Average Order Value Formula
Total Revenue / # of orders = AOV
Total Revenue / # of orders = AOV
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What is Average-Order-Value (AOV)?
AOV is the average dollar amount spent each time a customer places an order with a brand. AOV can be calculated with the following formula:
Why is it important for brands to maximize their Average-Order-Value (AOV)?
AOV maximization is a metric that all brands should work on improving for the following reasons:
As customers navigate through your site, continually recommend additional products they should consider purchasing aside from those that they have already reviewed.
This is a strategy deployed when a customer indicates they are interested in buying a product (through adding it to their cart or viewing the product page for an extended period of time, etc). In these situations, brands can offer customers alternative products superior to the product they are currently considering purchasing. For example, when contemplating the purchase of a 55” television for $550, the seller may offer the customer a 65” television for an additional $99, when the standard price of a 65” television is $750.
This is a strategy deployed when a customer indicates they are interested in buying a product (through adding it to their cart or viewing the product page for an extended period of time, etc). In these situations, brands can offer customers additional products complementary to the product they are currently considering purchasing. For example, when contemplating the purchase of a set of plates, the seller may offer the customer a set of matching bowls for 50% of the purchase price if they decide to purchase the plates.
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Brand’s can offer customers discounts if they reach certain cart value thresholds. For example, a brand can offer a 10% discount on all orders of $50 or more.
Brand’s can bundle product offerings together at a discounted price. For example, If a bakery is selling a box of 5 cookies for $15 and a box of 5 cupcakes for $20 ($35 total), they can offer a bundle box of 5 cookies and 5 cupcakes for $30.
If a brand has one or more product offerings, or a suite of products that may require, or make consumers desire to continue repurchasing, they can offer a loyalty program. Loyalty programs are a strategy for brands to create deeper relationships with their customers, drive retention, and set the way for ongoing AOV maximization. An example of a successful loyalty program is that of Jimmy Johns, who motivates their customers to continue ordering in return for free food items
How we help brands increase their AOV’s by up to 50%:
In collaboration with our parent company and product research partner Boser Enterprises, our teams will conduct product research into potential upsell and cross-sell products brands can sell alongside their current product catalog. Our team will begin by presenting brands a catalog of products that include both custom products and white-labeled products.
Once brands decide on which product(s) they’d like to run a test-market-analysis, our team will have prototypes of new products designed and manufactured through our supply-chain network. Once prototypes are approved, our team will have small batches manufactured to run a test-market-analysis.
Here’s how we run test-market-analysis for new products:
We incubate a test group of several prospective buyer audiences and walk them through several stages where we evaluate the benefits they see in the products as either an upgrade to a current product in the brands catalog, or a complementary to a current product in the brand’s catalog.
Next, we will identify their willingness to pay, along with the frequency at which they would expect to repurchase the product(s).
Once test-market-analysis is complete, our team will work with brands to determine sufficient order quantities of each new product SKU to initially manufacture. As the products are being manufactured and delivered to the brand’s warehouses, our team will begin developing an AOV maximization strategy for each of the brand’s digital and brick-and-mortar sales channels.
Once the brand’s new products come in-stock, our e-commerce team will implement a number of different plug-ins onto the brand’s digital sales channels and begin split-testing a number of upsell, cross-sell and revenue maximizing strategies. After some time, our team will uncover the best customer journey funnels to maximize AOV.
