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What is Average Transaction Value (ATV), and Why is it Important?

As a business owner, you’re inundated with marketing terms on a daily basis. Terms like cart abandonment, eCommerce and purchase flow to name a few. While some might be familiar to you already, there are others which could use further explanation. This may be the case with Average Transaction Value (ATV). ATV is commonly known as all-terrain vehicle, but when it comes to eCommerce it has a totally different meaning.

Average Transaction Value, or ATV for short, is a very important term for business owners to understand. More importantly, knowing how to impact your ATV in a positive way can ultimately lead to greater success. ATV is one of the many aspects of running a business, whether it’s a physical store or an online shop. Boosting your ATV can help your company’s success overall – and your bottom line.

What is ATV?

ATV is an acronym for Average Transaction Value. And while it may sound like a complex mathematical equation, it’s actually a straightforward calculation. 

The ATV of your business is the average dollar amount that a consumer spends with your business in a single transaction. 

To calculate the ATV for your business, take the total value of each of your transactions from a designated time period (day, week, month, quarter, etc.).  You will then divide that number by the total number of transactions your business had during the same timeframe.

ATV definition

For example, let’s say you want to calculate your ATV for one month.  If you had a total of $100,000 in revenue and 25 transactions within the month, then you would divide $100,000 by 25. $100,000 / 25 = $4,000. Your ATV is $4,000.

Example of how to calculate ATV

One important point to keep in mind is ATV is different than your average number of transactions. ATV will be an average dollar amount, which is different than the number of transactions you have during a specific period. 

Why Is ATV Important to Your Business?

Having data at your fingertips is important for any business. But knowing what it means for your success is another. What makes knowing your ATV so useful and not just another data point?

Helps Your Business Evaluate ROI

ATV is a tool for evaluating the total success of your business. Attracting customers is no easy feat, and it costs you money to secure each customer’s business. If you can increase your ATV with each customer, you will end up with a higher return on investment (ROI) on your sales and marketing costs.

Helps Your Business Determine Product Strategies

Knowing your ATV also means seeing what is – and isn’t – working for your product strategy. If you carry several items with different price points, then you might not realize how much your lower-end pricing is impacting your overall revenue. By knowing your ATV, you can see if the product strategy your company has selected is paying off. If you don’t like the number you’re seeing when you evaluate the ATV, then it can be a signal to you to focus on different products. 

Helps Your Business Evaluate Pricing Strategies

Knowing your ATV can help you evaluate your pricing strategy too. If your company decides to offer a promotion for a specific period of time, then you can calculate the ATV for the promotional period to see the overall impact the discount had on your revenue. Again, by knowing this information, you can make adjustments to your promotions going forward. 

Ways to Increase Your ATV

Now you know what ATV is and how it can help you understand your business.  How can you increase your ATV, thereby increasing your revenue?

Up-Sell Your Products

There are several ways to increase your ATV and increase your revenue. The first involves up-selling your products. This requires knowledge of the customer’s product selection, and of other items that are similar, but more expensive. The idea is to show a customer that by spending a little more on a higher quality item, they will get a lot more value out from their purchase and a better product.

Example of upselling products

Up-selling your products is important not only for increasing your ATV, but for fine-tuning your merchandising strategy. It’s a perfect way to show the customer how they can get a better product (more features and benefits) for a little bit more money. 

Offer a Great Customer Service Experience

Communication is key with increasing your ATV. In addition to having your associates familiar with your product selection, train them on the latest promotions and a best-in-class customer service experience. When you provide a great customer experience, you have the opportunity to increase your sales. Not only will your customer trust you to complete the purchase with you, but you’ll give them an incentive to come back at another time. 

Offer Flexible Payment Options

Another option to increase your ATV in eCommerce and retail is to offer flexible payment solutions. Individual customers have a budget, just like a business does, but it is often tighter and has less wiggle room. If you can offer your customers a way to pay for larger purchases in phases or installments, they are more likely to buy more items or larger quantities of items in a single purchase.

There are companies that offer flexible payment solutions to merchants, but Splitit is the only company that is able to offer installment payments on an existing MasterCard or Visa without extending a new line of credit or requiring the merchant to become a financier on top of running a business. This lets customers buy what they need and pay for it over the course of several months instead of having to put the entire amount up at the beginning of the process or pay high interest fees until the debt is paid off.

Using an installment plan such as Splitit not only makes it easier for your customer’s budgeting needs, but it goes hand-in-hand with offering a great customer experience. Since setting up a payment plan with Splitit is a straightforward process, you’re more likely to keep your customers

When You Know What ATV Is, You Can Increase Your Odds of Success

Get to know the numbers of your business on an intimate level. Make sure you keep track of your ATV and speak with your sales and finance teams to figure out ways of boosting the amount your customers are spending in a single transaction. If you cater to your customers and their needs, they will be able to fulfil yours. Offering flexible payment options and up-selling your products are a handful of ways you can begin to effectively increase your ATV.

ATV may seem like one more acronym in a sea of endless data points. But once you start incorporating this information in your reviews, you’ll quickly find out how you can impact your bottom line.

If you’re ready to increase your ATV, contact us for a free demo to find out more.

Splitit Team, December 12, 2018 Share this article

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