Aside from acquiring better qualified visitors to the site, the next best strategy to increase average order value is getting customers too buy more items each time they purchase.

Definition
The average number of items per cart is the measurement of the number of units or items in each successfully completed cart:

Sum of Products Purchased / Number of Completed Shopping Carts = Average Items per Cart

To make this calculation the analytics package or commerce application need to be able to report on the number of items contained in each completed cart. If your particular application does not report on this value automatically, you may want to consider using a custom variable, being sure to only sum the number of products purchased for successfully completed carts.

Presentation
It is a good idea to present average items per cart along with average order value to provide context if one or the other KPI decreases.

Expectation
Depending on what they’re selling, retailers will quickly realize that average items per cart are usually very close to 1.0 and very difficult to increase. In some instances, this KPI is uninformative because it will always be a single item; in other instances this KPI can provide valuable insight into the disposition of visitors coming to the site and the quality of up-sell and cross-sell presentment.

Action
This KPI should be carefully watched when an effort is being made to improve the quality of up-sell and cross-sell functionality in the shopping cart. In situations where new strategies are being rolled out but average items per cart and average order value are unchanged, additional work is warranted.

In situations where this KPI suddenly decreases, it is worthwhile to review with marketing groups what changes if any have recently occurred. Perhaps a successful sale on a single item is underway and is decreasing the number of multiple-item carts being completed. The converse is also true; if no recent work has been done on how up-sell and cross-sell is presented, an increase in average items per cart may be indicative of a more qualified audience or a particularly successful campaign.

For retailers, average order value is considered a “key” key performance indicator by many, when combined with revenue per visitor or visit and order conversion rate, is essentially the pulse of the web site.

Definition
The basic calculation is:

Sum of Revenue Generated / Number of Orders Taken = Average Order Value

In the ongoing effort to optimize the online business there are two major KPIs describing the site’s ability to generate revenue: average order value and order conversion rate. Smart business owners work diligently to improve both but segmenting visitors and marketing campaigns into high, medium and low AOV groups can help identify where the “best” (e.g., high AOV) customers are coming from.

Presentation
As with other dollar-based KPIs, presentation should be fairly obvious. It is a good idea to present this indicator and average cost per conversion, order conversion rate and revenue per visitor together to provide context to each.

Expectation
Sites should determine a baseline AOV for all customers to use as a comparator for all marketing acquisition campaigns. For example, it might help to make and keep track of the average order value for the entire site, targeted email campaigns, untargeted email campaigns, search marketing efforts and so on. Assuming your conversion rate is same for all customer acquisition efforts (rarely the case), you’ll discover that you’re better off focusing your efforts on high-AOV generating campaign types.

Entire Site AOV Email AOV Keyword AOV Banner Ad AOV
$100.10 $95.50 $120.15 $101.25

As you can see, the average order value for customers associated with search keywords is 20 percent higher than the site-wide AOV.

Action
A decrease in average order value should be compared to changes in the order conversion rate. If AOV decreases but order conversion rate increases revenue per visitor should stay roughly the same; if AOV and order conversion rate both drop revenue per visitor will likely be strongly impacted. Regardless, average order value should be closely watched and any changes should be diagnosed, looking at changes in the checkout process and marketing acquisition programs.

This key performance indicator makes the list of “RED BUTTON” KPIs that, when they go wrong, should bring everyone to a screeching halt while the problem is diagnosed. Especially when compared to marketing acquisition indicators like average cost per visit, the value of conversions are critical.

Average revenue per visit is a more granular examination of your site’s financial performance but otherwise similar to average revenue per visitor.

Definition
See average revenue per visitor but substitute “Visits” for “Visitors.”

Presentation
See average revenue per visitor.

Expectation
While average revenue per visitor is really a long-term, time independent performance indicator, revenue per visit is a good indicator of how you’re doing right now in your marketing and conversion efforts. Compare revenue per visit to average revenue per visitor to see if your short-term efforts are paying off but not really contributing to the lifetime value of a visitor.

Action
See average revenue per visitor.

(I listened to your comments and appreciate the feedback. What do you think?!)

Often it pays dividends to keep track of the cost of driving individual visits to the web site for comparison to your average cost per visitor. These key performance indicators used in tandem can tell you a great deal about your marketing acquisition costs.

Definition
A function of the total sum of marketing costs, the average cost per visit is defined as:

Sum of Acquisition Marketing Costs / Visits = Average Cost per Visit

Challenges associate with calculating this key performance indicator are the same as average cost per visitor.

Presentation
It is a good idea to present average cost per visit and average cost per visitor side-by-side, depending on how different these calculations are.

Expectation
In an idea world you would be able to drive visits with little or no marketing costs; unfortunately it is far from an ideal world. Still, lower is better.

Action
Especially when experimenting with new marketing channels you want to watch your average cost per visit carefully, looking for a dramatic increase that is not correlated with increases in value-based KPIs like average value per conversion, revenue per visit or average order value.

Thanks to everyone for checking the new blog out and for the comments coming in so far. I added an XML button on the right so people can subscribe–I’m going to try FeedBurner again to see what kind of stats they’re able to generate (feed metrics are a hobby of mine.)

Neil Mason asked:

Eric - are you going to focus on site centric KPIs or are you going to widen the field? For example, what about customer satisfaction, reach etc? Are you planning to cover these as well?

Absolutely! I hope to be able to cover a number of non-traffic and commerce related key performance indicators including customer satisfaction, site performance and response times (e.g., Average Time to Respond to Email Inquiries.) It is my firm belief that once companies get up-and-running with web KPIs the next place they should be looking is at the web-as-a-business.

Sam and Jerry had commented about the use of average as opposed to something that communicates more information (e.g., median). I had already written (but not blogged) a section header about averages that hopefully covers this. In general I agree but KPIs should be easily and quickly calculated. Does anyone have a simple strategy for calculating the median value for indicators like these?

Most of the other comments have been KPI-specific and are great! I’m going to use my Gmail account to keep careful track of everyone who contributes and will do my very best to acknowledge everyone in the final draft.

No, that does not mean I’ll be sending you a check ;-)