What Is Average Order Value (AOV)? Formula and How to Raise It

The AOV formula

AOV = total revenue ÷ number of orders, measured over a chosen period. Note it counts orders, not customers — one customer placing three orders in the month counts as three. That makes AOV a per-transaction figure, distinct from what a customer spends over their whole relationship, which is captured by lifetime value.

Track AOV as a trend rather than a single snapshot, and watch it alongside conversion rate and order volume. A tactic that lifts AOV but scares away buyers — an aggressive minimum, say — can lower total revenue even as the average rises.

Why AOV drives profitability

Many order costs are fixed per order — payment fees, picking, packing and shipping. A larger order spreads those costs over more revenue, so a higher AOV often lifts profit faster than it lifts sales. Raising AOV also improves the return on your acquisition spend: the same CAC now buys a bigger first order.

AOV feeds lifetime value too. In the LTV formula, average order value is one of the three multipliers, so a durable rise in AOV directly raises LTV and widens the LTV:CAC ratio that decides how much you can afford to spend on growth.

How to raise AOV

The most reliable levers are cross-selling complementary items, bundling products at a small discount, and setting a free-shipping threshold just above your current AOV so buyers add one more item to qualify. Upselling to a larger or premium version, and volume discounts that reward buying more, also nudge the average up.

Whatever you try, measure the effect on total profit, not just the average. A bundle that lifts AOV but is sold at a heavy discount can shrink margin; a threshold set too high can cut conversion. Test one change at a time and keep the ones that grow profit.

Frequently asked questions

What is a good average order value?

There is no universal figure — it depends entirely on your industry and price points. A grocery store and a furniture retailer have wildly different AOVs. The useful comparison is against your own history and your direct competitors, and the goal is a steady upward trend that also protects margin.

What is the difference between AOV and LTV?

AOV measures one transaction — how much is spent per order. LTV measures the whole relationship — the total value of a customer across every order over time. AOV is actually one of the inputs to LTV, alongside purchase frequency and lifespan.

Does a free-shipping threshold really raise AOV?

Often yes, when the threshold sits a little above your current AOV. Shoppers add an item to avoid paying shipping, which nudges the average up. Set it too high and buyers abandon instead; the trick is a threshold that feels reachable with one more product.

Should I focus on AOV or on getting more customers?

Both matter, but raising AOV is usually cheaper. New customers cost acquisition spend, whereas lifting AOV monetizes traffic you already have. A sensible approach is to squeeze AOV and conversion first, then scale acquisition once each order is more profitable.