Looking at the growth rate of the SaaS industry, you’d think that people are more than willing to spend money on software solutions that promise to make their everyday lives (and professional endeavors) easier. Not quite, though. Despite projections forecasting the total SaaS spend to reach $171.9 billion in 2022, most buyers still prefer free solutions. […]
Average Order Value (AOV)
AOV (average order value) is a metric that tracks the average dollar amount spent every time a customer places an order on a website. AOV is an important performance indicator for online businesses to measure because it offers insight into the purchasing habits of the average customer.
Similar to most other key metrics, average order value can be tracked over time to measure changes and growth, whether that is over a year, six months, or a few weeks. Most businesses follow their AOV monthly, however, for up-to-date readings that allow them to make frequent and necessary changes whenever the need arises.
Why is Understanding AOV Important?
Knowing your business’ average order value helps you to evaluate how well your overall marketing efforts and pricing strategy are working. This metric is necessary to measure the long-term value of each individual customer, providing invaluable information for how to continue your marketing and customer outreach efforts.
AOV is often viewed as a benchmark of customer behavior, which helps your business set clear goals and strategies as well as to measure how well your strategies are actually working. With such clear and honest feedback, you can rest assured that you’re making the best decisions for your business needs.
It is important to note that in most cases, marketers focus much of their energy on increasing traffic to their website. However, it would be more useful and even profitable to increase their AOV instead.
Many methods used for increasing site traffic like paying for ads actually cost a lot of money and can take up much of your time, but increasing average order value can be quick, direct, and inexpensive. Since there is a transaction cost linked with every order, upping your average order value is a great way to push direct revenue and increase your overall profits.