What is Average Order Value (AOV)

Average Order Value (AOV) is the average amount a customer spends each time they place an order on your website or app. It is one of the most important ecommerce metrics because it shows how much revenue you generate per transaction and helps you understand the value of each completed order. The current Kraken Data page already defines AOV and gives the core formula, so this version expands that into a fuller, more useful explanation for readers and search engines.

What does Average Order Value mean?

Average Order Value measures the average dollar amount spent per order over a set period of time. Businesses usually track AOV weekly, monthly, quarterly, or by campaign to understand purchasing behaviour and identify opportunities to increase revenue.

AOV is useful because it helps answer questions like:

• Are customers buying one item or multiple items?
• Are promotions increasing basket size?
• Which channels bring in higher-value customers?
• Is onsite merchandising helping shoppers discover more products?

In simple terms, AOV shows how efficiently your website turns orders into revenue.

AOV Formula

The formula for Average Order Value is:

AOV = Total Revenue / Number of Orders

For example, if your online store generated $40,000 in revenue from 4,000 orders, your Average Order Value would be:

$40,000 / 4,000 = $10

That means the average customer spent $10 per order. This is the same basic example used on the live page, which is a good simple way to explain the formula.

How to calculate Average Order Value

To calculate AOV:

1. Choose the time period you want to measure.
2. Add up your total revenue for that period.
3. Count the total number of completed orders.
4. Divide total revenue by total orders.

To get more value from the metric, calculate AOV by segment as well as site-wide. For example, you can break it down by traffic source, device, product category, campaign, new vs returning customer, or location. This makes it easier to identify where your highest-value orders are coming from and where there is room for improvement.

Why is Average Order Value important?

Average Order Value matters because it helps you understand how much revenue each conversion generates. If you can increase AOV, you can often grow revenue without needing to increase traffic.

That matters because more traffic usually means more cost. Whether you invest in SEO, paid media, email, social, or affiliate activity, acquisition is rarely free. Improving AOV can be one of the fastest ways to increase revenue from the visitors you already have. The current live page already links AOV to conversion rate optimisation and better revenue outcomes from existing traffic.

AOV is important because it helps you:

Measure marketing quality

AOV shows whether your traffic is generating higher-value orders, not just more orders.

Assess pricing and merchandising

If customers consistently buy only lower-priced products, there may be an opportunity to improve bundling, upselling, positioning, or product recommendations.

Understand customer value

AOV can help you evaluate the quality of different customer segments and support broader analysis of customer lifetime value.

Find revenue growth opportunities

Increasing AOV is often easier and more cost-effective than acquiring significantly more traffic.

What is a good Average Order Value?

There is no universal benchmark for a “good” Average Order Value because it depends on your industry, average price point, product mix, and customer buying behaviour.

For example, a grocery business may have a very different AOV to a luxury fashion retailer, and a subscription business may have a lower first order value but stronger long-term customer value.

Instead of comparing yourself to a generic benchmark, it is usually more useful to compare AOV against:

• your historical performance
• your product categories
• your marketing channels
• your conversion rate
• your margin and profitability targets

AOV should always be reviewed in context, not in isolation.

Average Order Value vs conversion rate

Average Order Value works best when analysed alongside conversion rate. A higher AOV is not always better if it causes fewer people to buy. Likewise, a high conversion rate is not always ideal if order values are too low to support profitable growth.

The goal is not just to increase AOV. The goal is to increase profitable revenue.

That means looking at AOV together with:

• conversion rate
• revenue per visitor
• gross margin
• customer lifetime value
• retention and repeat purchase rate

How to increase Average Order Value

The current Kraken Data page already mentions several tactics such as upselling, cross-selling, free shipping, coupons, volume discounts, limited-time offers, and loyalty programs. Those are all strong ideas, but they need a bit more explanation to be genuinely useful for readers.

Upselling

Encourage customers to choose a higher-value version of the product they are already considering. This might mean a premium model, a larger size, or a better-value plan.

Cross-selling

Recommend related or complementary products that make sense alongside the main purchase. Good cross-sells feel helpful, not pushy.

Free shipping thresholds

Offer free shipping above a minimum spend threshold. This can encourage shoppers to add one more item to their cart to qualify.

Product bundles

Bundle related products together to raise basket size and increase perceived value.

Volume discounts

Offer stronger value when customers buy multiple units, such as “buy 2 and save 10%” or “buy 3 and save 15%”.

Limited-time offers

Time-sensitive promotions can lift order values by giving customers a reason to buy more now rather than later.

Loyalty programs

Reward customers for spending more over time with points, perks, tiers, or member benefits.

Better onsite merchandising

Improve how products, bundles, add-ons, and recommendations are presented across product pages, cart, and checkout.

Reduced friction

Clear shipping information, transparent pricing, trust signals, and a simple checkout flow can all support higher basket sizes.

Common mistakes when trying to increase AOV

Focusing on AOV alone

AOV should not be optimised without also reviewing conversion rate and profitability.

Showing irrelevant recommendations

Poorly matched product suggestions can distract customers and reduce trust.

Setting unrealistic spend thresholds

If a free shipping target feels too high, shoppers may ignore it or abandon the cart.

Overusing discounting

AOV may rise while margins fall, especially if promotions are too aggressive.

Failing to test changes

What works for one category, audience, or website may not work for another. Testing matters.

How to analyse AOV properly

A single site-wide AOV number is useful, but limited. More valuable insights usually come from segmentation.

Review AOV by:

• traffic source
• campaign
• device
• customer type
• landing page
• product category
• geography

This helps uncover patterns such as mobile users spending less per order, email campaigns producing higher-value customers, or returning customers buying more add-ons than first-time shoppers.

Average Order Value and CRO

Average Order Value is an important part of conversion rate optimisation. CRO is not just about getting more people to convert. It is also about increasing the value of each conversion.

That means improving AOV can help support:

• revenue growth
• marketing efficiency
• higher basket sizes
• better customer value
• stronger profitability

This is why AOV is one of the most useful ecommerce KPIs to track and improve.

Final takeaway

Average Order Value (AOV) is the average amount customers spend each time they place an order. It is calculated by dividing total revenue by total orders. While it is a simple metric, it can be a powerful growth lever because it helps businesses understand order value, buying behaviour, and revenue efficiency.

If you want to grow revenue without relying only on more traffic, improving AOV is one of the best places to start.

Frequently asked questions

What is Average Order Value?

Average Order Value is the average amount a customer spends each time they place an order on your website or app.

How do you calculate Average Order Value?

You calculate AOV by dividing total revenue by the total number of orders for a given period.

Why is Average Order Value important?

AOV is important because it shows how much revenue each order generates and helps identify ways to grow revenue without increasing traffic.

How can you increase Average Order Value?

You can increase AOV through upselling, cross-selling, bundles, free shipping thresholds, loyalty programs, better merchandising, and reduced checkout friction.