Average Order Value is one of the best metrics to use for e-commerce businesses.
Running marketing campaigns and promotions without the ability to measure their effectiveness is a waste of resources. It is crucial to be able to identify and measure the effectiveness of your campaigns in order to identify sales trends and set achievable sales targets.
However, AOV doesn’t measure exactly how well your business is doing but a high AOV also is a sign that a business’s pricing strategy and marketing efforts are effective.
Remember that it is also important to track AOV over time, so you can see trends and make changes to improve it.
What is Average Order Value?
Definition of Average Order Value (AOV)
Average Order Value (AOV) is a metric used to measure the average dollar amount spent per transaction on a website or in a store.
A high AOV usually signifies that customers are spending more money per transaction, which might be an indication of a healthy business. Furthermore, it could be the effect of customers buying more expensive things or purchasing more items each transaction.
Average Order Value Formula
Average Order Value By Industry
The recent average order value metrics by industry are displayed below.
|Luxury & Jewelry||$182|
|Home & Furniture||$139|
|fashion, Accessories, and Apparel||$126|
|Beauty & Personal Care||$112|
|Food & Beverage||$75|
|Pet Care & Veterinary Services||$71|
The recent data as of November 2022 shows the average order value (AOV) for various industries, as determined by Dynamic Yield.
The highest AOV was recorded in the Luxury & Jewelry industry, at $182, while the lowest was recorded in the Consumer Goods industry, at $37.
The home and furniture industry had an average AOV of $139.
The fashion, accessories, and apparel industry had an average AOV of $126, the beauty and personal care industry had an average AOV of $112.
The food and beverage industry had an average AOV of $75.
The multi-brand retail industry had an average AOV of $109, and the pet care and veterinary services industry had an average AOV of $71.
This data provides valuable information on the average order values across different industries, which can be used by businesses to optimize pricing strategies and improve their bottom line.
Modal Order Value
Modal Order Value is very linked to Average Order Value. It’s also called Mode Order Value. To find the Modal Order Value it is best to put the values in order and count how many of each number. A number that appears most often is the mode.
123, 145, 146, 146, 146, 151, 162, 162, 162, 162, 178, 178, 180, 400
To simplify this we’ve rounder the values to integers. You can do the same for your order values.
We can now easily see which order value appear most often, in this case 162. But for our Modal Order Value you might be interested in an interval where order values appear the most.
In our case, the interval where you can see repeated values for Order Values is 146 > 178. Why is Modal Order Value Important?
While the average order value is much more common than the Mode Value, this interval can show you that most of the orders are in a different range from the average because there will be a lot of high-value orders which skew the result.
How to track Average Order Value?
Tracking your company’s AOV on a regular basis will help you understand how much each transaction is worth and give you an indication of how effectively your pricing strategies are working.
In fact, it is important to track AOV over time and in different segments, such as by product category, customer segments, or marketing channel, so you can identify where you should focus your efforts.
There are several ways to track Average Order Value (AOV) for a business:
Use e-commerce platform analytics: Many e-commerce platforms, including Shopify and Magento, have statistics that allow you to track AOV. You can easily track your AOV by using these platforms.
Use a business intelligence tool: Track AOV and other key indicators across several data sources using a business intelligence solution like Tableau, Power BI, or Looker. This is the most straightforward and convenient method for tracking AOV or any other measure.
Use a spreadsheet: Create a spreadsheet and manually enter total income and order count on a regular basis, then use the AOV formula to compute the average. It may take a bit more time, but it always works.
Use a web analytics tool: Create a custom report or objective in a web analytics solution like Google Analytics to track AOV.
Use your point-of-sale (POS) system: If you own a physical store, you can track AOV by running a report on total revenue and the number of orders through your POS system.
How often should you check Average Order Value?
Average order value can be very useful at the time of seasonal campaigns. It helps to determine or compare the quality of the campaign too.
Season to Season: Based on a seasonal campaign, last season’s total revenue and the current season’s latest revenue would be easy to understand. It can be optimized even before starting the campaign. If you just look at the total revenue and wait for the campaign to end. It is hard to optimize the campaign at the end.
But Average Order Value can really help you even if it’s your first week of the campaign. For example. Last season your AOV was 100$. If you want to compare it instantly without waiting to end the campaign. The first week of AOV could easily help to act on the campaign optimization
Monthly: Average order value can be useful to understand your monthly growth. You can focus to optimize it even at the start of the month.
Yearly: Most of the time, you may have looked at total revenue, and total revenue helps you understand the growth at the end of the year. Although, AOV will be really useful even before the start of the year to estimate the revenue for the end of the year, for example, if your average order value is $100 and the past year’s total number of orders was 1000, Total revenue would be 1000 * 100 = $100,000.
Average Order Value Calculator
Do you want to calculate your aversge order value? Use our simple calculator below.
Simple Average Order Value Calculator
Important Things about Average Order Value
AOV like any other metric out there is very essential for your business. It is essential to help you make the proper decisions to increase your business revenue.
AOV offers important insights into customer behavior: AOV will help you how much the common average spent of customers for every transaction which can give you an idea of how well they react to your discounts, promotions, and other tricks to encourage customers to buy.
Improve marketing and pricing strategies: If your AOV isn’t as high as you have expected, it gives you an insight into how to improve your campaigns and make some appropriate changes to your prices to make customers spend more,
Measure Customer Loyalty: The biggest idea in earning more is being able to lure in customer to buy additional items that will increase their cost per order.
Increase in profit: As you strategize on your business pricing, this will help you increase more profit.
Metrics related to Average Order Value
There are several other metrics that are closely related to Average Order Value (AOV) and should be considered when evaluating the performance of a business:
Indicates if the business is generating a high-profit margin on its products.
Your goal is to keep your business going, but not just that – It must be improving.
By understanding AOV, it will be a lot easier for you to keep your business and not lose track of your goal.
Vibetrace’s customer data platform helps you customize AOV according to your needs.
Vibetrace has designed its platform specifically for eCommerce stores. It has included all of the parameters required for tracking the business and various types of marketing campaigns.
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