.

Sometimes when marketers focus on driving traffic to a site they skimp on improving the AOV. It is more cost-effective to increase a purchase value per visitor, with no need to invest in a high-quality website. Marketing campaigns can sometimes get so caught up in trying to create a groundswell of traffic to a website that they overlook the easiest way to increase revenue, which is increasing the Average Order Value. CRM attribution is something that can really help with mapping your AOV. Although getting more people to come to your site might cost you, increasing AOV typically doesn’t.

A profitable marketing strategy is not always about how many people you can get to your site. A more valuable approach is to focus on how much money they spend while they are there. Increasing your AOV typically doesn’t cost anything, while increasing traffic typically does. 

How to calculate aveage order value? Average order value can be calculated by dividing one of three things: revenue, orders, or a time period. The formula is very simple, just divide one of those three numbers by the remaining two. The most common calculation is a month’s average, but it can be done for any time frame.