tl;dr
Your AOV is a key driver for profitability but your AOV actually doesn't tell you what your average order looks like. To do that and draw the right conclusions, this report shows you:
Different types of average (mean, median, mode).
Distribution over orders, revenue and profits in different value buckets.
Development of your AOV over time and customer lifetime.
How does it work:
The Average Order Value is not a true representation of the average value of your orders. This reports allows you to truly understand what order value distribution is by looking at different statistical methods and breaking it down into intervals.The report also shows you what value intervals are driving revenue and profit as well as how order values are developing over time.
Let's get started:
Before diving into the numbers, there are a few controls on top.
Customer Type:
Here you can select if you want the report to be based on:
All Customer
New Customers
Repeat Customers
Some brands have significant difference in order value for different customer types (this report will also tell you if that's the case for you). And you might want to design different initiatives to drive up order value for both customer types. Using this filter, you can analyse both customer group separately.
Value Interval:
In this reports, we sometimes group orders based on their value. Here you can select the size of those intervals. We create 12 intervals with the 10th being open end. So if you select 25 as an interval we will group your orders into:
0-24,99
25-49,99
50-74,99
...
300+
Revenue Display
When revenue is shown in the report below do you want that number to be shown as
Total (Default)
Divided by the number of orders
Average Order Value
What revenue figure do you want order value to be based on
Net (Revenue) - so excluding discounts, taxes and returns
Gross (Revenue) - so including discounts, taxes and returns
Gross (Revenue) excl. Shipping - so the price the customer pays before any extra shipping charges
What can I analyse:
On top you can see three cards containing a different statistical metric for average. None of them is perfect, but together they give a good understanding.
Usually Mean > Median > Mode but I could be different for you, especially if you are selling high priced items and have a few accessories for you core product that are much cheaper.
Breaking into down into different order intervals
Based on the value interval you set above, the chart and table below are generated.
They show you how many (what percentage) of your
Revenue (based on you Average Order Value selection)
Contribution Margin 2 (profit)
is generated within each value interval and what is driving increased order value:
Units per Order
Value per Unit
Refund RateYou will usually see that more than 50% of your orders are on a value interval that is below your mean. Plus that the distribution of revenue is less skewed than the distribution of orders because the reduced amount of orders is being partially compensated for by a higher value.
Development of AOV over time
The next two chart and table combination follow the same layout and show you the order value development over time.
Based on Calendar Month
Based on Order Count
The chart will always show you the development of both mode and median as well as the standard deviation. The table will also you show:
Mode
Units per Order
Value per Unit
What can I use this for:
Setting the Minimum Order Value to maximize profit
People don't like paying for delivery. So setting your minimum order value for free delivery is a crucial decision. The lower it is the higher your conversion will be. But it will also drive down the average order value which is a key component of your profitability.
So you will need to sacrifice something, one way or another.
This report will enable you to identify strategic cut off points that give you the best risk/reward ratio.
Is there a certain value (maybe your mode) that is still pretty low but has a high share of orders? Setting your minimum order value slightly above that might be a good idea so that people are incetivized to order more or the low margin of these orders gets subsidised by a delivery fee.
Measure impact of bundling or upselling strategies
Building on the point above, you decide to create bundles to get people over the minimum order threshold. Or you start implementing some upselling tactics on your cart page.
The AOV already will tell you whether or not there is an impact overall, but it cannot tell you whether you are getting the specific type of change that you aimed for.
This report does just that.
Measure usage intensity over time
Together with the Time Lag report, you can use the AOV Development by order count in order to better understand how your customers' usage of your product is developing over time.
Are they buying more and therefore need longer to repurchase?
Is value per reorder date actually accelerating? Great, customer are more and more including your product in their routine.
When is usage starting to slow down? That will be a critical point in your customer's lifecycle and taking the right actions here can massively increase overall customer value.
Remind them of why they started using it in the first place.
Send them other flavours so that they can try something new.
....
Options are endless and like always depending on your product, customers and brand.