KPIs for Marketing

KPIs for Marketing: average order value

Learn how to measure the success of your marketing campaigns with the right KPIs.

As a modern marketer, you have an ever-increasing list of key performance indicators (KPIs) to track. One KPI that should be at the top of your list is Average Order Value (AOV). AOV is a vital metric that can help your business optimize revenue generation, customer loyalty, and marketing strategies. In this article, we will dive into the importance of AOV and how businesses can use it as a powerful marketing tool.

Understanding the Importance of Average Order Value (AOV)

The AOV is a metric that calculates the average dollar amount a customer spends per order. It is a crucial indicator of a business's potential revenue generation. When marketers focus on AOV, they can easily determine the profitability of their business and evaluate marketing campaigns' effectiveness. Businesses with a high AOV are generally more profitable than those with a lower AOV. Therefore, understanding and tracking AOV should be an essential component of every marketer's toolkit.

Defining Average Order Value

The formula to calculate AOV is simple: Total revenue generated / Total number of orders. The result is the revenue per order. This figure is a vital KPI for understanding customer behavior and purchasing patterns. It also allows marketers to identify customers with high purchasing power and target them more effectively.

For instance, if a business generated $10,000 in revenue from 100 orders, the AOV would be $100. This means that, on average, each customer spends $100 per order. By analyzing this metric, businesses can determine if their products or services are priced appropriately and if they need to adjust their marketing campaigns to increase sales.

Why AOV Matters in Marketing

AOV is a critical metric for marketing because it helps businesses understand how much customers are willing to spend. It also helps to identify the most profitable products or services offered by a business. Using this metric, businesses can adjust their pricing strategy, product mix, and promotional tactics to increase overall revenue and profitability.

For example, if a business has a high AOV, it may consider offering bundle deals or discounts to encourage customers to purchase more items per order. Alternatively, if a business has a low AOV, it may consider offering free shipping or other incentives to encourage customers to spend more.

Awareness of AOV helps to define customer segments, promote customer loyalty, and discover growth opportunities. By analyzing AOV, businesses can identify their most valuable customers and tailor their marketing efforts to meet their needs. This, in turn, can lead to increased customer satisfaction and loyalty.

In conclusion, AOV is a crucial metric for businesses to track and analyze. By understanding this metric, marketers can make informed decisions about pricing, product mix, and promotional tactics to increase overall revenue and profitability. It also helps businesses identify their most valuable customers and promote customer loyalty, leading to long-term success.

Calculating Average Order Value

Calculating AOV requires two variables: Total revenue and Total number of orders. Let's discuss each variable in detail.

Total revenue is the total amount of money a company has earned from sales in a given period. This includes all sales, including discounts, promotions, and returns. Revenue is a critical metric for businesses as it reflects the overall performance of the company.

Total number of orders is the total number of orders a company has received in a given period. This includes all orders, including new orders, repeat orders, and canceled orders. The total number of orders is a crucial metric for businesses as it reflects the demand for the company's products or services.

Basic Formula for AOV

The simple formula for calculating AOV is to divide total revenue by the total number of orders. Let's consider an example: A company had $50,000 in revenue and received 1000 orders in the past month. The AOV is calculated by dividing the total revenue by the number of orders: $50,000 / 1000 = $50. The AOV for this company is $50 per order.

Factors Influencing AOV

Several factors can influence AOV. The most significant factor is customer behavior. Customers are more likely to add more items to their cart when they receive discounts, free shipping, or volume deals. Perceived value also plays a significant role; when customers see the added value, they are more likely to spend more per order. Additionally, customers are more susceptible to upselling and cross-selling techniques that offer personalized recommendations. Businesses that analyze customer shopping behavior and offer personalized recommendations have had success in increasing AOV.

Another factor that can influence AOV is the product mix. A company that offers a wide range of products may have a higher AOV than a company that offers only a few products. This is because customers are more likely to purchase multiple items when they have a broader range of products to choose from.

Seasonal changes and consumer trends can also influence AOV. For example, during the holiday season, customers may be more likely to purchase more expensive items or purchase more items overall, leading to a higher AOV. Companies should identify these changes and adjust their pricing or promotional strategies accordingly.

Periodic Analysis of AOV

While calculating AOV is essential, it is also necessary to analyze the metric periodically. This analysis provides insight into changes in customer behavior, marketing tactics, or the product line. Companies should identify seasonal changes and consumer trends to adjust their pricing or promotional strategies accordingly. Analysis of the AOV may also identify opportunities to upsell or cross-sell products by identifying frequently purchased items that can be included in a bundle deal.

Furthermore, periodic analysis of AOV can help businesses identify areas for improvement. For example, if the AOV has decreased over time, this may indicate that customers are not finding enough value in the company's products or services. In this case, the company may need to re-evaluate its pricing strategy or product mix to increase customer satisfaction and ultimately increase AOV.

In conclusion, calculating and analyzing AOV is a critical metric for businesses to understand their overall performance and identify areas for improvement. By understanding the factors that influence AOV, businesses can develop strategies to increase this metric and ultimately increase revenue.

Benchmarking Your AOV

Knowing the industry standards and averages for AOV is critical and can guide your strategies. Every business should strive to meet or exceed the AOV average for their particular industry. This can help them stay competitive and profitable.

But what exactly is AOV? AOV stands for Average Order Value, which is the average amount of money a customer spends per order. By tracking AOV, businesses can gain insight into customer behavior and identify opportunities to increase revenue.

To leverage AOV effectively, it's essential to identify your target AOV based on your product mix and pricing strategy. This can help you set realistic goals and develop strategies to achieve them.

Industry Standards and Averages

Every industry has its AOV standards and averages. Here are a few examples from various industries:

  • Fashion Retail: $85
  • Gym and Fitness: $75
  • Home Decor: $150
  • Cloud Software: $900

It's important to note that these averages can vary widely depending on the specific business and its target market. For example, a luxury fashion brand may have a much higher AOV than a fast fashion retailer.

Identifying Your Target AOV

When businesses set a target AOV, it should factor in customer behavior, profit margins, and the product line's popularity. For example, if a business sells a mix of high-end and low-end products, they may want to set a higher target AOV to reflect the higher-priced items.

Once a target AOV is established, businesses need to identify strategies to increase AOV to meet or exceed the target. This can include tactics such as offering discounts for larger orders, upselling customers on related products, or creating bundles to encourage customers to spend more.

Analyzing Competitor AOVs

Analyzing competitor AOVs can provide valuable insight into industry trends, popular products, and effective marketing strategies. By understanding what is working for your competitors, you can identify areas where your business is underperforming and develop strategies to improve.

For example, if you notice that your competitors have a higher AOV, you may want to consider offering more high-end products or creating bundles to encourage customers to spend more.

Overall, benchmarking your AOV is an essential part of developing a successful e-commerce strategy. By understanding industry standards and averages, identifying your target AOV, and analyzing competitor AOVs, you can develop effective strategies to increase revenue and stay competitive in your industry.

Strategies to Improve Average Order Value

Now that we've gone over the importance of AOV and how businesses can benchmark and analyze their AOV, we can discuss strategies to improve it. Increasing AOV is a crucial aspect of any business strategy as it directly impacts the revenue and profitability of a company. Here are some effective strategies that businesses can implement to improve AOV:

Upselling and Cross-selling Techniques

Upselling and cross-selling techniques are popular practices used to increase AOV. Upselling refers to recommending a more expensive version of a product the customer is interested in. For example, a customer looking at a 50-inch TV could be presented with a 65-inch TV based on their preferences. Cross-selling refers to offering additional complementary products that the customer may be interested in. For example, a customer who buys a laptop could be offered a printer, a mouse, or a protective case. These techniques not only increase the AOV but also provide customers with a better shopping experience by offering them more options to choose from.

Offering Volume Discounts and Bundles

Offering discounts for increased quantity purchases is another technique used to increase AOV. Volumes discounts incentivize customers to purchase in larger quantities, so they spend more per order. Bundling products or services is another way businesses can increase AOV by providing added value. For example, a customer purchasing a laptop and printer bundle can be offered a discount compared to buying the products separately. This strategy not only increases AOV but also encourages customers to purchase more products from the business.

Implementing a Loyalty Program

Implementing a loyalty program rewards frequent customers with exclusive deals, promotions, and points-based systems. The program incentivizes customers to return and purchase more frequently, ultimately increasing AOV over their lifetime value as a customer. Customers feel valued and appreciated when they are offered exclusive deals and promotions, which leads to increased customer loyalty and higher AOV. Moreover, a loyalty program also helps businesses to retain customers and attract new ones.

Personalizing the Customer Experience

Personalization is key to increasing AOV. When customers receive a personalized shopping experience, they are more likely to make a purchase and purchase more per order. Personalization entails understanding customer behavior, preferences, and purchasing habits to offer them the most relevant products and services. For example, a customer who frequently purchases makeup products can be offered personalized recommendations based on their previous purchases. This strategy not only increases AOV but also improves customer satisfaction and loyalty.

In conclusion, businesses should implement these strategies to increase their AOV and improve their revenue and profitability. By offering customers more options, incentives, and personalized experiences, businesses can increase their AOV and provide customers with a better shopping experience.


AOV may be just one of many KPIs, but it is a critical metric that impacts revenue, profitability, customer loyalty, and marketing strategies. Successful marketers use AOV to gain valuable insights into customer behavior and determine strategies that increase AOV. Businesses that offer added value, personalize the customer experience, and understand customer's behavior have the best chance of optimizing their AOV and thriving in today's competitive environment. Are you ready to incorporate AOV into your marketing strategy and increase your business's profitability and revenue potential?