How AOV can make you or break you

Let’s start with a little puzzle. You have two customers:

Jane purchases four different products from your online store on a monthly basis.

Emma purchases the same four products from your online store on a weekly basis.

Which one is better for your business?

To decide, you need to know one valuable piece: average order value (AOV). So what does this mean and why is it so important for e-commerce decision makers?

First things first: What is AOV?

Average order value is the average amount of money spent for every purchase a customer makes. It’s safe to say it is an important decision-making metric and a vital KPI for every e-commerce website.

It is relatively easy to calculate: you need to divide your revenue by the total number of orders.

Knowing and regularly checking the AOV is crucial for e-commerce businesses. It can improve performance and increase sales. Furthermore, it can help your business make important marketing and sales decisions. AOV is also one of the key components of e-commerce optimization.

Let’s evaluate this in more detail.

Whilst drinking your morning coffee you check Ads manager and spot campaigns that have a bit higher CPO than you can afford. You think that those ads are not profitable, so you triumphantly shut them off. Phew, you just saved a ton of money. It’s kind of like feeling you have just won a prize for your phenomenal work.

BANG!

Wait, what was that noise? Oh, it was the sound of us bursting your bubble.

The reason you need to take AOV into consideration

Let’s talk numbers:

You start advertising a product for $40 and set your target CPO at $10
The next day you take a look at the results
And you see that a couple of ads went above your budget with a CPO of $11-12

Naturally, you turn them off
However, a couple of calculations later
You realize that the AOV of the product is actually much higher
Because people buy them in pairs

It turns out your actual AOV is $70
Which in consequence makes your target CPO higher as well
Let’s say that your target CPO now stands at $17

This means you have been shutting off profitable ads
And making less money than you could’ve had

Not checking your AOV is kind of like being a pirate: wearing an eyepatch and only seeing with one eye. So saying it’s essential that you keep track of AOV is kind of an understatement.

You need to take it into account and stop turning off profitable ads/campaigns that would otherwise make big bucks and sell more of your products. Don’t forget about customers that buy more than one item at a time and the upsell you offer at the checkout: it all affects AOV. It must be tracked frequently in order to catch any major dips or peaks.

Not keeping track of average order value literally costs you money.

Think about it: if you didn’t neglect AOV, you would probably have more orders and earn more in THIS VERY MOMENT.

Do you now see why Obi-Wan Kenobi may as well say:

What we’ve learned:

Neglecting AOV is costing you money
Keeping track of AOV helps you see hidden opportunities
Knowing your AOV is crucial because some customers buy products in pairs/bundles or add upsells to their cart

There is one thing left for us to address.

Seeing as AOV fluctuates and you probably advertise a lot of products in different markets, keeping track of everything could be a mammoth task.

This is when ROAS monster comes in!

By merging dispersed ad results from several ad accounts, you get all your important metrics in one app. What is more, it displays real-time AOV for every product you sell, so you can act accordingly. And the best news?

It’s time AOV becomes the apple of your eye.

Bite into your 30-day free trial now. Start by booking a demo call.

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