What is average order value?

If you took 120 orders worth $960,000 last year, your average order value is $8,000. It is a simple number, and it tells you a lot about how your business sells.

Why average order value matters

Revenue can grow in two ways: more orders or bigger orders. AOV shows you the second. If sales are flat but AOV is rising, customers are buying more per order. If it is falling, you may be giving discounts or shipping smaller lots.

AOV also affects cost. Every order has fixed costs, such as picking, packing, paperwork and freight. A larger order spreads those costs over more revenue, which is one reason sellers set a minimum order quantity.

How to calculate average order value

Pick a period and a group of orders, then divide:

AOV = total revenue ÷ number of orders

Use the same period for both figures. Count orders, not invoices, or one order shipped in two parts will be counted twice.

Look at segments, not just the total

One company-wide number hides a lot. A distributor selling to contractors and to resellers will see two very different AOVs. Work out AOV per customer segment, per product family and per sales rep. That is where it becomes useful.

AOV is also one input to customer lifetime value, which is AOV × orders per year × years as a customer × gross margin.

An example from product sales

A packaging manufacturer had 120 orders last year with total revenue of $960,000.

• AOV: $960,000 ÷ 120 = $8,000.

The sales team then splits it. Contract buyers placed 80 orders worth $720,000, an AOV of $9,000. Walk-in buyers placed 40 orders worth $240,000, an AOV of $6,000. The plain average of $8,000 described neither group.

How to raise average order value

• Quote larger pack sizes or full pallets with a better unit price.
• Suggest related products on the same order, which is cross-selling.
• Use a customer price list with price breaks that reward bigger orders.
• Set a minimum order quantity where small orders lose money.

A higher AOV is not always better. Large discounts to push order size can cost more in margin than they bring in revenue, so check the gross margin too.

Related terms

• Customer lifetime value: what a customer is worth over the years.
• Cross-selling: a way to add products to an order.
• MOQ: the floor under order size.
• Sales order: the record of each order you count.

How PromptLab handles it

PromptLab keeps sales orders as their own records, linked to the account, and builds quotes from products and customer price lists. Reports and dashboards on pipeline and revenue, and the report builder, let you look at order revenue by account or product. Ask AI can answer plain questions about sales orders and accounts.

Frequently asked questions

How do you calculate average order value?

Divide total revenue by the number of orders in the same period. If 50 orders brought in $400,000, the average order value is $8,000.

What is the difference between AOV and average deal value?

AOV is per order and is often used for repeat purchases. Average deal value is per won deal and is used for pipeline reporting. A single deal may lead to several orders.

Is a higher average order value always better?

Not always. If you reach it by giving large discounts, you may earn less profit. Check gross margin alongside AOV.

Should I include freight and tax in AOV?

Pick one rule and keep to it. Many teams use the value of the goods only, so that AOV measures what the product sells for. Your finance team can set the standard.

How often should I measure AOV?

Monthly or quarterly works for most teams. Compare each period with the last, and split it by segment so that a change in mix does not mislead you.