#14 The Secret of AOV Metric
Welcome to our series, OMG: One Metric for Growth, where we dive deep into real-life examples of how one metric helped enterprises to grow their business. Today's Metric for Growth is: “The Secret of AOV Metric” 📈
Why is AOV Metric critical in Startup and How can it help you?
AOV stands for Average Order Value. The Simple formula is the total value of sales divided by number of invoices in each period. Through AOV and frequency, it becomes easy to calculate the Lifetime Value (LTV) the customer will give us. With these data, one can calculate the total market size, growth and potential of business to capture a larger market share.
In traditional businesses, AOV also indicates the proper utilization of existing resources. We need to train our sales team to periodically look into this metric. Many times, we look for external factors for growth, but we miss opportunities that lie within our control.
What is the impact of AOV metric on Business Performance?
There are 7 major advantages of tracking this metric.
- Proactive Approach – Sometimes, businesses rely too much on incoming calls. Through training, we can guide the sales team to understand customers' needs and accordingly suggest relevant products.
- Cross Sell – Every industry has combo products. While taking order if we can focus on offering related products, it can increase the AOV.
- Up-Sell – When we suggest the customers to look into the latest or upgraded item, there are chances that in many customers may opt for higher-value products.
- Trend – Tracking the trend of AOV for Salespersons, Products, and Customers will unlock insights that can help you take corrective action.
- No Additional Marketing Spend – Tracking and improving this metric can help us increase revenue and profit without any additional marketing spend.
- Optimize Resources – Without increasing the sales team, billing and accounts team, one can utilize the resources to optimum level.
- Increase the product depth – Adding just one extra SKU per invoice seems like it will have no significant impact. But it does just the opposite. It increases the AOV and improves the spread of revenue across SKUs along with faster turnaround time.
Maximizing your Average Order Value (AOV) is a powerful strategy for increasing revenue and optimizing resource use. By focusing on proactive sales approaches, cross-selling, upselling, and trend analysis, you can enhance your sales process and achieve significant growth without additional marketing spend. Implementing customer loyalty programs and personalized recommendations further strengthens this strategy, increasing client satisfaction and business success.
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Customer retention is the key
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What are the most relevant factors to consider?
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Don’t overspend on growth marketing without good retention rates
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What’s the ideal customer retention rate?
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Next steps to increase your customer retention
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