Average Order Value (AOV) is the average amount of money customers spend per in-app purchase. Importance This key performance indicator (KPI) enables app developers and user acquisition managers to understand pricing and identify different spend segments and which channels prove most effective in revenue generation. Maximizing AOV is a great way to increase revenues.
AOV provides a benchmark of customer behavior, offering valuable data to inform strategy and estimate growth. Combining Average Order Value with other key metrics such as stickiness gives UA managers an accurate view of what interests their app users and how to retain them. This metric directly relates to an app’s feasibility and sustainability, which essentially translates to its revenue generation capabilities.
Significance to Strategy Development
User acquisition managers use Average Order Value to examine pricing and marketing strategies. It shines a light on whether or not things such as more in-app purchase options are needed and at what price point, and if subscription period validity and pricing match the behavior and needs of the app’s audience.
The formula for calculating Average Order Value (AOV) is:
Average Order Value = Total Revenue ÷ Total Number of Orders
If three in-app purchase options are priced at $2, $3, and $4.5, and the AOV amounts to $3.17, it most likely means that purchases are mainly on the two cheaper products as the last is higher than the AOV. The lower-priced products are therefore making up the majority of sales. To increase AOV, the UA manager can run a campaign offering a $0.5 discount on the $4.5 product. Perhaps the resulting AOV data will indicate that by lowering the highest price point the app can increase AOV on a more permanent timescale.
More Essential Mobile App Marketing KPIs:
Learn about the essential Key Performance Indicators to measure and improve your mobile app marketing acquisition, engagement, retention, conversion and campaign performance. Check out more KPI metrics to measure your app success: