How it's calculated
- Average order value = product revenue ÷ orders
- What the average order keeps = average order value × margin on product revenue − the costs every order pays once
- With a bigger basket = (average order value + the amount added) × margin on product revenue − the same per-order costs
- Added a month = (what the bigger order keeps − what the average order keeps) × orders
Every figure on this page comes from Offer Suite's own margin engine, the same code the product uses to forecast each offer's and option's profit and to compute realized margin on orders. Money is computed in whole cents.
Worked example
A store took $40,900.00 of product revenue from 980 orders: an average order value of $41.73. At 55% margin on products, less the $9.48 every order pays for its pick, box, label and card fee, the average order keeps $13.47.
An upsell that adds $5.00 to the average order raises it to $46.73, 12.0% more. The order still pays $9.48 once, so it keeps $16.22, 20.4% more: $2,695.00 over the same orders. The bigger basket earns as much per visitor even if 17.0% fewer visitors buy.
Assumptions
- The bigger basket brings as many orders as today. The result also states how many buyers it could lose and still earn the same.
- The per-order costs ($9.48) are the other calculators' defaults: $1.18 pick and pack, $0.50 box, a $7.50 label and the card's $0.30 fixed fee. A heavier basket can move the label up a pound; the shipping calculator shows when.
- The margin on product revenue is the same for the products added as for the rest of the order.
- The order figures are an example. Your store's sales report gives yours for any period.
Questions
How do I calculate average order value?
Divide revenue by the number of orders over the same period. Use product revenue after discounts and before shipping and tax, so the figure compares from month to month.
Why does a higher AOV raise profit faster than revenue?
Each order pays for its label, its pick and pack and the card's fixed fee once. Extra products in the same parcel add their own margin and almost none of those costs, so the order's contribution grows by a larger percentage than its value.
What is a good average order value?
One that leaves a contribution after per-order costs large enough to pay for the visitor. It depends on your prices and costs, not on a benchmark: a $30 order with a $9 fixed cost keeps far less of itself than a $90 one.
How do I raise average order value?
Bundles, quantity discounts, a free-shipping threshold and an upsell after the purchase all add to the basket. Each has a cost; the bundle, threshold and gift calculators price them.