Why it matters
The ad spend it takes to bring a buyer to checkout doesn't grow with the size of their basket. So every extra rupee in the order improves the economics of a sale you've already paid for. AOV is also one of the four drivers of ROAS, alongside click-through rate, conversion rate and CPM — and often the easiest one to move with an offer rather than new ads.
How to calculate it
Divide revenue by orders for the same period. Keep the revenue definition consistent — with or without GST and shipping charges — or your break-even maths will drift. In Ads Manager, dividing purchase conversion value by purchases gives you the AOV of ad-attributed orders.
Worked example: how AOV moves break-even ROAS
Example: an Ayurvedic hair-oil brand compares a single bottle with a three-bottle bundle.
| Single bottle | 3-bottle bundle | |
|---|---|---|
| Price | ₹599 | ₹1,499 |
| Product cost | ₹150 | ₹450 |
| Shipping | ₹80 | ₹100 |
| Packaging and fees | ₹40 | ₹60 |
| Margin per order | ₹329 | ₹889 |
| Break-even ROAS | 1.82 | 1.69 |
| Maximum CPA | ₹329 | ₹889 |
Even with a discount built in (₹1,499 rather than ₹1,797 for three), break-even ROAS falls, because shipping and packaging are spread across three bottles. More importantly, the brand can now pay up to ₹889 to win an order instead of ₹329. Run your own numbers in the break-even ROAS calculator.
What's a good AOV?
The one that makes your unit economics work. Compare AOV with your cost per purchase: if CPA is close to your margin at today's AOV, raising AOV is often the fastest route to profit. Track it by campaign as well — some angles attract bigger baskets than others.
How to improve it
- Bundles that match how people use the product, such as a 30-day or 90-day supply, or a routine kit.
- Free-shipping thresholds set a little above your current AOV.
- Quantity breaks, such as "buy 2, save 10%".
- Cart and post-purchase add-ons that complement the main product.
- Ads that lead with the bundle, when the bundle converts well.
Common mistakes
- Celebrating an AOV rise that comes from one or two unusually large orders.
- Discounting bundles so deeply that margin per order shrinks.
- Ignoring customer lifetime value: a small first order from someone who reorders monthly can beat a big one-off basket.
Frequently asked questions
How do you calculate average order value?
Divide total revenue by the number of orders in the same period. For example, ₹2,40,000 from 200 orders is an AOV of ₹1,200. Keep the revenue definition consistent — with or without tax and shipping — across all your reports.
How does AOV affect ROAS?
AOV is one of the four drivers of ROAS, along with click-through rate, conversion rate and CPM. If everything else stays the same, a 20% higher AOV gives a 20% higher ROAS. It also raises the cost per purchase you can afford, because each order carries more margin.
What is the fastest way to increase AOV?
Bundles and free-shipping thresholds are often the quickest wins, because they change the offer rather than the ads. Set the threshold a little above your current AOV and build bundles around how people actually use the product. Test them against the single-item offer and compare profit per visitor.
