How to Find Average Order Value in Shopify for Increased Revenue

Table of Contents

1. Introduction
2. What is Average Order Value (AOV)?
3. A Better Way to Think About Average Order Value
4. Setting Up Your Shopify Store for AOV Calculation
5. Analyzing Your AOV Data
6. Five Strategies to Increase Average Order Value
7. FAQ Section
8. Conclusion

Introduction

If you're operating a Shopify store, chances are you're already familiar with the hustle of maximizing your sales while managing various aspects of your business. With the rise of e-commerce, understanding your metrics is essential, especially if you're aiming to boost your revenue. An eye-opening statistic reveals that small increases in average order value (AOV) can significantly affect your bottom line; for instance, just a 10% increase in AOV can elevate your revenue margin substantially without needing to bring in more customers.

But why should we focus on average order value specifically? AOV is a crucial metric that not only measures the average amount customers spend per transaction, it also provides insights into customer behavior, product pricing strategies, and the potential effectiveness of marketing campaigns. As Shopify merchants, we can leverage this information to elevate our businesses, and at Tevello, we are committed to empowering you with tools that allow for such growth.

This blog post will guide you through understanding average order value—how to find it using Shopify's built-in tools, how to effectively calculate it, and proven strategies to increase it. Plus, we'll showcase how Tevello’s all-in-one solution can streamline these processes and enable you to sell online courses and digital products, enhancing your revenue streams and customer engagements right from your Shopify platform.

Are you ready to dig deeper into your store's analytics and unlock new potential? Let’s explore the ins and outs of finding and increasing your average order value in Shopify.

What is Average Order Value (AOV)?

At its core, Average Order Value (AOV) is a metric that defines how much a customer spends on average within a single transaction. The formula to calculate AOV is quite straightforward:

AOV Formula:

[ \text{AOV} = \frac{\text{Total Revenue}}{\text{Total Number of Orders}} ]

For example, if your store has generated $3,000 in total revenue over 150 orders, your average order value would be:

[ AOV = \frac{3000}{150} = 20 ]

This means that, on average, customers spend $20 with each transaction made in your store.

Understanding AOV provides insights into customer purchasing behaviors, assists in pricing strategy, and guides marketing efforts. By tracking AOV over time, you can make informed decisions that impact your business growth.

A Better Way to Think About Average Order Value

While understanding AOV is essential, it’s crucial to approach it from a broader perspective. As Taylor Holiday, co-founder of the marketing agency Common Thread Collective, mentions, relying solely on the average can lead to skewed interpretations of data. Instead, we should also consider other measures of central tendency: mean, median, and mode.

1. Mean: Traditional average order value.
2. Median: The middle value of all orders, offering a more balanced viewpoint when there are outliers.
3. Mode: The most frequently occurring order value, providing insights into typical customer behavior.

This approach enables Shopify merchants to target not only their average but also their modal order values effectively, which can influence upselling strategies and promotional tactics.

Example Analysis

Let’s take our previous example of the Shopify store that generates $3,000 over 150 orders. If the modal order value is $15, businesses can understand that many customers frequently buy multiple items together, while a few high-ticket items skew the average order value higher. By focusing on the modal order of $15, merchants can create upsell strategies to encourage customers to shift their purchases to $20 or more.

By keeping a dynamic approach and not solely focusing on one number, we can draw a more comprehensive understanding of customer purchasing behavior and tailor our strategies accordingly.

Setting Up Your Shopify Store for AOV Calculation

Integrating Google Analytics with Shopify

For effective AOV tracking, we recommend integrating Google Analytics with your Shopify store. This setup allows you to monitor various metrics, including AOV, to make data-informed decisions.

Steps to Integrate:

1. Log in to your Google Analytics account and create a property for your Shopify store, generating a unique tracking ID.
2. In the Shopify admin panel, navigate to Settings > Online Store > Preferences and enter your Google Analytics Tracking ID.

Once the integration is complete, you gain visibility into customer behaviors, product performance, and conversion rates that directly impact your AOV.

Utilizing Shopify Reports

Shopify Reports further enhances your analytics capabilities, allowing for customizable reporting on sales data and AOV. The Analytics section of your Shopify admin provides access to a variety of reports that can help measure your AOV and optimize your strategies over time.

To view your AOV in Shopify:

1. Open your Shopify admin panel and navigate to Analytics > Reports.
2. Select the desired time frame and view your overall AOV.

Manual Calculation: Step-by-Step Guide

If you prefer manual calculation, here's how to do it:

1. Log into your Shopify panel and select the appropriate time frame for your analysis.
2. Note your total revenue.
3. Count the total number of orders placed within that period.
4. Use the formula mentioned earlier to calculate AOV.

Maintaining this analysis will enable you to track important trends over time, making it easier to apply strategic changes in your business.

Analyzing Your AOV Data

Identifying Trends and Patterns

Once you've set up accurate measurements of your AOV, the next step involves identifying trends and patterns. For example, look into daily, weekly, or seasonal changes in your average order value. Use this data to tailor your marketing efforts and promotional activities. Are there certain times of the year when customers tend to spend more? Knowing this can help you make informed decisions about inventory and marketing campaigns.

Comparing AOV to Industry Benchmarks

Understanding how your AOV compares with industry benchmarks can provide critical context for evaluating your performance. According to recent data, global annual AOVs averaged $133, varying across sectors. Thus, evaluating how you measure against these figures can highlight potential areas for improvement in your pricing, marketing strategy, or product offerings.

Subsequently, if you find your AOV is lower than industry averages, targeted strategies to increase it become essential in driving revenue growth without needing additional customer acquisition.

Five Strategies to Increase Average Order Value

Increasing average order value is not only about raising prices; it requires strategic thinking and a thoughtful approach to customer engagement. Here are five effective strategies to help you elevate your AOV:

1. Create an Order Minimum for Free Shipping

One of the most effective tactics for increasing AOV is offering free shipping over a specific spending threshold. According to surveys, many consumers expect free shipping, leading them to increase their cart value to meet these thresholds.

Example: If your current AOV is $20, consider setting free shipping for orders over $30. By doing so, customers may add extra items to their carts to qualify for free shipping, thus raising your AOV. We recommend leveraging Tevello’s features to seamlessly implement such incentives within your Shopify stores.

2. Bundle Products or Create Packages

Product bundling is a highly regarded technique for boosting AOV. We can create attractive packages of complementary products that customers often purchase together. This bundling not only provides value to the customer but also encourages them to buy more.

Example: A Shopify store selling beauty products can bundle a facial cleanser, toner, and moisturizer at a slight discount when purchased as a set, enticing customers towards a larger order value.

3. Implement Upselling and Cross-Selling

Upselling and cross-selling are tried-and-true methods for enhancing AOV. This strategy can be as simple as recommending complementary items right at the point of sale or during the checkout process.

Example: If a customer is buying a pair of shoes, suggesting laces or shoe cleaner as a complementary purchase can add value to their experience and increase your store's revenue.

There are several apps available in the Shopify App Store that can help implement upselling and cross-selling strategies effectively.

4. Set Up a Customer Loyalty Program

Customer loyalty programs not only enhance customer retention but can help increase average order values. By offering points or rewards for purchases, you encourage repeat buyers—and those repeat purchases will likely be at a higher AOV.

Example: Establish a points system where customers earn rewards for every dollar spent, which can later be redeemed for discounts on future purchases.

5. Offer Free Gifts with Minimum Purchases

Free gifts could serve as an additional incentive for customers to spend more to reach the set threshold. This tactic can foster a positive perception of your brand while also driving up order values.

Example: A bag retailer could offer a free tote for purchases over $75.

By applying these strategies, we can help improve both average order value and overall customer experience. Remember, with Tevello, we can effectively integrate these features into our course offerings, community building, and digital products—all within our Shopify store.

FAQ Section

What is the importance of tracking AOV in my Shopify store?

Tracking AOV helps you identify customer spending behaviors and optimize pricing strategies, which allows you to make informed decisions for marketing campaigns and product offerings.

How can I calculate AOV manually?

You can calculate AOV manually by dividing total revenue generated over a specific time period by the total number of orders during that period.

What AOV should I aim for in my Shopify store?

A "good" AOV can vary widely by industry and product type, but understanding your particular sector's benchmarks can help you set realistic goals for improvements.

How can Tevello help increase my Shopify store's AOV?

Tevello's all-in-one solution allows you to create online courses and digital products, nurture vibrant communities, and implement strategies efficiently to increase your AOV—all from your Shopify ecosystem.

Conclusion

Understanding how to find and effectively improve your average order value is vital for successful e-commerce strategy. With key metrics in hand and actionable strategies set in place, we as Shopify merchants can propel our businesses forward, enhancing revenue and customer relationships.

At Tevello, our mission is to empower you to unlock new revenue streams and cultivate valuable connections with your audience. By starting your 14-day free trial of Tevello today, you can explore our robust features tailored for course creation, community building, and selling digital products directly from your Shopify store.

Start your 14-day free trial of Tevello today. Together, let’s elevate your average order value and your entire e-commerce experience!