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January 31, 2023

Average Order Value: What It Is and How To Maximize It

Author imaage
Kiran Ramesh Hundaragi
Associate Growth Manager
A Complete Guide on Average Order Value

AOV is a measure of the average amount of money that a customer spends on each order they place with your business. It is calculated by dividing the total revenue made by the amount of orders received in a given period.

As an ecommerce business owner, you're no doubt always looking for ways to maximize your revenue. There are basically two main ways you can do so: you have to either attract more people to visit your online store and buy products, or you can encourage each customer to buy more. 

Given that attracting new customers is quite challenging and usually also pricey, it makes a lot of sense to focus on the second option. And the main way you can measure your store’s performance in that regard is by using the metric - Average Order Value (AOV).

Average order value

What is Average Order Value (AOV)?

The AOV is a key metric used to measure the performance of a business’s ecommerce or retail operations.

AOV is a measure of the average amount of money that a customer spends on each order they place with your business. It is calculated by dividing the total revenue made by the amount of orders received in a given period.

For example, if your business generates $1000 in revenue from 100 orders, your AOV would be $10.

Additionally, AOV per customer allows businesses to track and analyze customer spending trends, as well as optimize marketing strategies to better attract and retain your target audience.

Why is Average Order Value (AOV) important?

AOV is an important metric because it's directly linked to your revenue, and provides insight into customers’ purchasing habits and preferences. 

By increasing your AOV, you can generate more revenue from the same number of orders. And by understanding and optimizing your AOV, you can make more informed decisions about things like pricing, product selection, and marketing.

A low AOV can indicate that the products being offered are not in line with what consumers are looking for, or that the prices are perceived to be too expensive. On the other hand, a high AOV can be a sign that customers are satisfied with their purchasing experiences and are opting to buy more items per transaction.

A low AOV is a sign that you are losing out on sales (and the associated revenue!) that you could get relatively easily if you could just convince your store visitors to buy more. If your store’s AOV remains low for a long time, it could indicate that your business might cease to be viable unless you take some concrete steps to improve it.

So, how can you ensure that you're maximizing your AOV? Here are a few tips:

Tips to help increase customer spending at your store or online checkout

1. Streamline the customer buying experience with robust site search

Your customers should experience as little friction as possible in getting from your landing page to the checkout page. There are several standard techniques for improving the customer experience, including: detailed and relevant product descriptions, high-quality product images, smooth navigation and excellent site search.

The power of site search, in particular, is often underestimated when it comes to driving conversions. What modern consumers desire more than anything is speed, relevance and personalization – they don’t want to spend 40 minutes scrolling through a million products without coming close to what they want.

The good news is that there are now powerful site search engines based on artificial intelligence (AI) and machine learning (ML) that you can integrate into your store with just a few clicks! Such “smart” search engines can understand your store visitors’ search intent and deliver results that are extremely relevant, leading to better click-through rates and conversions.

In addition, such site search engines also allow you to provide personalized recommendations to potential customers, and to “pin” the products (i.e. display them at the top of the search results) you want to promote. Both these techniques can serve to increase the number of items purchased, and hence the AOV.

2. Offer irresistible bundle deals

Bundle deals are a great way to save money and get more value for your purchase. By offering bundle deals, you can encourage your customers to buy more and spend more with your business.

Bundle deals can be a win-win for both you and your customers, as they can get more for their money, and you can increase your sales and revenue. 

To make your bundle deals irresistible, consider offering various options and customizable bundles, as well as discounts and promotions. You can also use social media and email marketing to promote your bundle deals and reach more customers.

3. Master the art of up-selling and cross-selling

Up-selling and cross-selling are essential techniques for increasing sales and revenue for your business. 

Up-selling involves encouraging customers to upgrade or purchase a higher-priced or higher-value product or service. Cross-selling involves recommending additional or complementary products or services to customers based on their interests or needs.

You can recommend related products that are a better, more expensive version of the product a customer is looking at. Or, when customers are about to check out, offer them related products that complement the items they're already purchasing. 

4. Turn one-timers into lifelong fans with a loyalty program

AOV is also closely tied to customer retention, as satisfied customers are more likely to purchase additional items from a company over time and become repeat buyers. 

A loyalty program is a great way to reward your repeat customers and turn them into lifelong fans of your business.

By offering exclusive rewards, higher loyalty levels, discounts, and promotions, you can incentivize your customers to keep coming back and make more purchases with your business. 

5. Make payments seamless with subscriptions

Subscription services provide customers with convenience due to automatic renewal options, as well as potential savings that may be associated with a subscription. 

Offer a subscription service or recurring billing option so customers can purchase products on a regular basis, thus increasing the total amount of money spent per order. 

6. Free shipping for a hassle-free experience 

Free shipping incentive encourages customers to purchase multiple items per order, as they are not only getting the product they desire but also avoiding the cost of delivery. Free shipping can also be beneficial to businesses in that it strengthens customer loyalty and encourages repeat purchases.

Offer free shipping or other incentives for higher order values. Consider offering free shipping or other perks (like a free gift or discount on a future purchase) for orders above a certain value. This can encourage customers to spend more in order to qualify for the incentive.

7. Maximize your profits with a smart pricing strategy!

Conduct market research and use data and analytics to determine the most effective pricing strategy for your business.

Consider factors such as your competitors' prices, the value of your products or services, and your target customers' willingness to pay when optimizing your pricing strategy.

You can implement dynamic pricing and adjust your prices in real-time based on demand, competition, and other factors. Offer different pricing options, such as discounts, promotions, and bundle deals, to appeal to a wider range of customers and optimize your pricing strategy.

Scale your Average Order Value with Zevi

By tracking your AOV, you can identify areas where you may be able to increase customer spending and boost your business’s bottom line. Whatever methods you employ to increase your AOV, remember that small changes can make a big impact when it comes to the average order value. Keep these tips in mind as you work to maximize this important metric for your business!

With Zevi — an AI-powered site search engine — you can provide your customers with a faster and more personalized search experience on your website. Zevi uses advanced AI and ML techniques to understand the intent behind your customers' search queries and deliver relevant and accurate results. This not only improves the user experience on your website, but it can also increase customer satisfaction and engagement, leading to more sales and revenue for your business. Get our Shopify App now, or book a free demo today! 

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