January 24, 2013

Kaley's Knits: Manufacturing Growth Via AOV

We know that new customer acquisition is in the tank, while orders per buyer per year are on the rise.  It sure looks like the Management team at Kaley's Knits shifted focus from new customer acquisition to retaining existing customers.

There are two key metrics to evaluate, when considering orders per buyer per year.  The first is items per order.  Sometimes, when orders per buyer increase, items per order decreases.  What do we see here?
That's what we see here, right?  In late 2012, items per order dropped, from 2.52 to 2.47.  That's a big drop.  Customers are placing more orders per year, but are buying fewer items per order.

How expensive are the items the customer is purchasing?
Look at that!  Since late 2011, customers are buying items at ever-increasing price points. Clearly, Management is trying to encourage the customer to buy more expensive items.

If we multiply items per order by price per item, we arrive at a metric everybody looks at ... average order value!
Average order value is taking off like a rocket ship, since the middle of 2011, growing from $77 per order to $87 per order.

Next week, we'll talk about the ramifications these metrics.  We have enough information here to understand what the Management Team at Kaley's Knits is trying to do.

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