Product Repeat Average Order Value (Product Repeat AOV) is a key performance indicator (KPI) that focuses on the spending behavior of repeat customers on an ecommerce platform.
By evaluating Product Repeat AOV, ecommerce businesses can gain a deeper understanding of the buying habits of their loyal customer base. This metric not only helps refine marketing strategies that target repeat customers, but also helps improve customer loyalty programs.
Key Takeaways
- Definition: Product Repeat Average Order Value (Product Repeat AOV) is a key performance indicator (KPI) that focuses on the spending behavior of repeat customers on an ecommerce platform.
- Calculation: Product Repeat AOV is calculated by dividing the total revenue generated by repeat customers by the number of orders placed by repeat customers.
- Strategic Importance: Product Repeat AOV provides insight into the spending patterns of your most loyal customers, aids in inventory forecasting, helps optimize marketing spend, and helps build stronger relationships with repeat customers.
- Optimization Strategies: Product Repeat AOV can be improved by offering exclusive offers to repeat customers, implementing loyalty programs, providing personalized product recommendations, and introducing subscription models.
- Limitations: While valuable, Product Repeat AOV doesn’t reflect new customer behavior, can be influenced by promotions, doesn’t account for repurchase frequency, has limited insight into customer loyalty, can be influenced by external factors, isn’t directly tied to profit margins, can lead to potential overemphasis on repeat customers, and lacks depth without complementary metrics.
- Complementary Metrics: Product repeat AOV should be evaluated alongside metrics such as customer retention rate, customer lifetime value (CLV), and frequency of purchase for a comprehensive view of ecommerce performance.
Why does Product Repeat AOV matter for your business?
Understanding and leveraging Product Repeat AOV is invaluable for several reasons:
- Loyal Customer Insights: This metric gives insights into the spending patterns of your most loyal customers, helping tailor marketing strategies that resonate with them.
- Forecasting and Inventory Management: Knowing the average spending of repeat customers aids in inventory predictions, ensuring popular products are always in stock.
- Optimized Marketing Spend: By understanding the Product Repeat AOV, businesses can allocate resources more efficiently, ensuring marketing campaigns for repeat customers are cost-effective.
- Relationship Building: Recognizing and understanding the purchase patterns of repeat customers can enhance the relationship, leading to even more repeated purchases.
- Refinement of Offers: With insights into how much repeat customers typically spend, businesses can craft special offers or loyalty programs that further encourage repeat business.
How to calculate Product Repeat AOV ?
Explanation of the parts of the formula:
- Total revenue generated by repeat customers is the accumulated sum of all orders made by customers who have made more than one purchase on the ecommerce platform. It provides an insight into the earnings coming from customers who keep coming back.
- Number of orders made by repeat customers represents the total count of orders placed by these returning customers. This gives a measure of how frequently repeat customers are purchasing.
- Dividing the total revenue by the number of orders provides an average value, giving the business an idea of how much a repeat customer typically spends on each order.
In essence, the Product Repeat AOV is a measure of the average order value of repeat customers. A high Product Repeat AOV indicates that repeat customers are spending more on each purchase, which can be a testament to the business’s quality, trustworthiness, and customer loyalty.
Example Scenario
Imagine that in a certain month:
- Your ecommerce platform has a total revenue of $50,000 from repeat customers.
- These repeat customers made a total of 250 orders during this month.
Insert the numbers from the example scenario into the above formula:
- Product Repeat AOV = $50,000 / 250
- Product Repeat AOV = $200
This means that on average, repeat customers spent $200 per order on the ecommerce platform during this month.
Tips and recommendations for increasing Product Repeat AOV
To elevate Product Repeat AOV, consider the following strategies:
Exclusive offers for repeat customers
Catering to your repeat customers can significantly improve your AOV. One effective strategy is to offer exclusive deals or discounts specifically for these loyal customers. This can be a win-win situation where customers feel valued and are more likely to continue buying, and the company sees an increase in sales volume and profitability. Early access to sales or new product launches can also create a sense of exclusivity and privilege, further enhancing customer loyalty and encouraging repeat purchases.
Loyalty programs
Loyalty programs can be a highly effective tool for increasing repeat AOV. By implementing a points-based system, customers are incentivized to purchase more frequently or in larger quantities in order to accumulate points. These points can then be redeemed for discounts or special rewards, creating a cycle that encourages repeat purchases. This approach not only retains existing customers, but also improves their shopping experience, resulting in higher customer satisfaction.
Personalized recommendations
Using customer data to provide personalized product recommendations can significantly increase repeat purchases and AOV. By analyzing past shopping habits, preferences, and behaviors, companies can suggest products that the customer is likely to be interested in. This not only increases the likelihood of additional sales, but also makes the shopping experience more convenient and personalized for the customer, thereby increasing customer loyalty and repeat purchases.
Subscription models
Subscription models can be particularly effective for products that customers need to buy on a regular basis. By offering a subscription service, customers can enjoy the convenience of automatic, regular deliveries at a slightly reduced price. This ensures consistent sales for the business and can increase overall AOV as customers are more likely to make additional purchases on top of their regular subscription.
Feedback and reviews
Feedback and reviews play a key role in increasing AOV. Encouraging repeat customers to leave feedback or reviews about their purchases can provide valuable insights into what they value and what could be improved. Offering incentives such as discounts on future purchases for leaving a review can make customers feel valued and involved in improving the business. This can lead to increased customer loyalty, repeat purchases, and ultimately higher AOV.
Examples of use
Exclusive Membership Tiers
- Scenario: A DTC luxury handbag brand notices that repeat customers have a significantly higher AOV.
- Use Case Application: The brand introduces an exclusive “Platinum Member” tier for customers who have a high Product Repeat AOV, giving them early access to new collections and exclusive discounts.
Subscription Boxes
- Scenario: A DTC gourmet food store finds that repeat customers often buy a combination of certain gourmet products.
- Use Case Application: The store introduces a monthly gourmet subscription box, offering a curated selection of popular products at a discounted rate for subscribers.
Referral Programs
- Scenario: A DTC shoe brand finds that repeat customers often bring in new customers through word of mouth.
- Use Case Application: The brand introduces a referral program, offering discounts to repeat customers who refer new customers, thereby incentivizing them to make larger purchases.
Personalized Discounts
- Scenario: An online electronics store observes that repeat customers often wait for sales to make larger purchases.
- Use Case Application: The store sends personalized discount codes to these customers, encouraging them to make purchases outside of sale periods, thus increasing their AOV.
Feedback Incentives
- Scenario: An online bookstore finds that reviews from repeat customers tend to boost sales.
- Use Case Application: The bookstore offers discount vouchers to repeat customers who leave detailed reviews, thus motivating them to come back and purchase more.
Product Repeat AOV SMART goal example
Specific – Increase Product Repeat AOV by 15% (from an average of $200 to $230 per order).
Measurable – Product Repeat AOV will be monitored and compared monthly before and after the implementation of targeted marketing campaigns and loyalty programs.
Achievable – Yes, by implementing loyalty programs, offering personalized discounts, and focusing on feedback from repeat customers. Also by analyzing data to provide more tailored product recommendations and introducing exclusive offers for repeat customers.
Relevant – Yes. This goal aligns with the annual strategy to increase revenue from existing customers and build brand loyalty.
Timed – Within the next eight months.
Limitations of using Product Repeat AOV
While the Product Repeat Average Order Value (Product Repeat AOV) is a valuable metric for understanding the spending behavior of repeat customers, it has limitations when used as a sole determinant in ecommerce analysis:
- Doesn’t Reflect New Customer Behavior: Product Repeat AOV focuses solely on repeat customers and does not provide insights into the purchasing behavior of new customers, which is essential for growth and expansion.
- Can Be Influenced by Promotional Activities: Special deals or promotions targeted at repeat customers can temporarily inflate the Product Repeat AOV, which might not be indicative of regular spending behavior.
- Doesn’t Account for Frequency of Repurchases: A repeat customer might have a high AOV but might purchase only once or twice a year. The metric doesn’t provide insights into how often repeat customers are making purchases.
- Limited Insight into Customer Loyalty: A high Product Repeat AOV is beneficial, but it doesn’t necessarily imply customer loyalty. Other factors, such as satisfaction and product quality, play a role in customer retention.
- Subject to External Factors: Product Repeat AOV can be influenced by external factors like economic downturns or global events, affecting repeat customer spending.
- Not Directly Tied to Profit Margins: A high Product Repeat AOV doesn’t guarantee higher profit margins. If the cost of retaining customers or the cost of goods sold is high, profitability might still be compromised.
- Potential Overemphasis on Repeat Customers: While focusing on increasing Product Repeat AOV, businesses might neglect attracting new customers, which is crucial for long-term growth.
- Lacks Depth Without Complementary Metrics: Using Product Repeat AOV in isolation doesn’t offer a complete understanding of customer behavior. It should be combined with metrics like Customer Lifetime Value, Retention Rate, and others for a holistic view.
In conclusion, while Product Repeat AOV provides valuable insight into the spending habits of repeat customers, it should not be the sole metric used to guide business decisions. It’s important to consider it in conjunction with other ecommerce metrics to gain a well-rounded understanding of a company’s health and performance.
KPIs and metrics relevant to Product Repeat AOV
- Customer Retention Rate: This metric indicates the percentage of customers who continue to buy. A high retention rate combined with a high Product Repeat AOV is a positive sign for any ecommerce business.
- Customer Lifetime Value (CLV): As with the general AOV, CLV is interconnected with Product Repeat AOV. It’s beneficial to assess how the two metrics influence each other.
- Frequency of Purchase: This KPI gives insights into how often repeat customers are buying. It can be used in tandem with Product Repeat AOV to devise targeted marketing strategies.
By analyzing and optimizing Product Repeat AOV in conjunction with these other KPIs, your company can nurture its relationship with repeat customers and maximize revenue.
Final thoughts
Product Repeat AOV provides insight into the spending habits of a company’s most valuable asset – its repeat customers. By focusing on this metric, companies can not only increase their revenue, but also solidify their relationship with their most loyal customers.
Product Repeat AOV FAQ
What is Product Repeat AOV?
Product Repeat AOV denotes the average spending of repeat customers each time they place an order on an ecommerce platform.
Why is Product Repeat AOV crucial for my ecommerce business?
It provides insights into the spending habits of your most loyal customer base, enabling optimized marketing and customer retention strategies.
How can I optimize Product Repeat AOV?
Introducing loyalty programs, offering personalized discounts, and focusing on feedback are some strategies to enhance Product Repeat AOV.
Are there any other metrics related to Product Repeat AOV?
Yes, metrics like Customer Retention Rate and Frequency of Purchase can be analyzed alongside Product Repeat AOV for a comprehensive understanding of customer behavior.
If my Product Repeat AOV is on the rise, does it indicate business growth?
A growing Product Repeat AOV is a positive sign, indicating increased spending from loyal customers. However, it’s essential to view this metric alongside others for a holistic view of business performance.