Average Order Value (AOV)
What is average order value? The Average Order Value is the average amount spent by a customer per order. This can be measured to your overall performance or for specifics, for example to traffic sources, product categories or campaigns.
However this will only show the average spend per transaction, not the spend per customer! To understand the spend per customer there is a different metric available called ‘Revenue Per User’, in abbreviation: RPU. It is advised to use a CDP or DMP to measure RPU effectively.
Why is average order value important?
AOV is a commonly used key performance indicator (KPI) that online businesses measure to understand their customers’ purchasing habits. Like most online metrics, AOV can be tracked for any time period, but most companies monitor the moving monthly average.
Knowing your company’s average order value helps you evaluate your overall online marketing efforts and pricing strategy. As a benchmark of customer behavior, the AOV helps you set goals and strategies and evaluate how well those strategies are working. If the AOV metric is combined with other metrics, real insights will boil up. For example, when using the metrics AOV and RPU (Revenue per User) combined, marketers will be able to understand if purchases are made by loyal customers or new customers, and how much their gained value differs. When AOV is used in relation to channels, marketers will understand the customer profile per marketing channel.
Sometimes marketers focus on increasing traffic to a website when it would more impactful and profitable to focus on increasing their AOV. Increasing ones traffic typically costs money, while increasing AOV typically does not.
How to calculate average order value?
To calculate your company’s average order value, simply divide total revenue by the number of orders. The formula is very simple, just devide the total revenue by the total orders in a certain period. AOV can be measured for any time period, but most marketers monitor the moving monthly average.
For example, let’s say that in the month of February, your webshop sales were $16,000 and you had a total of 1,100 orders. $16,000 divided by 1,100 = $14,55 so February’s AOV was $15.
How to find average order value in Google Analytics?
Don’t want to calculate the Average Order Value each time yourself? Don’t worry, Google Analytics automatically shows it to you under the Conversions tab. Save time by following these steps: Conversions > Ecommerce > Overview > Transactions.
It can also be found under Acquisition when looking at your traffic sources. When using custom segments you will be able to specifiy the AOV even further, e.g. comparing mobile agianst dekstop AOV.