AOV is the average amount that a customer spends on each order they place with a company.
AOV is an important metric for ecommerce companies, because it can provide insights into customer behavior and preferences. A high AOV generally indicates that customers are buying more items or higher-priced items, which can be an indicator of customer loyalty and satisfaction. A low AOV, on the other hand, may indicate that customers are only buying a few low-priced items, which can be a sign that there is room for improvement in the company's product offerings or pricing strategies.
Additionally, AOV can help companies make decisions about marketing and advertising strategies. For example, if a company has a high AOV, they may want to invest more heavily in advertising to attract new customers, as the potential ROI may be higher. Conversely, if a company has a low AOV, they may want to focus on increasing the value of each order by offering discounts for larger purchases or promoting higher-priced items.
To calculate AOV, you simply need to divide the total revenue earned from all orders by the total number of orders:
AOV = Gross Revenue / # Orders
For example, let's say that a company earned $50,000 in revenue from 500 orders in a given month. To calculate the AOV for that month, you would divide $50,000 by 500, which gives an AOV of $100.