What is Average Order Value (AOV)?
Nexa Consultancy | Startup & Finance Glossary
Average Order Value (AOV) is a key e-commerce metric that tracks the average total of every order placed with a merchant over a defined period. Increasing AOV is a primary goal for many D2C brands as it is often easier to encourage existing customers to buy more than it is to acquire new ones.
For Startups: For a D2C startup, focusing on AOV is crucial for improving marketing efficiency and profitability. A higher AOV means the company can spend more to acquire a customer while maintaining a healthy LTV:CAC ratio. Strategies to increase AOV include product bundling, cross-selling ("you might also like..."), and offering free shipping above a certain order threshold.
Calculation: AOV = Total Revenue / Number of Orders.
Example: An online store generates ₹10 Lakhs in revenue from 1,000 orders in a month. Its AOV for that month is ₹1,000.