Expressed as a dollar amount, average customer spend measures how much a typical customer spends on your eCommerce company's products over a chosen time frame.
Caption: Varos lets you analyze your average order value based on multiple parameters, and even benchmark it against competitors.
Average customer spend and average order value are often used interchangeably. Given that the two metrics are calculated in nearly the same way and generally serve the same purpose, this is understandable. They only differ from one another in terms of scope — and that difference is incredibly minor.
Average customer spend may also focus on specific demographics or subsections of your customer base, but this is not strictly necessary. For all intents and purposes, we will treat the two metrics as interchangeable.
Customers are the lifeblood of any eCommerce business, and as such any metrics that allow you to monitor, track or assess their behavior is invaluable in helping your business grow and thrive. Average customer spend is no exception.
Alongside metrics such as returning customers, refund rate, and repeat purchase rate, it's advisable to treat average customer spending as a kpi for your company, helping to provide you with several important insights:
Additionally, if you regularly monitor average customer spend, it can provide you with advance warning that there's something wrong with your brand — customers may start to spend less or purchase from you less due to issues with your product catalog, pricing, or website, for instance.
To calculate average customer spend, simply take your total revenue from transactions and divide it by your total number of customers. This is best done with a particular time frame in mind, such as one month.
If you want to focus on a particular demographic or customer group, the calculation remains the same — the only difference is that you're working with a slightly narrower dataset.
Caption: Tracking changes in your average customer spend/average order value is an important part of any successful eCommerce sales strategy.
There are multiple strategies through which you can increase how much your customers are willing to spend: