Average order value, or AOV, is one of the most important metrics an ecommerce brand can look at when trying to increase revenue. Often overshadowed by customer acquisition, AOV is the unsung hero in unlocking revenue.
But what does AOV mean, really? And how can you calculate yours and then improve it?
Read on for a deep dive into AOV, including what it stands for, how to increase it, and why also knowing a few other key measurements can give you even more insight.
AOV stands for average order value. Average order value is the average amount of money a customer spends when placing an order on your online shop.
Generally speaking, the more your customer is spending on an average order, the greater your profitability and your return on ad spend (ROAS). If you’re spending money on customer acquisition costs, you want AOV to be high to maximize the revenue from your spend.
AOV is similar to LTV, or customer lifetime value, but the two are different in important ways. LTV reflects the value of a customer to your company over an unlimited period, not just throughout one purchase. But these two ecommerce metrics are intimately related: Generally, the higher your AOV, the higher your LTV, too.
Depending on your business’s goals, you may want to monitor your AOV daily, weekly, or monthly. Monthly is typical, but more frequently may be helpful when you’re just starting your business to keep a close eye on your progress.
So, how do you calculate AOV? There’s a simple AOV formula to follow:
AOV = your total revenue / your total number of orders
For example, if you earned $2,000 in total revenue and had 400 orders, your AOV would be:
$2,000 / 400 = $5
In other words, each customer spends $5 per purchase on average.
That wasn’t so bad, right? But don't let the simplicity of the AOV calculation fool you. There are some reasons to gather more than just your AOV (keep reading to find out why!).
You may think a high AOV is “good,” but that’s not always the case. AOV is influenced by a number of factors, including manufacturing costs, shipping costs, product bundling, and much more. That said, it’s generally the case that if you’re able to increase average order value, you’re also able to increase revenue.
It might help contextualize your AOV to know the average AOVs in some popular industries. Here are the top five median AOVs in ecommerce, based on our platform data over the last 365 days:
Understanding the AOV meaning is a good start, but getting to know three other measurements, called the three measures of central tendency: mean, median, and mode.
Mean, median, and mode are statistics used to represent or predict centralized tendencies of a data set. That’s a fancy way of saying they are different ways of showing you where the midpoint of the data is, allowing you to synthesize your data from different perspectives into a coherent thesis.
The mean is the average value of a data set, in this case all of your orders. This is essentially the AOV definition!
This is the literal middle value of a data set. If your order values were $22, $69, $420, $1,000, and $1,999, your median would be $420.
The mode is the number that pops up most frequently in a data set, or the order value you get most often. If your order values were $22, $69, $22, $420, $22, and $199, your mode would be $22.
Here’s an example using data from a Triple Whale client:
The mean order value for this company in Q4 of 2024 was $28.11. The median order value was $20.75. And the mode order value was $4.
Your next step is calculating the mode-to-mean ratio, or MMR. This is a percentage calculated by dividing your mode order value by your mean order value.
MMR = Mode / Mean x 100
In this example, MMR = $4/$28.11 x 100 = 14.23 percent. Generally, when your MMR is between 67 and 100 percent, your mean order value will be a better representation of your customer’s tendencies. When it’s between 0 and 66, your mode order value will be a better representation. Then, you can use this insight to make changes to pricing, segmentation, and other factors that will ultimately improve AOV.
Now that you have a deeper understanding of the AOV acronym, you’re ready to explore ways to drive more revenue. Here are some helpful tips for how to increase AOV in ecommerce.
The most obvious way to increase order size is simply… charge more for your products. This should naturally result in higher AOV and revenue. That said, higher prices can discourage some customers, so it’s important to find the right balance between raising prices and retaining customers.
Upselling encourages customers to purchase a higher-end product or add-on to increase AOV, while cross-selling entices customers to buy related or complementary items.
Customers perceive bundles as offering more value, leading them to spend more. A tool like Triple Whale’s Insights can help you determine which products are most successful, and which bundles would drive more sales.
A tried-and-true strategy for increasing AOV is to offer free shipping—but only if the order value exceeds a certain amount. Customers traditionally enjoy spending more money on products than paying for shipping.
Help push hesitant shoppers over the finish line with clear communication about specific obstacles that might otherwise stop them from checking out or cause them to limit their order value.
Offering a discount for buying in bulk can significantly increase your AOV. Customers are incentivized to buy more of a product to save money based on perceived value.
Scarcity and urgency can drive customers to purchase more. Limited-time offers create a sense of necessity that pushes users to take immediate action and seize the opportunity before it disappears. This can lead to increased order sizes.
Personalizing the shopping experience can lead to larger order sizes. By offering recommendations based on past purchases or browsing behavior, customers are more likely to add additional items to their carts.
When we worked with New Zealand-based fashion company Shine On, we used product analytics to identify the brand’s most profitable products. Then, these “hero” products were recommended in campaigns aimed at new customers to maximize ad spend efficiency and increase profit. Ultimately, their AOV increased by 12% and revenue increased by 84%!
The sense of necessity to capitalize on a good deal can drive customers to make larger purchases.
If you’re unable or don’t want to offer a coupon or discount, another way to give your customer a little something extra is by providing the opportunity to unlock access to a free gift with an order value above a certain threshold. Customers are likely to add an extra item to their carts when they know they’ll get something else for free.
If your brand makes a commitment to donate a certain amount of money to a worthy cause on every order above a certain amount, the perks to you can be twofold:
Ease of returns can help incentivize hesitant customers. Include topline details and a link to your full return policy on product and checkout pages. Streamlining and improving your return policy and offering free shipping on returns may help, too.
Loyalty programs that offer customers points or other incentives per purchase encourage higher AOV to attain the next tier of rewards. Membership programs build on feelings of exclusivity and offer select discounts and rewards only to those customers who opt in. Both options build retention and loyalty and drive higher order values.
Answering your customers’ questions in real time can help nudge them toward making a purchase, especially on big-ticket items that require a little more support—and result in higher order values. In fact, customers who use a live chat feature are nearly 3 times more likely to convert than those that don’t, according to Forrester. And if you provide a top-notch experience, you’ll also drive customer loyalty and retention.
If this all sounds like a lot to manage, that’s because it can be. But you don’t have to shoulder the effort alone. There are many tools and apps that can help you navigate AOV.
AOV doesn't just play a big role in your business, it's the backbone. This metric lets you generate more revenue from existing customers, meaning you can grow your business without throwing heaps of money at marketing and advertising.
AOV, or average order value, is your total revenue divided by your total number of orders. It gives you a window into customer behavior, allows you to understand their purchasing habits, and develop strategies to make each sale more profitable. It gives you a benchmark to measure your customer acquisition cost against. Ideally, your AOV should be considerably higher than your acquisition cost. It also directly affects your bottom line. A higher AOV means more revenue without having to increase spend on customer service, delivery, or conversion.
But it’s also important to consider other key ecommerce metrics in addition to AOV to have the full context of how your business is performing, such as ROAS, LTV, and CAC. Here at Triple Whale, we can help with all of it: Our pre-built retention dashboards and AI agents monitor purchase patterns, predict lifetime value, and surface personalized recommendations that keep your most valuable customers coming back. Book a demo today!
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