Average order value (AOV)
Average order value is the average amount a customer pays per order, calculated by dividing your total revenue by the number of orders in the same period. Raising it by offering a bundle or add-on increases your profit from the same ad spend, because the cost to acquire an order doesn't change much when the order itself gets bigger.
Also calledAOVaverage order amountaverage cart valueaverage basket value
The formula
Average order value = Revenue from delivered orders ÷ Number of delivered orders
- Revenue from delivered orders: the total amount collected from customers after discounts are deducted but before product cost is deducted.
- Number of delivered orders: orders that arrived and were paid, not a mix with rejections at the door that would artificially inflate the average.
Worked example
Adding a "second item" offer in Saudi Arabia
- 1Before the offer: 50 delivered orders with revenue 12,000 SAR, or 12,000 ÷ 50 = 240 SAR per order.
- 2Added a second-item offer at 120 SAR inside the order form; 20 out of 50 customers accepted.
- 3New revenue: 12,000 + (20 × 120) = 14,400 SAR, or 14,400 ÷ 50 = 288 SAR per order.
- 4Additional cost: 20 × 60 = 1,200 SAR for the extra units.
- 5Additional profit: 2,400 − 1,200 = 1,200 SAR.
Takeaway: Raising the average from 240 to 288 SAR added 1,200 SAR in profit from the same number of orders and the same ad budget.
What it means in practice
Average order value is the easiest lever in cash-on-delivery. The extra value doesn't raise ad cost or confirmation calls or delivery cost, so everything above the cost of the extra item goes straight to profit.
Calculate your average on delivered orders only. Large orders are most likely to be rejected at the door in markets like Algeria and Morocco, so an average calculated from confirmed orders overstates what you'll actually collect.
Practical ways to raise it: a two-item bundle at a better per-item price, a complementary product at a low price inside the same form, and free shipping above a threshold just higher than your current average.
Watch your average and delivery rate together. Raising the average by raising price alone may lower your delivery rate, leaving you with less actual cash even though the number looks better on paper.
Common mistakes
- Calculating your average from confirmed orders in a market where customers reject part of their shipments, showing an average that doesn't match what you actually collect.
- Raising your average with low-margin add-ons that pump the number while cutting profit per order.
- Reading a month that included a deep discount campaign, which hides the decline in value during normal days.
- Bundling items that double your parcel weight without factoring in the extra shipping cost.
Questions and answers
How do I raise average order value in cash-on-delivery?
Add a bundle option inside the order form itself: two items at a better per-item price, or a complementary product at a small price. The customer decides once before shipping, so no extra payment step is needed. State the total clearly to avoid surprise and rejection at the door.
Does raising price raise average order value?
Yes mathematically, but the net effect depends on conversion. Raise price 20% and lose 25% conversion and you have less revenue than before. Test the new price on a parallel campaign with equal budget and compare the delivered revenue, not order count.
What's the link between average order value and cost per order?
Your average sets the ceiling for what cost per order you can absorb. If your average is 240 SAR and your margin is 160 SAR, any cost per order above 160 is a loss. Raising your average raises that ceiling and opens up audience segments you couldn't profitably reach before.
Do I calculate the average including shipping fees?
Most accurate to calculate it on what the customer actually pays at the door, including shipping they bear. Fix this definition and stick with it, because switching between two definitions makes month-to-month comparison worthless.