Here is a a usable definition of average order value and how it relates to e-commerce. Find out why it matters so much and what outcomes you can affect.
Average order value is a key metric in e-commerce. It is often called by its Acronym: AOV. It is calculated by dividing total revenue by total transactions. AOV is used as a health metric for an e-commerce website. Every e-commerce manager wants a high average order value. They spend time optimising it and building strategies and tactics to push that number up.
The retail manager will also be interested in Average Order Value, although it is likely to be termed as average basket size or average transaction value.
Why does it matter so much?
- If you have a high AOV, you need fewer transactions to hit your revenue targets
- A higher AOV often means customers are buying more than one thing, which means you are cross selling well
- While this is not always the case, margin is often higher with a high AOV – both as a percentage and absolute terms
- That margin can be used in things like marketing money, commissions and tools to get more sales, which fuels growth
- If you have a higher AOV than your competitors, it’s going to mean you are attracting a better customer
A great e-commerce operation has a sophisticated approach to improving average order value. Objective setting, strategies and tactics are supported by automation and machine learning that is seamlessly integrated into the online experience. Shopper outcomes are clear: needs are met, because all activity is oriented toward understanding explicit and implicit needs. The sophisticated e-commerce operation is highly skilled at responding to those needs.
The future of retail requires the use of increasingly sophisticated tools that understand shopper needs, responds to explicit needs and considers what implicit needs can be met to achieve higher average order value.
Confer With is a highly attuned toolset that understands customer needs, responds to those needs and achieves growth in average order value.