How to use Average Order Value In Practice
Your average order value will be directly tied to your ability to acquire customers through paid channels.Â
If your Average order value is low you will either need to lose money on your first order or be diligant on how you acquire customers & rebills & manage lifetime value. Â
How To Calculate Average Order Value
sum(revenue) / sum(transactions)
*/ Things to note
1. Account for refunds?
2. Daily, weekly, monthly, quarteryly or annualy?
*/
Where You Should find Average Order Value?
There are two places you should look: Shopify/Payment Processor & Google Analytics.Â
Shopify will provide you with the most accurate AOVÂ
Google Analytics will allow you to have more breakdowns which will allow you to have AOV by channel, source, landing page, etc.Â
Visual Examples of AOV
These are examples taken from Vision Labs Demo reporting.Â
You will want to ask your “By Questions” When visualizing this:Â
- By Source & MediumÂ
- By Order Number
- By Day/week/month
- By Campaign
Â
How to Act on AOV
AOV will guide your custom acquisition metrics.Â
A lot of AOV will be guided by your product Category. If you know which category you are in you will be relative 20% give or take to that category.Â
Functions that increase AOV are situations like:Â
- BundlesÂ
- UpsellsÂ
- Cross SellsÂ
- Subscriptions (can lower AOV, but increase LTV)