Average Order Value (AOV): How to Calculate It and Raise It
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Average order value tells you how much a customer spends, on average, each time they buy from you. It’s a simple number, but it’s one of the easiest levers a small business can pull. Getting existing customers to spend a little more per visit is often cheaper than finding new ones.
This guide explains average order value in plain English, shows the formula, walks through an illustrative example for a small online candle shop, and covers practical ways to raise it without annoying customers.
What Is Average Order Value?
Average order value (AOV) is the average amount spent per order or transaction over a period.
It’s used by online stores, restaurants, cafés, retail shops, and service businesses alike. For a café it might be called average ticket or average check. For a salon it might be average spend per visit.
AOV is one of three numbers that together drive sales:
Revenue = Number of customers × Orders per customer × Average order value
Raise any one of them and revenue goes up. AOV is often the quickest to move.
The AOV Formula
Average order value = Total revenue ÷ Number of orders
Use the same period for both, such as one month. For a cleaner number, many owners leave out sales tax and shipping charges, and subtract refunds.
Worked Example: An Online Candle Shop
An online candle shop sells $14,400 in October from 480 orders. All figures are illustrative.
AOV = $14,400 ÷ 480 = $30
The shop charges $6 for shipping and offers free shipping over $50. Most orders are one or two candles at $16 to $18 each.
The owner tries two changes in November:
- Lowers the free shipping threshold to $40, just above the price of two candles plus a small add-on.
- Adds a $9 wick trimmer and matches set as a suggested add-on at checkout.
November results:
| Measure | October | November |
|---|---|---|
| Orders | 480 | 470 |
| Revenue | $14,400 | $16,450 |
| Average order value | $30.00 | $35.00 |
AOV rose by $5, or about 17%, and revenue rose by about $2,050, with slightly fewer orders.
But revenue isn’t the whole story. Free shipping costs the shop money on every order that qualifies. The owner checks the gross profit margin on the new orders to make sure the extra sales still leave more profit after shipping. If not, the threshold needs adjusting. The free markup and margin calculators make this check quick.
Why AOV Matters
- It spreads fixed costs. Packing, payment fees, and marketing costs are similar whether someone spends $20 or $40. A bigger order means a bigger share is profit.
- It makes marketing pay off. If each new customer costs $25 to win, a $30 first order barely covers it. A $45 first order gives you room. See customer acquisition cost.
- It feeds lifetime value. Higher spend per order raises what each customer is worth over time, which is explained in customer lifetime value.
How to Raise Average Order Value
- Set a free shipping threshold a little above your current AOV. Customers often add an item to qualify.
- Bundle products. A “gift set” of three candles at a small discount sells more than three single candles.
- Suggest add-ons. A side with a meal, a protective spray with shoes, or a filter with a vacuum.
- Offer an upgrade. A larger size, a premium version, or a faster service, priced so it feels like good value.
- Use volume pricing. “Buy two, get 10% off” works well for consumables.
- Train staff to suggest, not push. One helpful suggestion per sale beats a hard sell.
Common Mistakes
- Raising AOV by discounting too much. If a bundle discount eats your margin, you sell more and earn less.
- Ignoring the number of orders. A higher AOV with far fewer orders can mean customers are put off by the minimum.
- Letting a few big orders skew the average. One $2,000 wholesale order can make AOV look great for a month. Look at the median order too, or track wholesale separately.
- Including tax and shipping. These inflate AOV without adding profit. Be consistent with what you include.
- Pushing add-ons that don’t fit. Irrelevant suggestions feel pushy and can hurt trust.
Frequently Asked Questions
What is a good average order value?
There’s no universal number. It depends on what you sell and your prices. Compare your AOV with your own past months and focus on steady improvement.
Is average order value the same as average revenue per customer?
No. AOV is per order. Revenue per customer counts all the orders a customer placed in a period, so it will be higher if people buy more than once.
Should I include sales tax in AOV?
Usually not. Sales tax isn’t your money, so leaving it out gives a truer picture of what each order brings in.
Does a higher AOV always mean more profit?
Not always. If you raise AOV through heavy discounts or free shipping, the extra revenue can be eaten up by costs. Always check your margin alongside AOV.
How often should I check AOV?
Monthly is a good rhythm, and also before and after any change, like a new bundle or shipping offer, so you can see whether it worked.
