Average Purchase Value

What is Average Purchase Value?

Broadly defined, the sales metric Average Purchase Value is the average dollar amount spent (in an individual transaction) on your product or service. You could either calculate it based on the value of the overall contract, annual value, monthly value, weekly value or daily value depending on your business model and the length of the average contract. The time period should be defined based on your purchase regularity.

How to calculate Average Purchase Value:

Total ($) Value of Orders / (#) of Orders over a Defined Period = ($) Average Purchase Value

Pros:

1. Understand the average first time order of a new customer.
2. See if activities feeding into sales are generating higher value or lower value deals
3. Understand if competitive pricing pressure is driving deal size down.
4. If you know average purchase value you can calculate the volume of deals you need to generate. From there, you can also understand how many opportunities you need based on your opportunity (or Sales Qualified Lead (SQL)) to Deal conversion rate. And even look at how many Leads (Marketing Qualified Leads (MQL)) you need to generate those opportunities.

Cons:

This sales metric is not to be confused with Customer Lifetime Value, known as LTV or CLV, which looks at the value of a customer over the entire course of their relationship with you. CLV is more focused on understanding if the economics of your Cost of Sale or Cost of Acquiring a Customer (CAC) add up. However, Average Purchase Value is more focused on understanding changes in value at first purchase point. This enables you to understand whether your sales and marketing activities are driving higher or lower value customers into your customer base.

Relevant Sales Metrics and KPIs:

If you’re adding Average Purchase Value to your sales KPI dashboard, you might want to also consider tracking these related sales metrics for context.

• Customer Lifetime Value (LTV or CLV)
• Cost of Sale
• Lead Response Time
• Average Sales Cycle Length

Industry Benchmarks and Examples

Average Purchase Value varies greatly depending on your business model. For B2B Base One and B2B Marketing surveyed B2B buyers and found that the median purchase size was £732k. However, excluding some very large outliers they settled on a more realistic average purchase value of £69k. This is still quite high and will vary greatly depending on whether you’re targeting SMB, mid-market or enterprise companies, as well as what your cost of sale are. All-in-all only you can work out what your Average Purchase Value should be to make the economics of your business stack up. Sources: Buyerspere Report, Online Order Value

Additional Notes:

Average Order Value (AOV) is more Ecommerce focused, looking at the value of each basket conversion. Average Purchase Value may also be known as Average Contract Value (ACV), which simply looks at the value of the entire contract signed.