How to Calculate & Increase Average Order Value (AOV) for Your eCommerce Business?
Average Order Value (AOV) is one of the most critical metrics in the eCommerce industry. It basically helps to scale profits & grow revenue for eCommerce businesses.
In other words, finding out the average dollar spend of each order placed on your eCommerce store can help you to not only better plan your pricing & marketing strategies, but also helps to increase the AOV, which can ultimately impact the overall revenue of your eCommerce business.
And in this post, we’re going to help you understand what is average order value (AOV) and how to calculate AOV for your eCommerce business.
What is Average Order Value (AOV)?
The average order value (AOV) is simply the average amount of money that a customer spends on your eCommerce store.
AOV is an extremely important metric that helps eCommerce businesses to understand their customers’ purchasing habits.
And just like any other eCommerce metric, the AOV can also be measured or tracked for any time period. However, most eCommerce businesses measure their AOV on a monthly basis.
With that being said, let’s look at how to calculate average order value (AOV) for your eCommerce store.
How to Calculate Average Order Value (AOV) for Your eCommerce Business?
Calculating the average order value (AOV) for an eCommerce business is extremely easy.
All you need to do is, divide the total revenue by the number of orders.
Average Order Value (AOV) = Total Revenue / Number of Orders
For instance, if your eCommerce business generated $10,000 from a total of 300 orders in last month, then the average order value is:
AOV= $10,500/300 = $35
Once you’ve calculated the average order value for your eCommerce business & finally know where you stand, let’s quickly look at a few ways to increase AOV for your eCommerce business.
How to Increase Average Order Value (AOV) for Your eCommerce Business
The average order value (AOV) has a big impact on an eCommerce business.
Therefore, it is crucial for every eCommerce business to implement plans & strategies that help to increase their average order value.
Here are 3 proven ways to increase average order value (AOV) for your eCommerce business.
1 – Offering Product Bundles with Discount
Offering product bundles with discounts is one of the most straightforward ways to instantly increase your average order value.
By bundling products together, you basically increase the perceived value of a customer’s purchase.
And the best part is, you’ve sold multiple products at once instead of just one.
For instance, MageDelight is one of the best Magento 2 extension providers. And they’ve also bundled their extensions together & witnessed an increase in average order value.
Now, if your eCommerce store is based on Magento 2 platform, then you can easily start creating product bundles in your store by integrating MageDelight’s Magento 2 Product Bundled Discount Extension.
2 – Offer Free Shipping
Free Shipping is a highly effective method to motivate customers to spend more money on your eCommerce store.
The best way to utilize free shipping to increase the average order value, you can simply to set a minimum amount of money threshold that a customer needs to spend in order to become eligible for free shipping.
For example, if a customer spends $50, then he or she can become eligible for free shipping.
The best practice to offer free shipping in order to increase the average order value is to set your threshold at 30% higher than your average AOV.
The goal of offering free shipping is to increase the number of products sold and thus the overall revenue.
Although, make sure that you don’t set the threshold too high or i+t will result in an increased cart abandonment rate.
3 – Offer Discounts
Discount is another great & proven way to increase the average order value (AOV) in your eCommerce store.
All you need to do is add a minimum amount spend cart rule to encourage customers to buy more items.
For example, you can offer $10 off when customers spend $65 or more.
This kind of price cut helps to encourage extra purchases as the majority of customers feel just wrong to miss a discount opportunity.
And if your eCommerce store is based on Magento 2 store, then you can easily create any type of cart rules to offer various types of discounts by integrating MageDelight Advanced Promotions Extension.
The ultimate goal of average order value (AOV) is to focus on customers who already want to buy something from your store and help them discover & purchase additional items relevant to the primary product in their shopping carts.
With that, we’ve come to the end of this post. We hope that you have found this post helpful. If you still have any questions, feel free to contact us anytime for help.