Average Order Value (AOV): Definition, Formula & Calculator

As an e-commerce shop owner, attracting web traffic is just the first step. The real challenge lies in converting that traffic into higher revenue. One crucial metric that helps understand customer spending behavior and business profitability is Average Order Value (AOV).

Understanding AOV allows businesses to assess the effectiveness of their pricing strategy, marketing campaigns, and upselling techniques. If your AOV is increasing, it means customers are finding more value in their purchases. However, if it's decreasing, it might indicate dissatisfaction with pricing or product offerings.

In this guide, we will cover everything you need to know about AOV, including its definition, formula, comparisons with ACV, strategies to improve it, and industry benchmarks. Let's dive in!

What is Average Order Value (AOV)?

Average Order Value (AOV) is the average amount of money a customer spends on each order. It provides valuable insights into customer purchasing behavior, pricing strategy effectiveness, and business profitability.

AOV Formula:

For example, if your store generated $5,000 from 200 orders in a month, your AOV would be: $25. This means that, on average, a customer spend $25 on each order.

Why Tracking AOV is Important

Understanding and tracking AOV helps businesses:

AOV vs. ACV: What's the Difference?

Both AOV and ACV (Average Cart Value) provide insights into revenue generation, but they differ in scope:

Key Differences:

In short, AOV is more useful for evaluating sales and marketing effectiveness, while ACV helps businesses optimize checkout conversions.

How to Calculate Average Order Value?

Calculating AOV is simple: simply divide the total revenue across a given period by the total number of orders during that same timeframe. For example, if your store earned $3,000 from 100 orders in one month, then your AOV would be $30 ($3,000/100). 

Here are some ways you can use to start calculating your average order value:

1. Use spreadsheets

For those who are comfortable with spreadsheets, you can use Excel or Google Sheets to determine your store's average order value. 

All you need is a list of all the orders placed over a certain period and their respective values. Once that information has been gathered, start by setting up a spreadsheet with columns dedicated to customer information such as name, contact info, date of purchase, and total purchase amount. 

Then use basic math functions like SUM and AVERAGE to pull the necessary data from the table and display it in easy-to-read formats.

However, with the complex nature of e-commerce today, many sellers need help using Excel or Google Sheets to calculate AOV. This is because the data is large and changes every time. You may have calculated your AOV in your sheet today, but the next day, that data still needs to be updated. You’ll have to recalculate again!

2. Use an automatic tracking app

Fortunately, various tools can help you track your AOV efficiently. Profit analytics solutions like TrueProfit go beyond just calculating AOV or calculating profit margins—they provide a comprehensive view of your business’s financial health in real time.

TrueProfit is a comprehensive profit analytics app for Shopify that helps sellers track not only average order value but also essential business metrics like revenue, orders, total costs, net profit on ad spend, and ultimately, your bottom-line net profit. Unlike other tools that rely on surface-level metrics like ROAS, TrueProfit empowers Shopify merchants to analyze their marketing channels, products, and customers through the only perspective that truly matters: net profit.

With its intuitive dashboard and real-time P&L analytics, TrueProfit ensures you get accurate, up-to-date insights on AOV, customer lifetime value, sales trends, and more. These valuable insights help you make informed decisions about your pricing strategy, marketing efforts, and overall business growth—all without the hassle of spreadsheets or manual calculations.

How to Increase Average Order Value

Tracking your AOV is important, but continuously improving it is what truly drives growth. Here are five practical and effective strategies to boost your AOV:

1. Upsell during checkout 

Upselling is a great way to increase your average order value without scaring off customers with high prices. Offer related products at the checkout page that complement their purchase and appear as if they’re getting a good deal. 

For example, if someone buys a pair of headphones, you should upsell by offering them a carrying case at checkout for just $5 extra dollars.

2. Bundle products together 

Bundling multiple items into one package creates convenience for customers and saves them money compared to buying each item separately!

For example, if you sell apparel and accessories, offer customers the opportunity to purchase multiple items as part of one package deal. You could even offer exclusive bundles specifically tailored for different customer segments or occasions– ideal for any online store looking for an edge in their AOV game.

3. Offer discounts and incentives

Everyone loves discounts and special offers, so use them to incentivize customers to buy more items at once. Consider offering free shipping or discounted bundles when customers purchase multiple products from your store.

For example, consider offering customers a discount when they purchase two items or more, or even a free gift with their purchase as an extra bonus! This encourages customers to add extra items to their cart and take advantage of the incentives while also potentially increasing brand loyalty in the long run.

4. Announce a limited-time offer 

These offers can come in many forms, such as discounts on orders over a certain amount or free shipping for purchases within a specific timeframe. 

For example, if you've got an online store selling clothes, then announcing a 50% discount in 1 day when customers spend more than $100 could be what they need to hit that higher limit and increase their purchase amount.

Don't forget to use the power of Fear Of Missing Out (FOMO) by creating a sense of urgency with messages like “Last chance: Offer ends tonight at midnight”. 

5. Run a loyalty program 

Create a loyalty program for customers who purchase from your store frequently. This could include exclusive discounts or bonus gifts for loyal customers after they reach certain spending levels. This can encourage customers to return for more and purchase more items at once in exchange for rewards.

For example, offering points for every purchase encourages customers to continue buying from you instead of going elsewhere. Once enough points have been earned, they can be exchanged for discounts or products in your store.

This method gives customers an incentive that encourages repeat spending and increases AOV.

What is a Good AOV? (Industry Benchmarks)

A "good" AOV varies by industry:

If your AOV is below industry benchmarks, you may need to refine pricing strategies or improve cross-selling techniques.

Final Thoughts

Tracking and improving your Average Order Value (AOV) is critical for long-term business success. By implementing effective strategies such as upselling, bundling, and loyalty programs, businesses can increase revenue without having to acquire new customers.

For real-time tracking and optimization of AOV, consider using TrueProfit, a comprehensive profit analytics tool for Shopify merchants. Unlock deeper insights into your store’s performance and maximize profitability today!

Irene Le

Irene Le – Content Manager at TrueProfit & eCommerce Marketing Specialist  Irene Le is the Content Manager at TrueProfit, specializing in crafting insightful, data-driven content to help eCommerce merchants scale profitably. With over 5 years of experience in content creation and growth strategy for the eCommerce industry, she is dedicated to producing high-value, actionable content that empowers merchants to make informed financial decisions.