AOV – Average Order Value
Total revenue divided by number of orders. The biggest lever for increasing revenue without more advertising.
In practice
Doubling AOV from $40 to $55 means +33% revenue from the same traffic. Upsell + bundle + a free shipping threshold.
Common misconception
'Low AOV means cheap products.' Not true. Low AOV means there's no upsell, bundle, or free shipping threshold.
How to fix it
Low AOV? (1) set a free shipping threshold at 20-25% above AOV, (2) an order bump at checkout, (3) a 3-product bundle with a 10% discount.
Example
A soap store: AOV was $23. Free shipping above $33 plus a bundle plus an order bump raised AOV to $35.
Priority
Free shipping threshold → bundle → order bump → post-purchase upsell.
Related terms
Keep learning. Metrics that touch the same area:
- ROI – Return on InvestmentFinanceA general profitability metric: (net profit / investment cost) × 100. Different from ROAS — it includes all expenses.
- LTV / CLV – Customer Lifetime ValueFinanceTotal expected profit from a customer over the entire relationship. A healthy LTV:CAC ratio is 3:1.
- Gross MarginFinance(Sale price - COGS) / sale price × 100. The basis for every pricing and advertising decision.
- COGS – Cost of Goods SoldFinanceThe direct cost of producing or acquiring products sold. Includes: product + import shipping + customs + packaging.
- Cash FlowFinanceThe movement of cash in the business. 'Profitable on paper, broke in the bank' — a common problem in growing stores.
- Repeat Purchase RateFinanceThe percentage of customers who made at least a second purchase. A gauge of product-market fit and experience quality. Healthy: 25-40% within 12 months. Above 40% is excellent.
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