What is an Average Order Value? & How Do You Calculate it?

Some of the most successful businesses think about their long term strategy. 

To do this there’s a couple of metrics brand owners need to take a look at. 

The main one is your customer acquisition cost. 

But if you want to get ahead in today’s competitive market, focusing on increasing your AOV is key. 

The higher your AOV, the more profit generated per customer. 

This can then be reinvested into your marketing for acquisition or retention. 

It may seem like an easy task, but it can take some planning and effort from time to time. 

So, let’s start with what is AOV? 

The AOV means, Average Order Value. It is an essential metric of overall business health, and can be used as a lever to pull when you need more cash flow for other areas in your company.

To calculate your AOV, use this simple formula: 

Total revenue / number of orders = average order value. 

Often, AOV is calculated monthly, but it’s also possible to do so weekly or even daily!

Let’s see it in practice! 

For example, your store had 1,000 orders and earned $23,000 in June 2022. 

$23,000 divided by 1,000 is $23. This means that your AOV in June was $23.

$23,000 in revenue / 1,000 orders = $23 AO

Increasing the AOV will have a significant impact on your business. 

If we use our example above, an increase by just $5 per order will result in a total gain/improvement from such action at 5k!

Why is knowing your AOV important?

Your AOV is one of the most critical metrics for eCom brands to track. 

By knowing your AOV, you’re able to identify buying behaviors and trends to improve your marketing / sales strategy. 

Without it, it’s hard to determine whether or not an expense on conversion costs and ad spend is worthwhile. 

Keeping records is a simple way to understand shopping habits. You’ll notice there are certain items consistently bought together. 

Knowing your AOV will give you insight to break through your pricing strategy and make it more effective by showing how much customers are willing to spend per order. 

By increasing your AOV will help you understand how far you can go with the increased customer acquisition costs associated with paid advertisements. 

For some tips on how you can increase your AOV, read our article here: 

Or if you’d rather let us advise you, book a call with our team! 

This can be the difference your business needs to help beat out your competition. 

Additional Resources

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