- Do you want to calculate the average order value
for your E-commerce store?
Well, I'm gonna show you exactly how to calculate it
in this video. Let's go
(upbeat music)
Hey guys, my name is Sam
and I love helping E-commerce stores grow remotely.
In this video, we're gonna go through step-by-step
how to calculate the average order value
for your E-commerce store.
We're gonna be using Google Sheets
for this is gonna be free, really easy to do.
I'm gonna jump into my computer right now
and take you through it, let's go.
Okay guys, so we're now in our Shopify dashboard
and I've gone to the orders section here
so you can see we have all these past orders.
What we're gonna do is just go to export,
pop up this window, click all orders
and then just put it in plain CSV file, export orders.
Once that's done it's then going to send an email
to your email address with the export file
or a link to download it.
Once it's there, let's open it up.
So here we have the email now,
it's been emailed to me here and it has the order export.
Let's open that.
That's going to then open link,
download the CSV file down here.
I'll move my big face.
Open up that file.
And then what we're gonna do is select the whole file,
it's opened up in Excel
but depending on whatever spreadsheet program you have,
you can also import it directly into Google Sheets.
I'm gonna export, copy of that, sorry.
So copy and then I'm gonna paste here
with just values.
So just paste straight into here.
Boom. Okay, cool.
So now that we have that information there
you can always just click this and filter it.
And that then allows you to sort this data
depending on the order number or anything like that.
But what we're gonna do is just open up a new sheet,
have a new cell, average order value,
and I'm just going to do that.
And then the formula we're going to use
to calculate the average order value,
you just average, and then in brackets,
and then we can then go and select
which cells we're going to use
so go back to the original
and then we're gonna go over here to the total
and select that whole column.
Enter.
Okay, there we have that changed to dollars.
Our average order value for this whole store
is $669.30.
That's it.
And here's the thing.
That's for the whole life of the store,
if you wanna work it out for different products,
maybe for different years or months,
all you need to do is just separate out the values
that you want here, the different orders,
put them into a new sheet
and run that same formula on that column for total
for those orders that are in that sheet.
Okay, that's everything.
Okay guys, now that we've calculated our average order value
for our E-com store,
if you found this video helpful so far
please leave a thumbs up
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Now I'm going to dive deeper
into the average order value metric
and how you can improve this
and see more success for your E-commerce store.
Okay, so I've just calculated this for our store
but what does it even mean?
What does average order value mean?
Well, basically it's really simple.
It just means how much money on average
does a first-time customer or any customer
spend on your store when they just buy one time.
Now, why is this important
and why do we wanna increase this?
So this really tells us a lot
about the value that our store provides
and maybe your products are priced at $30
but the average order value is 35, 40 or $50.
This really shows you that people can buy multiple products.
And here's the big thing, you're gonna spend
say 10, $15 or whatever it is to acquire each customer,
with your paid ads, maybe with organic
but you still have to get back links
and all that sort of stuff,
but you have to pay to acquire these customers
in some way or another.
Well, if you can increase the average order value
then even though you pay $10 to acquire that $30 customer
if you can increase the average order value to $40,
you're still paying $10,
but suddenly, boom, you get an extra $10 in revenue
which depending on your profit margin,
that could be an extra three to $4 in profit per order.
And that's over all the orders.
It's, absolutely fantastic.
And so this is why you can really help grow your store,
not by getting more customers,
but just by increasing the amount
that each of those customers does spend.
It can be really efficient.
It's very similar to say, increasing your conversion rate.
You're still paying for that traffic anyway.
But if you can increase your conversion rate
just a little bit, that's gonna pay off in the long run
because suddenly it has this ripple effect where
all these orders are affected
and your store is gonna generate more sales in the long run.
A good way to think about it
is that you're already spending this money to get them
in your store in the first place.
You might as well spend that energy
to try and get them to spend more once they're there.
Now, how can you increase the average order value
of your store?
Here are my tips.
The first one is have a free shipping threshold.
Often, I recommend just having free shipping overall anyway
because many customers expect that,
but say you're struggling
to get your average order value up.
What you can do is say, hey, free shipping
on all orders over $100.
Maybe your average order value is $80
and you wanna increase that
well, pick a number above that, maybe $100,
maybe 120, that's where you wanna really push
that average order value and say free shipping
over that amount.
Now what's really important here is to do the calculations,
do the math yourself
and make sure that this is actually profitable.
Make sure that if you add free shipping, you know,
you're covering that in the actual pricing
and the value of your products.
Another tip is giving your customers a discount
if they spend over a certain amount
or they buy a certain number of products.
Say they buy a second product, they get 20%
off that second product or 50%, whatever works for you.
What you can also do is say, okay, if you spend over $200,
you get a discount of 10%.
Now, even though you're giving them a 10% discount
and that cuts into your profit,
it actually works out better in the long run
because you already spent that money
to acquire that customer
and you're just increasing the average revenue
that they're generating for your store.
Another great one is to offer gift cards as well.
So say they spend over $200.
You give them a $50 gift card
that they can use themselves or give to someone else.
This is also great for increasing
that average customer lifetime value
of those customers, because then they have to come back
and use that, they can't just go
and use that on a different store.
It's a gift card for your store.
So they're gonna come back
and depending on what value that is,
they're gonna be forced to actually spend more money
on top of that.
So that can be a really, really great thing
as well as maybe they give it to a friend
or family member and suddenly, boom,
you've just got another person
in your funnel that could be interested
in your store that you can have there
adding to your revenue.
Another great thing that's a bit different
is making sure you have upsells and cross sells.
Cross sells, these are similar products that can also solve
that same customer's need, but they might be more expensive.
And you can do this by having related products, maybe in,
underneath, on the product page or in the checkout
where someone might say,
oh, this product is a bit more expensive
but it's actually way better for what I'm looking for.
And so you can get them in there from that cheap product
maybe you're on your paid ads
but then they actually convert
on a much more expensive product.
An upsell is where you can sell other items on top,
like imagine going to McDonald's and buying a burger
and they say, would you like fries with that?
Well, in the same way on your checkout page, product page,
you can add a little thing that says,
hey you can also buy this product to complement the product,
maybe it's an accessory and they pay a little bit more
but then boom, they get an extra product
and it increases your overall customer value for that order.
It's fantastic.
Okay, another great tip you can do
is offer a free gift if someone spends
over a certain threshold.
So maybe you have a certain widget
or little gift on your store.
It might be a lot less valued than your other products
and maybe it's $20 and you're paying costs for that product,
selling it for cost.
But what you can do is put that on your store
as an extra free gift that someone gets
if they spend massively on the most expensive product
or they spend over a certain threshold.
And what you're doing here is you're giving someone
some sort of incentive to really spend more
and get that bigger premium product.
People love free things.
So this really incentivizes those bigger orders
and it doesn't cost you anything.
You just ship that out with that product there
and it works really well.
Okay, another important metric for your store
is the customer lifetime value.
This is closely related to the average order value,
but it's on a much longer timescale.
You're looking at how that person repeats
their purchase over time.
It's really, really important to calculate and where...
I've actually done a video on how to calculate this
and I'm gonna leave a link in the description
to this video.
I really recommend checking that out because I provide
a lot of great tips on how to actually increase
the revenue that you generate per customer.
And this is basically this video, but on steroids,
on a much bigger scale.
Now that's everything for today.
If you found this video useful, please, please
smash the like button here.
That really helps us keep making great content.
And if you wanna learn more about how to grow
your E-commerce store remotely,
just hit the subscribe button.
We're gonna be releasing a lot of great videos,
case studies, tutorials, even vlogs
about running your E-commerce store remotely
from anywhere in the world.
As always, if you also have any questions
just leave them in the comments below
and I'll answer them as soon as I can.
But for now, thanks so much for watching
and I'll see you next time.
Bye for now.
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