Summer of Metrics: Average Order Value

To close out the summer, I'd like to go through the main ecommerce metrics and tie them together so you can be more strategic with your metrics. Presenting the: Summer of Metrics

...cheers, fanfare, silly colored smoke released...

Let's kick it off with Average Order Value (AOV).

Average Order Value is a simple transaction metric that tells you how much your customers spend in their orders on average. Some will spend more, some will spend less.

For Shopify stores it helps you understand how much each order is worth to you (order, not customer).

It doesn't account for profit or later customer behavior, but since it's easy to calculate and ubiquitous, it's good for a quick rule of thumb.

Typically it's used to measure the end part of your customer acquisition funnel. e.g. If it costs $1 to get a visitor to show up on your site and 1-in-20 visitors buy with an Average Order Value of $50, then you're spending $20 to get a $50 order.

($1 cost per visitor divided by 5% conversion rate equals $20 cost to acquire a customer).

Since Average Order Value doesn't account for costs, you won't know if an acquisition is profitable. Plugging in other metrics like your margin can work that out but it makes the equation more difficult.

Usually you'll have an idea of how much AOV you need to be profitable. Then AOV can act as a floor. You never want your orders to dip below that. In Repeat Customer Insights I'd even consider setting that as your AOV target and use the system to tell you when you're too low.

AOV's ease of calculation and use with acquisition is why much of the advice online is around increasing your AOV.

Eric Davis