Average Purchase Value
Average Purchase Value refers to the average dollar amount spent on your services. This metric can either be calculated based on the overall value of the contract or it’s annual, quarterly, monthly, or weekly value. The option you choose to calculate your Average Purchase Value ultimately depends on your business model and the average length of a contract.
How to calculate your Average Purchase Value:
Total ($) Value of Sales / (#) of Sales over a Defined Period = ($) Average Purchase Value
What we like about Average Purchase Value:
Knowing your Average Purchase Value is important because it helps you understand the average first-time order of a brand new customer. This helps you determine whether or not your marketing efforts are driving high-value deals into your sales pipeline.
Also, if you know your Average Purchase Value, you can reverse engineer your revenue goals. Just take a look at the number of sales you need to close. You can break this down even further and look at how many SQLs you need to generate and what your Closing Rate needs to be.
What we DON’T like about Average Purchase Value:
Average Purchase Value is not to be confused with Customer Lifetime Value (LTV), which calculates the value of a customer throughout their entire relationship with you. LTV helps you see the big picture, whereas Average Purchase Value is focused on the initial sale. This helps you understand whether your marketing and sales efforts are paying off in the short term. This is important for local service businesses that need to be paid back relatively quickly.
Marketing metrics similar to Average Purchase Value:
Before you select Average Purchase Value as your One Metric That Matters (OMTM), be sure to check out these related sales metrics and KPIs for context.
• Closing Rate
• Customer Acquisition Cost
• Customer Lifetime Value
Learn How to Set SMART Goals
Setting SMART goals helps you clarify your ideas, focus your energy, and use your resources wisely. To help you get started, we’ve created a FREE template with all the tools you need to set (and achieve) your most important marketing goals.
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