What’s an AOV (Average Order Value), And Why Is It Important For Your Shopify Store?

Business owners and retailers the world over are concerned with increasing their revenue, thriving in a sea of competition, and improving their bottom line. However, to become a successful business, you should be able to track and measure your performance in sales every step of the way.

Measuring your performance, especially on your Shopify store, gives you a hint about what you and your team are getting right and what you may be doing wrong. Your stores AOV is one the best places to start.

In this article, we will explore what AOV means and why it’s so essential for your business.

What’s an AOV?

Average Order Value (AOV) is a sales metric that business owners, marketers, salespersons use to measure consumer buying behavior on their Shopify stores. It is a key performance indicator (KPI) that measures the average dollar spent when customers place orders on your products displayed on your e-commerce site over a time period.

While some marketers focus on conversion rates and website traffic, the role of AOV cannot be downplayed, as it plays directly into your revenue and profit. Why? Because while conversation rates and website traffic are great metrics, they don’t matter if customers don’t spend money on orders.

AOV is typically found on most e-commerce web analytics dashboards and can be analyzed by anyone without any technical experience.

How Is the AOV Calculated?

The average order value is calculated by dividing the total revenues generated by the number of orders placed. Say, for instance, your total revenue for last month was $120,000, and the total orders placed was 3,000. Your AOV is calculated by dividing the total revenue by the total order placed:

So, we have 120000/3000, which will give us 40. Thus, the average order value made for last month is $40.

One essential piece of information to note is that AOV is ascertained from the orders made and not from the number of customers patronizing your business in the month under review. And that’s because a customer can place multiple orders within a month on your Shopify store. Thus, each order placed is factored separately into the AOV.

Why Is the AOV So Important For A Shopify Store?

The average order value is essential in determining your customers’ purchasing habits and how effective your digital marketing campaigns are.

Say, for instance, you run an e-clothing store that has displays clothes ranging from $18, $27, $30, and $50. At the end of the month, if your AOV is $24, you can deduce two conclusions:

1. The number of customers ordering your low-end clothes is on the high side.
2. Your customers aren’t purchasing multiple items from your e-clothing site.

You have this information at your fingertips; what does that tell you? If you’ve invested a lot into marketing strategies and campaigns for all the items in your stores, you can tell the returns aren’t much, to say the least.

Thus, with the AOV, you can go back to the drawing board and look for creative ways to improve the positioning of your products. You can also categorize your customers into different segments — low, media, and high spenders. To achieve this, all you have to do is determine their purchase history and frequency.

You can then create customized ads and marketing strategies for each segmented group. It’s recommended to test-run some of your campaigns and see how effective they are before going on a full-scale launch.

How Can I Increase The AOV On My Shopify Store?

An “easy” way to increase your AOV, and therefore your revenue, is to upsell to customers already proven to trust your store with an item added in their cart or customers who already made a purchase.

HypeCart can do this for your Shopify store in multiple different ways.

1, Upsells and Cross Sells in your cart

When a customer has added an item to your cart, HypeCart can based on different trigger values you’ve created in the dashboard show offers of interest to that customer.

For example: A customer has added a pair of shoes for $60 in their cart. HypeCart can then show a care package for those shoes for $8 in the cart. If a customer decides that a care package for $8 is worth it when buying shoes for $60 then you have effectively increase that order value by $8. If you do that on 100 orders, it’s $800 in sales that you’ve earned.

2, Progress bars in your cart

A great way to increase your average order value is to have progress bars for free shipping in your cart. This will incentivise customers to increase their order value in order to reach a threshold for free shipping.

For example: A customers adds a notebook for $9 in their cart and sees that if they spend over $10 they don’t have to pay any shipping fees. The customer decides to purchase a pack of pencils for $2 in order to reach the free shipping threshold. Voila — you’ve increased your AOV by $2.

3, Post Purchase Upsells

Once a customer has decided to make a purchase and trust your brand — there really is no better place than this to show some great upsells.

With HypeCart you can create a funnel with a total of three upsells here. Let’s go through an example funnel.

The customer has made a purchase on your store and before reaching the Thank You Page an offer (Offer A) created in HypeCart will display a product with a 10% discount. With just one click the customer can chose to either add this product to their order.

If accepted another offer (Offer B) with an accessory for the product in Offer A will be shown, with a $10 discount. After deciding on whether or not to pick up on this offer the customer will be sent to the Thank You Page.

If the customer declines Offer A then we can show another offer (Offer C) with either a new product or the same product with a better discount.

4, On the thank you page

The thank you page is one of the most underrated spaces for promotions. With HypeCart you can add several different types of promotion widget with a page builder and they will show up on the Thank You Page.

Our most popular widgets are:

• Discount Next Order
• Product Recommendations
• Product Upsell
• Re-Order

The thank you page will turn into an order confirmation page that Shopify emails to customers by default for example with shipping updates. Your promotion widgets will still be there every time your customer visits the page.

Other Metrics That AOV Impacts

The AOV isn’t just relevant in determining your customer’s spending habits. There are other metrics tied to your business performance where the AOV is involved. They include:

• Lifetime Revenue Per Customer. This is a customer’s average value of their various orders over a time period. It also determines each customer’s total purchasing worth. If the Lifetime revenue per customer is low, it means that they’re less likely to order multiple or expensive products.
• Cost Per Conversion. This sales metric reveals how much it costs your business to acquire paying customers and not just leads. Expenses, in this case, may range from ads cost, influencer marketing, offline campaigns, etc. The cost spent on advertising should be subtracted from the AOV to get the profit from each order.

In conclusion, reviewing your Shopify stores,’ AOV is essential in determining your sales strategies and the reactionary purchase from your customers. It also equips you with the data you can use in making high-level decisions that will go a long way in improving your bottom line and your customers’ experience.

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