How to Calculate and Increase Your Average Order Value
Updated July 25, 2023.
If you're looking to grow your business, increasing your average order value is an important first step. We’ll detail how you can do this here.
What Is an Average Order Value?
Average order value (or AOV), is one of the most important factors to consider when you are running a business. It is a measurement of the average value of an order.
AOV is best used to understand your overall store's performance however we recommend that along side AOV you make use of Median Order Value (MOV) to better understand your "typical" customer.
Google Analytics is a handy platform businesses can use to track average order value. Amongst many other functions, like tracking link clicks, tracking AOV can be carried out from its very handy set of e-commerce analytics tools.
Need help with Google Analytics? Take a look at our guide to analyzing and interpreting user metrics on GA.
What Is a Good Average Order Value?
A good average order value (AOV) is one that contributes to a company's bottom line by bolstering sales and profits. According to Littledata, across all industries, a survey of over 3100 stores in July 2022 showed that the average order value sits at around $101 USD.
They go on to say that an order value of $270 USD would place a store within the top 20% of the top-performing businesses. Conversely, an order value of just $53 USD placed a store in the lowest 20%.
Where Can You See the Order Value?
You can use this easy guide to track your order value in Google Analytics:
- Sign in to your Google Analytics account
- Begin by going to the "Conversion" on the left panel
- Click on the e-commerce dropdown
- Select "Overview"
- You can see the average order value in this report
If you wish to assess the order value your sources are contributing, do as follows:
- Start from "Acquisition"
- Select "All Traffic"
- Choose "Source/Medium"
- Now go to the explorer tab and click on e-commerce
Are you using Shopify to run your e-commerce store? If so, check out how to add Google Analytics to Shopify with this handy guide.
How Is Average Order Value Calculated?
Google Analytics uses this formula to calculate the average order value:
GA Average Order Value = Overall value of sales in dollars / Total orders in a specific time
This calculation gives a snapshot of the average order value at a given point in time. To get a more accurate picture of average order value, analysts often look at data over a period of several months or years. For instance, if you’ve made your website on WordPress, you can install the WordPress Analytics plugin to monitor your AOV.
This is how to calculate AOV: You need to first calculate the revenue made over a predetermined period and then divide it by the number of orders made during that time. For example:
- Your revenue for the month of January was $2000
- The number of orders your business received was 25
- Therefore, your average order value is $80
4 Ways to Increase Average Order Value
To highlight the importance of AOV and help you boost sales, we'll explain how to increase average order value with these 4 tried and tested strategies. Additionally, you should ensure that you understand the stages of the consumer buying process.
1. Use Cross-Sell and Upsell Strategies
Cross-selling and upselling is clever salesmanship. Cross-selling simply means to sell a customer an additional product on top of their original purchase at the checkout stage. While up-selling simply means convincing a customer to buy a more expensive product with a larger profit margin than they originally intended to buy.
Both methods can increase average order value simply by increasing the amount of money the customer was originally planning to spend on your business. In order to do this, you need to understand customer behavior on your store.
2. Designate a Minimum Order Amount for Free Shipping
When customers see that there is a minimum spend for free shipping, they are more likely to find ways to get their order above the minimum. It becomes a challenge to them, and they will often look for ways to make the purchase worth it. For example, they might purchase items they didn’t plan on or purchase a more expensive option just to reach the minimum order amount to receive free shipping.
3. Offer a Comprehensive Returns Policy
The main benefit of offering a returns policy is that you can reassure your customers that the products you are selling are of good quality and worth the price. That way, they would be more confident in buying from you and hence commit to a bigger purchase. In the end, they are more likely to recommend your site to their friends.
An added benefit is that customers don't have to be worried about purchasing expensive clothes, shoes, or jewelry from you because they know they can return them if they don't fit or if they aren't satisfied.
4. Offer Bulk Order Discounts
Offering your customers a discount on bulk orders will increase the average order value. The reason for this is that the higher the order value, the more money the customer "saves" by placing single or multiple orders. In other words, customers with larger orders find it more beneficial to purchase in bulk as it allows them to save more money while subsequently boosting your AOV and increasing revenue and profit. This can also help you optimize the conversion process.