The Importance of Average Order Value and How You Can Increase It

5 min read

As you run your online business, you need to keep track of how you’re doing.

There are tons of different metrics you can pay attention to but one, in particular, may clearly indicate your business’s performance.

That metric is average order value (AOV).

Now some of you may be thinking, “Great. Another acronym to remember.”

Yes, there are lots of acronyms to keep in mind in the online business world, but don’t overlook this one as you keep your company running smoothly.

Becoming familiar with AOV and knowing how to improve it can make all the difference in helping your business out.

In other words, this is one acronym you’ll want to know all about.

That’s why we’re here. Take the time to learn a little bit more about average order value, why it’s so important, and what you can do to increase it.

What is Average Order Value?

Average order value is pretty easy to define. Put simply, it’s how much money a customer spends on average on a single order.

Average order value is a type of metric used specifically for online businesses.

In fact, it’s one of the most important for you to track.

What is Average Order Value

Calculating your company’s average order value should happen often. At the very least, you should do it every week. You might even punch the numbers every day.

How Do You Calculate Average Order Value?

Compared to other business metrics, figuring out the average order value is very easy.

The average value formula is simple: just take your total revenue and divide it by the total number of orders.

So let’s say that for the month of May you sold a total of $14,000.

For the same month, let’s say you had a total of 500 orders.

To calculate average order value, you would take your $14,000 in sales and divide it by 500 orders. The result would be $28.

So your AOV is $28.

See? It’s quick and easy.

One thing to note regarding AOV.

This is the average for your number of orders and not the sales per customer.

Calculating Average Order Value

Some customers may put in multiple orders over a period of time. These repeat customers are a healthy part of an online business, but their orders shouldn’t be lumped together.

Each order should be treated separately no matter how many times a customer buys from you.

Why is AOV So Important?

You now know how to calculate AOV. So why is knowing it so important in the first place?

There are two main ways that knowing average order value can be beneficial to you and your sales funnel.

The first is that it gives you a concrete idea of how much you can spend on advertising.

Once you know your AOV, you can then subtract certain amounts like the cost of the product, employee costs, and more.

After you’ve done that, the number that you’re left with is the amount you’ll have on hand to spend for advertising purposes.

This is extremely helpful as you plan out your advertising strategy. You can also see how AOV and marketing are so closely connected.

The second advantage to knowing AOV is it helps you measure how effective your order bumps and upsells are.

If your AOV seems a bit too low, that may indicate the order bumps and upsells you’re using aren’t resonating with customers.

These on-form items are great ways to provide customers with ways to buy more of your products.

Experiment with them to see what messaging works best for increasing your AOV.

With better converting order bumps and upsells, you’ll see AOV increase.

Clearly, average order value is a vital statistic and one you shouldn’t ignore.

How Do You Increase Average Order Value?

Now that you know the basics of AOV and why it’s important, you’re now probably asking how to increase average order value.

There are many different methods you can use for increasing AOV. Let’s go over several of them and see which ones you can start using today.

Rewarding Loyal Customers

If you want repeat customers to spend more on an order, try rewarding their loyalty.

One effective way you can do this is through directing them to offer funnels reserved specifically for customers who frequent your company.

Try to look at this through the customer’s shoes. They’ve ordered from you on multiple occasions, and suddenly, they get a special offer from you as a thank you for their continued patronage.

This offer involves getting them into a funnel that is only available to them and other customers like them.

Who wouldn’t take advantage of that?

By rewarding your loyal customers this way, you’ll see a noticeable increase in AOV.

Cross-selling and Upselling

The art of cross-selling and upselling is all about getting the customer to buy more products.

In the case of upselling, you offer the customer an item that goes great with the original product they intend to buy.

The customer should see how well they go together and how much they’ll benefit by purchasing the additional item.

Cross-selling gets the customer to enter a new funnel with a new product.

This is done on the final “thank you” page after the customer has completed their transaction. The new funnel is introduced, giving them another opportunity to buy from you.

It’s a great way to lead the customer into a new product and sales funnel that will still benefit them.

Customers will like that they’re getting more value from your company, while you’ll be earning more money with each order.

Free Shipping

Do you know what customers love? Free shipping.

In one recent study from UPS, researchers found that more than half (52%) of online customers actually added to their order so that they could qualify for the free shipping offer.

Why not take a similar approach?

You could try this strategy out by offering the customer free shipping through an order bump.

As the study shows, many customers are more than willing to qualify for free shipping, even if it means increasing the amount of their order.

It’s a method that’s already proven to be very effective.

If you’re looking to increase AOV, offering free shipping via an order bump is one strategy you’ll need to consider.

Sound intriguing? Why not start making a similar offer today?

Split Testing

Another way to improve average order value is through split testing.

Getting customers to pay more sometimes means making little tweaks to your sales funnel.

That might mean changing the headers, switching around button colors, or even adding in a new visual element.

Figuring out what works best requires split testing, where the new version is compared to the old version.

The version which gets the best results — in this case increased AOV — is the one you’ll want to use.

Start Increasing Average Order Value Today

That might be a lot to take in for one article, but luckily ClickFunnels can help you out.

ClickFunnels gives you the tools you need to improve the AOV of your online company.

From split testing to upselling and more, implementing these strategies is easier than ever.

How have you increased your AOV? Which techniques get you the best results? Discuss it in the comments below.

Continued Reading

Everything You Need to Know about Dropshipping

Ecommerce KPIs: Key Performance Indicators You Need to be Measuring

Pricing Tactics and the Art of Clickfunnels Upsell

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