Most of you measure Average Order Value ... AOV as it is often known. Your e-commerce business utterly depends upon the measurement of this metric.
How many of you track "Average Margin Value", or "AMV"?
Instead of summing up the amount the customer spent (three items ... $30, $30, $40 = $100), you sum up the amount of gross margin generated by the customer in that order ($18, $12, $22 = $52).
Too often, we provide 40% off with a hurdle, then celebrate a big order of $120. Let's pretend that your gross margin is 50%.
- No offer = $100 AOV.
- Yes offer = $120 AOV.
AOV increased with the offer.
How about AMV?
- No offer = $100 - $50 = $50.
- Yes offer = ($120 - $60) - ($120*0.4) = $60 - $48 = $12.
Do you prefer a $50 AMV, or a $12 AMV?
It's pretty obvious that you should be measuring AMV, correct?
Tell me what stops you from measuring it?
P.S.: In a Twitter poll, 36% of respondents measured AMV, while 9% responded that the metric is "useless". It's fun to have a competitive advantage, isn't it?
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