For B2B brands, having a wide variety of concrete performance metrics is an essential tool for both setting and achieving your goals. While important metrics like site traffic and conversion rate tend to get a lot of lip service, average order value — or AOV — can be a bit of a sleeper. But make no mistake, you don’t want to miss the wealth of insights AOV can offer; a healthy AOV not only indicates profit potential, consistently keeping track of your AOV Ecommerce data helps you lay strong foundations for the future.
What Is AOV?
While AOV might not be quite as obvious as something like site traffic, it’s actually a pretty straightforward concept, whether you work in B2B or B2C commerce. Just as it sounds, AOV is simply the average dollar amount Ecommerce customers spend per order. It’s important to remember that AOV assesses sales generated per individual order rather than per customer.
AOV is more than just a statistic — a healthy AOV indicates potential for powerful revenue growth. With strong AOV, Ecommerce businesses are empowered to scale their profits and revenue upward. Additionally, while other metrics such as social media views or advertising results often require expenditures to bolster, tactics to increase your AOV are often cost-free, leading to direct revenue.
Speaking to Tinuiti, ShipBob CMO Casey Armstrong says, “As customer acquisition costs continue to rise and competition becomes more fierce, you need the higher AOV for your unit economics to continue making sense.” In tandem with your company’s conversion rate and revenue-per-visit, AOV is a key determinant in performance evaluation.
How To Calculate AOV
To determine your average order value, all you need is basic math. Put simply, total revenue generated over a specific period of time divided by the number of orders made during that same period equals your AOV. For example, if your company sees $2,500 in revenue from 25 orders over the course of a week, your AOV comes out to $100 for that week.
Assessing Current Performance
It’s clear that a high AOV is a key goal to aim for, but much of the metric’s value lies in its potential to reveal customer behavior. Like all key performance indicators, it pays to analyze AOV in regular intervals. Analyzing AOV helps you to identify customers’ buying habits, and to address the “whys” of fluctuating purchase trends. A low AOV lets you know, for instance, that your customers tend to make small purchases. This is info that can have a big influence on how you target those customers and the moves you make increase the amount or value of those orders. Likewise, AOV can help you gauge pricing sensitivity, a lever you can finesse until you find the optimal price point.
Look for variations in your AOV, and make note of patterns or associations with certain key events, such as spikes from an SMS marketing campaign or dips during certain seasons. To illustrate how valuable AOV data can be, think about this: While Salesforce reports that B2B ecommerce orders increased by 44 percent in the first half of 2020, self-service orders sported an average AOV of about half of the average in-person purchases. While that’s only an example, it’s exactly the sort of paradigm-shifting insight that tracking your AOV can provide.
Tiered Pricing and AOV
Because B2B ecommerce thrives on volume, tiered pricing breaks can be make or break when it comes to your AOV results. Tiered pricing can manifest in a few different ways, but it’s typically the practice of offering discounted prices on bulk orders (i.e. if you buy one product each costs $1.00, but if you buy 20 each one costs $0.75), or offering tiered pricing based on different categories of quality, such as “Basic,” “Silver,” or “Premium” product or service brackets.
Introducing tiered pricing breaks can improve AOV for B2B companies in a variety of ways, many of which focus on increasing volume for positive growth outcomes. Tiered pricing breaks on bulk orders is a super direct way to increase sales numbers while offering upgrades can boost the amount spent at checkout. Meanwhile, pricing tiers that offer more affordable or more premium product categories attract a wider swath of customers by catering to a more diverse spectrum of needs, from frugal buyers to big spenders who value quality. More volume, more customers and more in-cart upgrades all combine to create greater average order value.
More Ways to Improve AOV
To remedy a low AOV, Ecommerce platforms may wish to ramp up their efforts to cross-sell online purchases or increase upselling at checkout, all of which enhance your product relationships. Offering bundles and product kits hits a similar nerve, especially for increasing order frequency.
Similarly, AOV-bolstering techniques that typically cater to B2C can also help brush up your average order value in the B2B world. Your platform’s social proof — such as customer and professional product reviews, testimonials and user-generated community content — might not be as glossy as a B2C site, but access to positive reviews may generate the customer initiative needed to bump that AOV, especially in terms of attracting new customers. AOV may also give you the data you need to focus on customer segmentation, or targeting customers with incentives that cater specifically to their buying habits, such as offering discounts to those with a lower AOV and rewards programs for those with a higher AOV. Customer rewards like special pricing tiers, first-in-line access to new stock or even buyer-specific pricing may help boost B2B order volume, and in turn strengthen your AOV.
While a less-than-ideal AOV can be discouraging, it’s also an imperative call for action, and may inspire you to implement new sales tactics focused on existing Ecommerce customers, such as discount codes, digital coupons, volume-based deals or a free shipping minimum. Remember: for increasing B2B average order value, order volume, perceived value and ordering frequency are a powerful trifecta.
Maximize Customer Data With Zoey
With knowledge of the average order value in hand, you can focus on maximizing the potential of your current customer base rather than expending capital and energy to attract new customers — and that puts both time and money in the bank. To see how you can grow your Ecommerce and gain insights into customer buyer behavior, contact the Zoey team today:
Dan is a small business owner and freelance writer based in Dallas, TX. In over a decade of experience, he’s been fortunate to write and collaborate with business-facing brands including The Motley Fool, Chron, Office Depot, Fortune and more.
