Definition: The average order value (AOV) is key to making successful business decisions. This metric shows how much the average order is worth. For example, if the AOV is $100, then this could tell us that something about our store is working really well and we just need to figure out what it is. It can also show us what sorts of advertising or product promotions should be done.
AOV is determined by sales per order, not sales per customer. This means that you’re taking into account each purchase individually, regardless of how many times they come back to shop. AOV is the average order value, meaning it’s the average purchase price. So, someone who comes back to buy more than once is still only one customer in AOV. One way retailers can achieve higher margins is to increase their average order value. The more expensive items have a higher margin. When an online business increases their AOV, they are increasing the return on investment of all marketing efforts. Increasing AOV means that they are getting more for every dollar spent on customer acquisition. Assuming the more expensive products have higher margins, you have an opportunity to optimize your marketing. If you increase AOV by raising prices or improving your positioning, you can see a higher ROI and ROAS for all of your marketing efforts. The higher your AOV, the more you are getting from each customer — and as a result from every dollar spent to acquire those customers.
Another way to improve your marketing return is to apply multi-touch attribution. An easy way, if you are using Salesforce, is to use the Incrementality by Odyssey app. You can check their product of Salesforce Multi-Touch Attribution on their website.
It’s important to watch out for changes in AOV. Any fluctuations in this metric should be examined in order to understand why the change occurred. There may be a number of reasons a drop in AOV occurs-such as a sudden change in seasonal demand, a new marketing campaign, or even a cosmetic change on your site.