How to Calculate Average Order Value (AOV)
Average Order Value measures the average amount spent per transaction. Learn how to calculate AOV, segment analysis techniques, and strategies to increase order value.
Average Order Value (AOV) measures the average amount customers spend per transaction. It is a fundamental e-commerce and retail metric that directly impacts revenue - increasing AOV means generating more revenue from existing traffic and customers without increasing acquisition costs.
AOV helps businesses understand purchasing patterns, evaluate marketing effectiveness, and identify opportunities to increase basket size through merchandising, pricing, and promotional strategies.
Basic AOV Formula
AOV = Total Revenue / Number of Orders
All values should be for the same time period.
Step-by-Step Calculation
Step 1: Define the Time Period
Select your measurement window:
- Daily (for operational monitoring)
- Weekly (for trend analysis)
- Monthly (for reporting)
- Campaign period (for promotion analysis)
Step 2: Calculate Total Revenue
Sum the value of all orders:
- Typically uses gross revenue (before refunds)
- Usually excludes shipping and taxes
- May include or exclude discounts (document your choice)
Step 3: Count Total Orders
Count completed orders:
- Exclude cancelled orders
- Exclude pending/unfulfilled orders (optional)
- One order = one transaction, regardless of items
Step 4: Calculate AOV
AOV = Total Revenue / Number of Orders
Example Calculations
Basic AOV Calculation
January metrics:
- Total revenue: $250,000
- Number of orders: 2,500
AOV = $250,000 / 2,500 = $100
AOV by Channel
| Channel | Revenue | Orders | AOV |
|---|---|---|---|
| Direct | $120,000 | 1,000 | $120 |
| Organic Search | $80,000 | 900 | $89 |
| Paid Search | $30,000 | 400 | $75 |
| $20,000 | 200 | $100 |
Channel analysis reveals where high-value customers come from.
AOV by Customer Type
| Customer Type | Revenue | Orders | AOV |
|---|---|---|---|
| New Customers | $100,000 | 1,500 | $67 |
| Returning | $150,000 | 1,000 | $150 |
Returning customers often have significantly higher AOV - a reason to invest in retention.
AOV Variations
AOV Before vs. After Discounts
Gross AOV: Before discounts
Gross AOV = Gross Revenue / Orders
Net AOV: After discounts
Net AOV = Net Revenue / Orders
Both are useful - gross shows customer willingness to pay, net shows actual revenue captured.
AOV by Product Category
| Category | Revenue | Orders | AOV |
|---|---|---|---|
| Electronics | $150,000 | 500 | $300 |
| Apparel | $80,000 | 1,200 | $67 |
| Accessories | $20,000 | 800 | $25 |
Category AOV informs merchandising and inventory decisions.
AOV by Device
| Device | Revenue | Orders | AOV |
|---|---|---|---|
| Desktop | $150,000 | 1,200 | $125 |
| Mobile | $80,000 | 1,100 | $73 |
| Tablet | $20,000 | 200 | $100 |
Mobile often has lower AOV - consider mobile-specific optimization strategies.
Relationship to Other Metrics
Revenue Components
Total Revenue = Traffic × Conversion Rate × AOV
To grow revenue, improve any component:
- More traffic
- Better conversion
- Higher AOV
Customer Lifetime Value
CLV = AOV × Purchase Frequency × Customer Lifespan
AOV is a key input to lifetime value calculations.
Revenue Per Visitor
Revenue Per Visitor = Conversion Rate × AOV
Combines conversion efficiency with order value.
Common AOV Mistakes
Mistake 1: Including Cancelled Orders
Cancelled orders inflate order count and reduce AOV. Exclude them consistently.
Mistake 2: Inconsistent Revenue Definition
Some reports use gross revenue, others net. Define whether AOV includes discounts, shipping, and taxes - and apply consistently.
Mistake 3: Ignoring Outliers
A few very large orders can skew AOV significantly. Consider using median order value or trimmed mean for better central tendency.
Mistake 4: Not Segmenting
Aggregate AOV hides important variation by customer type, channel, and category. Segment analysis reveals actionable insights.
Mistake 5: Comparing Across Categories
Comparing AOV between luxury goods and consumables is meaningless. Compare within similar product categories and customer segments.
Strategies to Increase AOV
Bundling
- Product bundles at discount vs. individual items
- "Complete the look" recommendations
- Starter kits and sets
Upselling
- Premium versions
- Higher-quantity options
- Extended warranties
Cross-Selling
- Complementary products
- "Customers also bought"
- Related accessories
Minimum Thresholds
- Free shipping threshold
- Discount at minimum spend
- Tiered rewards
Pricing Strategies
- Volume discounts
- Subscription options
- Limited-time offers
Product Display
- Higher-priced items featured
- Price anchoring
- Value comparisons
Measuring AOV Impact
A/B Testing AOV Changes
When testing strategies:
- Track both AOV and conversion rate
- Higher AOV but lower conversion may reduce total revenue
- Calculate revenue impact: Revenue = Traffic × CVR × AOV
Promo Impact Analysis
| Period | Revenue | Orders | AOV | Notes |
|---|---|---|---|---|
| Pre-promo | $200,000 | 2,000 | $100 | Baseline |
| During promo | $280,000 | 3,500 | $80 | 20% discount |
| Post-promo | $180,000 | 1,800 | $100 | Demand pull-forward |
The promotion increased revenue but decreased AOV - evaluate total impact.
AOV in Context-Aware Analytics
metric:
name: Average Order Value
description: Average revenue per order
calculation: SUM(order_revenue) / COUNT(DISTINCT order_id)
revenue_definition: Gross product revenue, excludes shipping and taxes
order_status: Completed orders only
time_grain: daily
dimensions: [channel, customer_type, device, category]
excludes:
- cancelled_orders
- test_orders
- internal_orders
owner: ecommerce_analytics
certified: true
With explicit revenue and order definitions, AOV calculations are consistent across dashboards, reports, and analyses - enabling accurate trend tracking and cross-segment comparison.
Questions
Typically, AOV uses the order subtotal - product value before shipping and taxes. This makes AOV comparable across regions with different tax rates. Document your approach and apply consistently.