What is the average purchase value? This is a question that many business owners, corporate companies, and Saas companies ask themselves. In order to answer this question, it’s important to understand what the average purchase value is and what factors influence it. In this blog post, we’ll discuss what the average purchase value is and provide you with tips on how to increase it. We hope that you find this information helpful!
What Is The Average Purchase Value?
Average Purchase Value is the average amount spent on your products or services. This value can be calculated based on the overall contract or its periodic value (annually, quarterly, monthly, or weekly). It provides insight into the amount spent on your products over a specific period.
Why Is It Important For Startups To Track Average Purchase Value Metric?
Startups need to track the Average Purchase Value (APV) metric to determine the average amount of money customers spend per purchase. This metric provides valuable insight into your customers’ lifetime value (CLV), which can help you identify key trends that may indicate whether or not your business is headed in the right direction. If you want to know more about customer lifetime value, here’s the link.
Tracking APV over time can help you understand how to maximize your customer values and properly budget and plan for future growth. Tracking APV can help you identify opportunities to increase customer engagement and loyalty, allowing you to make more informed decisions regarding customer acquisition and retention. With this data, you can better serve your customers’ needs, helping to create a positive relationship between your business and them.
With a better understanding of your customer’s needs, you can develop strategies to reach them more effectively with the right messages and offers, further increasing customer loyalty and promoting long-term growth.
How Do You Calculate The Average Purchase Value?
In order to calculate the Average Purchase Value, businesses need to add up the total value of orders over a defined period and then divide it by the number of orders in that period. This can be done manually or with the help of analytics software. Once the Average Purchase Value is calculated, it can be used with other metrics to gain valuable insights into customer behaviour and overall business performance.
Total ($) Value of Orders / (#) of Orders over a Defined Period = ($) Average Purchase Value
By understanding the Average Purchase Value, businesses can gain valuable insights into their customer base and make more informed decisions about how to best market their products and services.
What Factors Affect Average Purchase Value?
There are many factors that affect the average purchase value of a business. Some include:
Product type:
The cost of the product, as well as how it is marketed to customers, can greatly influence how much they are willing to pay. If a business sells high-end items with an exclusive audience, then its average purchase value will likely be higher than if they were selling more affordable products.
Seasonality:
The seasonality of the products a business sells can also have an effect on their average purchase value. For example, during the holiday shopping season, businesses might offer discounts to customers and this could cause them to make larger purchases than usual.
Location:
Where a business is located can also influence its average purchase value. If a business is located in an area with a higher cost of living, then customers may be more willing to pay more for their products.
Target market:
The age, gender, income level, and other demographics of the target market can also affect the average purchase value. If a business targets older consumers with higher disposable incomes, they are likely to have a higher average purchase value than if they were targeting younger consumers with lower incomes.
Competition:
The level of competition in the market can also affect the average purchase value. If there are other businesses offering similar products at lower prices, then customers may be more likely to shop around and find the best deal, thus reducing the overall average purchase value.
Ultimately, the average purchase value of a business is determined by a combination of all these factors and more. It’s important for businesses to understand how each factor impacts their customer’s buying decisions in order to maximize their profits. By doing so, they can ensure that their products are priced correctly and that customers receive the best possible value for their money.
What Are The Effects Of Average Purchase Value On A Startup?
Average purchase value is a key metric for startups and can have huge implications on business success.
A higher average purchase value means that customers are spending more money per transaction, which increases the overall revenue of the company.
On the other hand, a lower average purchase value could indicate that customers are not finding enough value in the products or services offered by the startup, which could lead to decreased customer loyalty and revenues. In addition, a lower average purchase value can also indicate that the startup is not targeting the right customer segments or pricing their products correctly.
Ultimately, understanding and optimizing average purchase value should be one of the main goals of startups as it directly affects their revenues.
Industry Benchmarks and Examples
The Average Purchase Value for a business can vary widely, depending on your model. According to research from B2B Base One and B2B Marketing, the median purchase size was £732k – however, excluding some of the more extreme outliers leads to a more realistic average value of £69k. The specifics of what you should be aiming for will depend on factors such as the size of your target companies, and the cost of sale. Ultimately, you are best placed to decide what Average Purchase Value is necessary for your business to be profitable.
| Type of Business/Purchase | Benchmark (estimated) Purchase Value |
| UK Average B2B Media | £69k |
| US B2C Online E-commerce | $78 |
Strategies To Increase The Average Purchase Value
Offer discounts or promotions on higher-value items:
Encourage customers to purchase more by offering discounts or promotions on high-value items in your store, such as bundles of products or upgrades. This will encourage customers to purchase a more expensive version of the item, resulting in an increase in average purchase value.
Implement upselling tactics:
Upselling is a sales technique where you encourage customers to purchase more expensive versions of the product they’re already looking at. This could be in the form of an upgrade or add-on, such as adding a warranty or additional accessories. By emphasizing the benefits of these higher-value items, customers will be more likely to make a more expensive purchase.
Create packages:
Bundling products together is a great way to increase the value of an order and encourage customers to buy more. You can create product packages that are tailored for specific customer needs or interests, or offers them at discounted prices. This will entice customers to add more items to their cart, thereby increasing the average purchase value.
Offer free shipping:
Incentivizing customers to spend more by offering free shipping on orders over a certain amount is an effective way to increase the average purchase value. This helps to encourage customers to add more items to their cart as they have nothing extra to pay once they reach a certain threshold.
Promote add-ons:
Customers are often overwhelmed with choices when shopping online and may not think of purchasing an accessory or add-on to their product. Promoting these items next to the item they’re looking at is a great way to increase the average purchase value. You can also offer discounts on these accessories to further entice customers to make the purchase.
Adopt a loyalty program:
Setting up a loyalty program for your store is an effective way to increase customer spending and average purchase value over time. By offering rewards points, discounts or free products when customers reach certain thresholds, they will be more likely to shop at your store in order to get the benefits of the loyalty program.
By utilizing these strategies, you can increase your store’s average purchase value and make it easier for customers to buy more items. In the long run, this will not only help drive profits but also boost customer retention and engagement with your brand.
Conclusion
Use purchase value as a metric to see where you can increase efforts and make more sales. You now know what the average purchase value is and how it’s calculated. Leverage this information to improve your marketing campaigns and business strategy. As always, we’re here to help you grow your business. If you need assistance calculating your purchase value or want help increasing it, contact us today. We’ll work with you to create a custom plan that boosts your bottom line.