Varos Glossary

Average Customer Spend

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. 

What's the Difference Between Average Customer Spend and Average Order Value? 

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 measures the total amount customers spend on average.
  • Average order value measures how much customers typically spend on a single order. 

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. 

Why You Need to Know Average Spend per Customer

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: 

  • Customer loyalty
  • Spending habits and shopping behaviors
  • Customer engagement

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. 

Understanding the Average Customer Spend Formula

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. 

Optimizing and Boosting Average Customer Spending

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:

  1. Subscriptions can provide your organization with a source of recurring revenue. This could take the form of perks such as exclusive discounts on products and services or early access to deals and sales. 
  2. Design your eCommerce store to recommend complementary products to customers based on the products they've already added to their cart. 
  3. Incorporate abandoned cart email flows into your eCommerce store to reduce cart abandonment rates. 
  4. Prioritize the customer experience across your entire sales funnel. Problems with on-site navigation and a poor checkout process are among the most common problems. 
  5. Offer discounts for bundling certain products together.
  6. Create a customer loyalty program that incentivizes customers to not only spend more, but also share your eCommerce brand with friends, loved ones, and colleagues. 
  7. Experiment with a price increase. This is an incredibly risky move, and should be done only with extreme caution and careful consideration. 
  8. Offer free express shipping at a certain price threshold. 
  9. Incorporate customer reviews into your product detail pages. 
  10. Add rotating limited-time offers to your store to create a sense of urgency.
  11. Find ways to reduce customer hesitancy. This could include a virtual try-on feature or a generous warranty.