THE MEDIA ENCYCLOPEDIA
Average Order Value
Average Order Value (AOV) is the average amount of revenue relative to an ecommerce store’s total transactions.
What is Average Order Value (AOV)?
Average Order Value (AOV) is the average amount of revenue relative to an ecommerce store’s total transactions over a certain period of time. Increasing Average Order Value (AOV) allows ecommerce retailers to pursue more ambitious efforts to acquire new customers.
What is the formula for Average Order Value (AOV)?
AOV = Total Revenue / Total Transaction
What is an example of Average Order Value (AOV)?
By determining Average Order Value (AOV), retailers glean an opportunity to discern the value of a single transaction and how much they are willing and able to spend to acquire new customers.
Let’s take a retailer that sells three different Hot Sauce products — mild, medium, and spicy.
With each bottle selling for $6.99, let’s pretend consumers can only purchase one single bottle at a time. As a result, Average Order Value (AOV) is only $6.99.
| Period | Product | Price | Transactions | Total Revenue |
| 2020-Q1 | Mild | $6.99 | 100 | $699.00 |
| 2020-Q1 | Medium | $6.99 | 50 | $349.50 |
| 2020-Q1 | Spicy | $6.99 | 75 | $524.25 |
| 2020-Q2 | Mild | $6.99 | 75 | $524.25 |
| 2020-Q2 | Medium | $6.99 | 50 | $349.50 |
| 2020-Q2 | Spicy | $6.99 | 100 | $699.00 |
| 2020-Q3 | Mild | $6.99 | 50 | $349.50 |
| 2020-Q3 | Medium | $6.99 | 75 | $524.25 |
| 2020-Q3 | Spicy | $6.99 | 100 | $699.00 |
| 2020-Q4 | Mild | $6.99 | 75 | $524.25 |
| 2020-Q4 | Medium | $6.99 | 75 | $524.25 |
| 2020-Q4 | Spicy | $6.99 | 100 | $699.00 |
| Total | $6.99 | 925 | $6.99 |
To increase the Average Order Value (AOV), the retailer decides to offer a Party Pack which bundles all three of the Hot Sauce products into one package, which will sell for $14.95.
In addition, the retailer decides to offer a membership program where consumers can purchase a recurring delivery of their favorite Hot Sauce for an annual fee of $74.95.
By introducing new products and services, the store was able to increase their Average Order Value (AOV) by nearly 50% to $10.36.
In increasing Average Order Value (AOV), retailers are able to justify more ambitious efforts for new customer acquisition.
| Period | Product | Price | Transactions | Total Revenue |
| 2020-Q1 | Mild | $6.99 | 100 | $699.00 |
| 2020-Q1 | Medium | $6.99 | 50 | $349.50 |
| 2020-Q1 | Spicy | $6.99 | 75 | $524.25 |
| 2020-Q1 | Party Pack | $14.95 | 25 | $373.75 |
| 2020-Q1 | Membership | $75.95 | 10 | $759.50 |
| 2020-Q2 | Mild | $6.99 | 100 | $699.00 |
| 2020-Q2 | Medium | $6.99 | 50 | $349.50 |
| 2020-Q2 | Spicy | $6.99 | 66 | $461.34 |
| 2020-Q2 | Party Pack | $14.95 | 21 | $313.95 |
| 2020-Q2 | Membership | $75.95 | 10 | $759.50 |
| 2020-Q3 | Mild | $6.99 | 100 | $699.00 |
| 2020-Q3 | Medium | $6.99 | 50 | $349.50 |
| 2020-Q3 | Spicy | $6.99 | 75 | $524.25 |
| 2020-Q3 | Party Pack | $14.95 | 14 | $209.30 |
| 2020-Q3 | Membership | $75.95 | 9 | $683.55 |
| 2020-Q4 | Mild | $6.99 | 100 | $699.00 |
| 2020-Q4 | Medium | $6.99 | 50 | $349.50 |
| 2020-Q4 | Spicy | $6.99 | 75 | $524.25 |
| 2020-Q4 | Party Pack | $14.95 | 22 | $328.90 |
| 2020-Q4 | Membership | $75.95 | 11 | $835.45 |
| Total | $22.37 | 1013 | $10.36 |
THE MEDIA ENCYCLOPEDIA