Average Order Value (AOV) is the average revenue generated per completed order. It’s a simple but high-leverage metric for e-commerce and subscription checkouts: how much money, on average, you squeeze out of each basket. Mathematically:
AOV = total order revenue ÷ number of orders. That’s it—no mysticism, just arithmetic.
Why analysts care: AOV sits next to your Conversion Rate and traffic volume to determine revenue. If your site converts and you can nudge people to add one more item, AOV rises and revenue follows without buying more clicks. It’s also a useful lens when diagnosing dips or spikes in Revenue and Ecommerce Conversion Rate.
Calculation details (keep it consistent)
- Numerator (revenue): Common practice is merchandise subtotal after discounts, excluding shipping/taxes. Just be consistent in your definition across reports.
- Denominator (orders): Count orders/transactions, not sessions or users. See: Transaction, Session, User.
- Returns/cancellations: Decide whether to use gross (before returns) or net (after returns) revenue. Document it.
Mini example
Orders today: $50, $120, $80
AOV = (50 + 120 + 80) ÷ 3 = $83.33
| Order ID | Order value |
|---|---|
| #1001 | 50 |
| #1002 | 120 |
| #1003 | 80 |
| AOV | 83.33 |
Interpretation and common traps
- AOV vs. ARPU: Don’t mix AOV with “average revenue per user” (user-level, multi-order). AOV is per order.
- Channel bias: Paid traffic with heavy couponing can inflate conversion while deflating AOV. Segment by channel, campaign, device.
- Product mix effects: AOV rises when big-ticket items dominate. That isn’t always “better” if margin percent is lower—pair AOV with margin.
- Outliers: One enterprise purchase can skew a small data set. Use medians alongside means when sample sizes are tiny.
Optimization levers
Cross-sell/upsell blocks, smart bundles, free-shipping thresholds (“free over $X”), volume price breaks, and checkout UX that makes adding complementary items effortless—all proven ways to move AOV without breaking your funnel.