Your online business is buzzing with orders daily, you’re seeing those sales numbers rise, and you’re excited see your business growing. That feeling of success is quite empowering, isn’t it?
But here’s a million-dollar question—are you really making the most out of each sale?
Yes, I am talking about the idea of Average Order Value (AOV).
For a very long time, e-commerce store owners have been obsessed with the idea of getting more customers to grow their businesses. However, with the rising cost of customer acquisition, more and more store owners are realizing the importance of AOV.
In this guide, we’re going to talk about AOV (Average Order Value), and why it such an important metics in e-commerce. We’ll also take look at various strategies to raise average order value (AOV) so you can increase your profitability.
Let’s begin.
What is Average Order Value (AOV)?
Average Order Value (AOV) is the average dollar amount your customers spend when they buy from you store.
For example, if an e-commerce store’s AOV is $10, it means their customers are spending $10 per transaction on average. This way, you can identify patterns in customer buying behaviour and further target your efforts towards increasing your AOV.
When monitored and optimized, AOV is a powerful tool to help you to boost revenue growth.
Why is Average Order Value Important?
Average order value KPI is an essential key metric for your online business because it can give you critical insights like:
1. Provides Customer Behavior Analysis: If AOV is lower, it indicates that your customers are only interested in making small purchases.
Whereas, if your customers have spent more on a particular product—this information can help you understand their buying behaviour. For instance, you can add more offers to such products to increase the order value.
2. Improves Customer Life Time Value (CLV): A higher AOV often contributes to customer lifetime value by encouraging customers to spend more on each transaction.
This happens when customers build trust, loyalty and strong connection with your business.
3. Increases Customer Retention: When customers spend more money on every transaction and are rewarded for this behavior—your AOV increases. This leads to brand loyalty and an increase in customer retention.
When you retain existing customers, you can save money on new customer acquisition because cost of customer retention is lower than customer acquisition.
4. Enhances Pricing and Marketing Strategy: Understanding AOV helps you evaluate the effectiveness of your marketing strategies. For example, implementing up-selling or cross-selling tactics and getting an instant boost in AOV means your marketing strategy worked in your favour.
5. Boosts Marketing ROI: When customers spend more on each purchase, they help you save money on marketing, advertising, and branding.
For example, a customer learns about one of your products via Facebook ads. When they shop from you, they buy multiple products during the same session. This helps save cost of customer acquisition and instantly boost marketing ROI.
Basically, AOV provides you the ability to increase your revenue, with the same spending on marketing and advertising.
But the next important question is—how to measure AOV correctly?
How to Calculate Average Order Value (AOV)
Curious to learn how to calculate average order value for your ecommerce store?
Well, it can be done using the formula below:
Average Order Value Formula
Step 1. Find Total Revenue: First, calculate the total revenue generated in a specific period (e.g. for a month, quarter, or year)
Step 2. Count Total Orders: Next, calculate the total number of orders generated in that period
Step 3. Apply the following formula: Divide total revenue by the total number of orders to get AOV
Average Order Value (AOV) = Total Revenue / Total Number of Orders
Example Calculation
To understand the calculation of Average Order Value (AOV) better, let’s consider a practical example.
Suppose an ecommerce store has generated a total revenue of $10,000 in a month, with 500 orders placed during the same period.
Now, to calculate the AOV, you will divide the total revenue by the number of orders:
AOV = Total Revenue / Number of Orders
So, in this case:
AOV = $10,000 / 500 = $20
This means that, on average, customers spend $20 per order.
3 Important Factors that Impact AOV
Several factors can influence Average Order Value (AOV). Understanding these can help you optimize your strategies and boost your ecommerce store’s performance.
1. Time of Day and Seasonality
The time of day and seasonality can significantly impact AOV.
For instance, sales may spike during peak hours, such as weekends or holidays, or specific seasons, like winter or summer.
Recognizing such time and season patterns allows ecommerce stores to tailor their pricing strategy and offers to maximize AOV.
2. Web vs. App Orders
The channel used by customers to place orders can also affect AOV.
Research shows that desktop orders have a higher conversion rate than mobile app or tablet orders.
Thus, by analyzing AOV based on channels, ecommerce store owners can identify opportunities to optimize their website or mobile app, encouraging customers to spend more and thereby increasing the average order value.
3. Campaigns and Offers
Marketing campaigns and offers play a crucial role in impacting AOV.
For instance, promotional offers or discount codes can entice customers to spend more, thereby increasing AOV.
Analyzing AOV for specific campaigns allows you to evaluate the effectiveness of your marketing strategies and make data-driven decisions.
5 Simple Strategies to Increase Average Order Value (AOV)
The AOV formula is excellent but how do you increase it for your online store?
Check out these five strategies that can increase your average order value in 2025:
1. Free Shipping Threshold
According to Cart Abandonment Rate Statistics 2024 by Baymard Institute, 48% of US online shoppers abandon their carts due to high shipping fees.
So, you can set a minimum purchase amount, encouraging customers to add more items to their cart to qualify for free shipping.
A deeper understanding of your customer’s buying behavior can help tailor this strategy effectively.
For example, a sustainable packaging brand Package Free, offers free shipping on orders above $65 at the top of their website homepage, prompting customers to spend at least $65.
2. Upselling
Encourage your customers to buy a high-priced version of a product they are looking for.
This can be done by showcasing premium features, sharing customer testimonials, and offering bundles that make the price worth it.
By convincing customers to buy more expensive items, you can boost your revenue by 10 to 30%—as reported by Accenture.
For example, Apple often uses upselling by comparing its product features and highlighting different prices with different specifications to attract potential buyers.
3. Cross-selling
Upon collecting information about your target audience, you can also recommend related products.
Cross-selling nudges your customers to buy more products while placing an order. Here a commonly used technique is showing a list of ‘related products’ below each product.
For example, Cowboy is an e-bike brand that cross-sells their related products like helmets, bike seats, and cleaning kits during checkout.
4. Promotional Offers & Discounts
Running promotional offers like discounts and free gifts when reaching a spending limit can also encourage customers to make more purchases.
For example, Bath and Body Works has a “Buy 1, Get 1” offer, also known as a tiered discount that nudges customers to hit a pre-defined spending threshold.
5. Incentivizing Checkouts
When your customers check out, automatically add small add-ons related to their orders to their cart as part of a customer loyalty program.
These include yearly membership, community rewards, monthly subscriptions, gift-wrapping, warranty protection, etc.
For example, Sephora includes a “Beauty Insider Community” reward at checkout, offering free shipping, a small product sample, or a promo code to incentivize and encourage higher spending.
Such tactics boost AOV and foster customer retention in the long run because they make customers feel appreciated.
Don’t Just Focus on the Average Order Value
While the average order value (AOV) is a helpful metric for monitoring your customers’ buying behavior, boosting ROI, and increasing revenue, it only tells a small part of the story.
AOV doesn’t give you the full picture of your online business performance.
Therefore, it’s important to track other key performance indicators (KPIs) alongside AOV. Here are some other crucial metrics to consider:
1. Cart Abandonment Rate
This metric shows what percentage of customers add products to their carts but don’t complete the purchase.
A high cart abandonment rate usually signals severe problems with the checkout process, shipping costs, or the inability to find desired payment options.
2. Conversion Rate
The sales conversion rate will show you the percentage of visitors who completed the purchase.
A higher conversion rate signals a smooth customer journey, product appeal, and effective marketing strategy execution. There are many design factors involved to such as attractive site layout, clear content flow, and an easy-to-follow call to action.
3. Customer Lifetime Value (CLV)
Customer lifetime value estimates how much revenue a single customer can generate throughout their relationship.
This is an essential metric for sustainable growth as it shows how long a customer is active with your brand and how often they return for more purchases.
A higher CLV indicates strong customer loyalty, effectiveness of your products, and overall satisfaction.
4. Refund and Return Rate
This metric helps to track the percentage of products returned and refunded by the customer after purchase.
A higher refund and return rate can reduce profits, so tracking return rates alongside AOV helps identify if higher order values result from impulsive purchases.
5. Gross Profit Margin
While AOV shows how much revenue you generate per order, Gross Profit Margin tells you the exact percentage of revenue generated after deducting expenses like product-making costs and labor costs.
A higher gross margin shows the percentage of revenue a company can retain for itself.
Conclusion
Understanding and optimizing average order value is a vital marketing strategy to drive higher profits and improve customer retention.
By implementing relevant best practices like upselling, cross-selling, and offering free shipping thresholds, you can boost your revenue per transaction.
However, remember not to rely solely on AOV to optimize your online business’s health.
If you want to boost your AOV and revenue with targeted email campaigns, contact InboxArmy, an eCommerce email agency, to craft a strategy that drives both revenue and retention for your store.
FAQs
1. What does high AOV mean?
A high AOV means that, on average, your customers spend more with you per transaction.
This indicates an effective execution of pricing strategy, upselling, cross-selling, and bundling of products, encouraging your customers to add higher-value items to their cart.
A higher AOV is considered good because more revenue is generated per sale.
2. How do I increase the average order value in my ecommerce store?
To effectively increase your average order value, try implementing the following tactics:
- Encourage customers to buy more high-value products.
- Suggest customer’s related or complementary products.
- Offer more bundles or packages at slightly discounted prices than purchasing individual items.
- Set a minimum order value to get free shipping.
- Offer discounts, coupons, and freebies when purchasing bulk orders.
- Reward customers for spending more money by incentivising higher value purchase and/or loyalty programs.
3. What is considered a good average order value for an e-commerce store?
A good average order value for an ecommerce store can vary based on the industry, target audience, and product pricing. So, do your research based on your target market and industry.
However, based on ecommerce benchmarks, the average order value globally is $133.
4. Should AOV be considered in isolation or in conjunction with other metrics?
While Average Order Value (AOV) is a valuable metric, it should not be considered in isolation.
To fully understand your ecommerce brand, AOV should be analyzed alongside other key metrics like Gross Profit Margin, Conversion Rate, Customer Lifetime Value (CLV), and Refund Rates.
This will provide you with a more holistic view of customer behaviour and the effectiveness of sales strategies—enabling you to make more informed decisions to improve immediate revenue and long-term growth.
5. How does the cart abandonment rate relate to AOV?
Both cart abandonment rate and AOV are closely related metrics in ecommerce, as together they offer insights into customer behaviour and effectiveness of pricing structure, upselling, and checkout process.
For example, increasing AOV by encouraging additional items can complicate the checkout process, which can overwhelm the customer and result in cart abandonment.
