If you’re shopping for a dress shirt at a high-end retailer, you might be tempted to buy a bundle that includes a matching tie, pocket square, and cufflinks—after all, why not get everything you need at once? By offering this bundle, the brand is trying to increase its average transaction value, and it convinced you to spend a little more than you intended.
Here is how to calculate ATV for your own company, as well as strategies for growing your revenue per transaction.
What is average transaction value?
Average transaction value (ATV) is the amount a customer spends in a single purchase from your business, averaged across all transactions. It measures how much revenue you’re generating from each sale on average. ATV provides insight into customer buying behavior and can help you understand the effectiveness of your pricing strategies, product offerings, and sales tactics.
A high ATV could indicate your upselling sales tactics are effective or that your premium products are popular. Conversely, a low ATV might mean marketing isn’t attracting the right customers, or existing customers aren’t seeing the full value of your offerings. Tactics like product bundling and improvements to a website’s ecommerce checkout flow can be used to help improve.
How to calculate average transaction value
Calculating average transaction value requires only two pieces of information: your total revenue and the number of transactions over a specific period. You can measure average transaction value for any time frame—whether you’re looking at daily, weekly, monthly, or annual performance.
Here’s the formula for average transaction value:
Average Transaction Value = Total Revenue / Number of Transactions
Let’s say you own a home décor store and want to calculate your average transaction value for September. Your point-of-sale system reports you did a total of $54,000 in sales and processed 600 transactions during that same period.
Here’s how you would calculate your ATV:
$54,000 / 600 = $90
The calculation reveals that each customer spent, on average, $90 per visit to your home décor store in September.
Why is average transaction value important?
Knowing your average transaction value can help you determine your marketing spend and develop strategies around your pricing and product lineup. Here’s how watching this metric can guide your business:
Increase your marketing ROI
Boosting your ATV—going from a low average transaction value to a high average transaction value—means getting more out of your marketing costs. For example, an online houseplant retailer may find that by bundling plants with ceramic pots and planter’s soil it can bump up its ATV without significantly increasing customer acquisition costs. This type of ripple effect increases your marketing return on investment (ROI), allowing you to invest in other business functions, such as customer service.
Fine-tune your pricing strategies
Your ATV can deliver pricing insights. Are you undercutting your business with bargain-basement prices or pushing customers away with sky-high tags? By experimenting with different price points and observing how this impacts your ATV, you can zero in on pricing that will yield the best profit margins. For example, a specialty food retailer may discover that introducing a line of premium-priced, locally sourced products actually boosts its ATV, even if it means fewer units sold.
Modify your product strategies
A stagnant ATV might mean you need to give customers more reasons—and more ways—to increase their spend. For example, you could introduce higher-end product options or create irresistible bundles that encourage larger purchases. Your ATV can guide these decisions, helping you spot gaps in your product range or identify winning bundles to promote further.
Consider an activewear brand that notices a dip in its ATV. It might encourage customers to invest in complete workout ensembles rather than single items by marketing coordinated outfits. As a result, the brand might see its average purchase value begin climbing again.
How to increase your average transaction value
- Implement upselling and cross-selling tactics
- Incentivize larger purchases with a free gift
- Design effective product bundles
- Adjust shipping thresholds strategically
- Use smart add-ons at checkout
From subtle nudges to overt strategies, brands employ various tactics to get customers to spend more per transaction. Here are five ways to try increasing your ATV, along with examples:
Implement upselling and cross-selling tactics
Upselling encourages customers to purchase a higher-end product or upgrade from their initial choice. In person, this might involve a salesperson recommending a premium version of a cosmetic. In ecommerce, it could be displaying a comparison chart of “good, better, best” options on the product page.
Cross-selling, on the other hand, suggests complementary or related products to accompany the customer’s primary purchase. An online bookseller might display a product carousel of reading lights on a book’s product page, while an online electronics retail business might recommend a protective case after a customer adds a smartphone to their shopping cart.
The luggage brand Away uses these tactics on a carry-on comparison page on its website. It presents four different hardside carry-on options side by side, highlighting their features, dimensions, and capacities. The Bigger Carry-On, or second-largest size, is labeled as the “Most Popular” choice, subtly upselling customers from the smaller sizes. This comparison might encourage customers to consider upgrading to a larger or more feature-rich model, potentially securing a higher average transaction value.
Incentivize larger purchases with a free gift
Offering a free gift with larger purchases can meaningfully boost your average transaction value by tapping into customers’ desire for added value. This strategy works especially well for products with repeat purchase potential or a longer shelf life. By setting an incentivized purchase threshold that’s notably higher than your current average order value, you create a compelling reason for customers to buy more.
Kettle & Fire, known for its bone broth and nutrient-dense soups, implements this tactic effectively. Those willing to make a larger buying commitment—orders of 24 cartons or more—receive a free Mushroom Bisque Keto Soup. This approach helps drive a high transaction value and lets customers try the brand’s premium products risk-free, potentially leading to diversified future purchases and increased customer lifetime value.
Design effective product bundles
Bundling multiple items into one purchase can help increase the amount each customer spends in a single transaction. This strategy works particularly well if you’re known for a flagship product that customers often buy individually, such as sunglasses. Consider pairing the product with complementary items to showcase your broader range.
For example, the kitchenware brand Our Place is famous for its Always Pan, typically priced at $150. However, the brand currently offers the pan as part of a four-piece Perfect Pot set for $395. If customers were to buy all four pieces individually, the cost would be $620. This makes buying the bundle an easy decision for those customers who want to save $225. This tactic not only increases Our Place’s average transaction value, it also introduces customers to the brand’s other products, encouraging them to explore Our Place’s full line of cookware.
Adjust shipping thresholds strategically
For ecommerce brands, implementing a Bombas, a sock and apparel company, cleverly uses this psychological trigger with its own $50 free shipping threshold. A customer who has placed the Women’s Ankle Sock 4-Pack priced at $49.40 in their shopping cart is tantalizingly close to free shipping. This creates a subtle tension—they can spend just 60¢ more to qualify for free shipping or pay for shipping on top of their purchase. Many customers, driven by their perception of value, will opt to add another item to their cart, increasing their order value—potentially, by a significant amount beyond just the additional 60¢.
Use smart add-ons at checkout
Strategically placed impulse purchases at the point of sale can raise your average transaction value by enticing customers to make small, additional purchases. In person, stores often display these low-cost, high-margin items, like snacks or lip balm, near the cash register, capitalizing on customers’ idle time while they wait in line to check out. For ecommerce, leveraging smart add-ons means suggesting complementary items on the checkout page—for example, socks or a belt to complement a clothing purchase.
Intelligent Change, a brand specializing in personal development products, boosts its sales at checkout with product recommendations. As customers are about to buy their Five Minute Journal, the brand displays a carousel of complementary items, like its Get Closer Conversation Game. It’s a subtle nudge to add just one more thing to the shopper’s cart, potentially doubling a customer’s spend. This approach likely increases its average sale amount while introducing customers to more of the brand’s products.
Average transaction value FAQ
What is the meaning of ATV in retail?
ATV in retail stands for average transaction value, which is the average amount a customer spends per purchase from a business.
What is the average transaction value KPI?
The average transaction value KPI measures the average monetary value of each sale, calculated by dividing total revenue by the number of transactions over a specific period.
What can average transaction value tell me about my business?
Average transaction value can reveal the effectiveness of your business’s pricing strategy and product mix, as well as information about customer purchasing behavior and your company’s overall sales performance.
