The second part of our CLV trifecta is the average order value (AOV). This is essentially the amount a customer spends per order. A business can calculate this by dividing total revenue by the number of orders placed during that period.
Communities typically have less influence over the AOV than over frequency or retention. However, a community might encourage members to upgrade or buy more of an item when they do make a purchase. An organization could also use community data to highlight other products they might be interested in to increase the average order value. This is often common in SaaS products and impulse purchases.
A community might encourage members to upgrade or buy more of an item when they do make a purchase
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Fortunately for us, the average order value can be calculated using the same methodology as above. The only difference is we can replace frequency with average order value in most places. This means:
- Determine change in average order value since members have joined the community.
- This can be by direct collection, surveys, or sampling.
- Determine change in non-members over the same period using the same method and subtract this from the figure above.
- Generalize this figure across the entire group (total members * by retention rate) * by the increase or decrease in average order value attributable to the community.
- Multiply by the average gross margin.
Community ROI Template
We have included the table below (remember to download the sheets though).