Average Order Value (AOV) in SaaS

What is AOV in Unit Economics?

At first glance, this unit economics metric seems simple and rarely raises questions. However, in practice, it turns out to be more complex. Let’s break down what AOV really is. 

Starting with the basics: what does “order value” mean, and what does “average” mean? It’s important to remember that unit economics is a tool for product development managers and decision-makers in this field. Essentially, it connects business economics and finance with business process management and operational tasks. 

Because of this, the definition of AOV in unit economics may differ from its interpretation in finance and accounting.

How is Order Value Calculated in Unit Economics?

The key difference lies in how we define an order value. 

An order value is the amount a customer pays for a product or service. For example, if we sell a subscription for €50 per month and the customer pays €50, this is their order value.

However, from a financial perspective, the customer may split the payment into two €25 transactions. For accounting, this would count as two separate orders, but for unit economics, what matters is that the customer purchased a specific service for €50. 

Another example: if a customer pays for a full year upfront at a discounted rate of €480, accounting would record this as a single transaction, whereas in unit economics, it would be counted as 12 payments of €40 each (as this is the effective monthly price).