What is Average Transaction Value?

Average Transaction Value (ATV) refers to the average amount a consumer spends on a single purchase. The calculation is done using a simple formula wherein the store's total revenue for a given period is divided by the total number of transactions in the same period.

Monitoring ATV for a retail business is very important, and for a multitude of reasons.

• Evaluation of Business ROI: The average transaction value of a customer is a good way to assess the return on investment (ROI) of the business or specific product(s). The processes involved in attracting, acquiring and retaining customers are often quite cost-intensive. ATV helps retailers understand if their marketing efforts are paying off in the context of sales. The higher the ATV for each customer, the better the overall ROI.
• Development of Product Strategies: Retail businesses usually carry a number of different products with different price points and strategies. It can get confusing to clearly mark each individual product's impact on overall revenue generated. This is where the average transaction value comes in. The figure is a direct indicator of how effective existing strategies, which products are faring well and which are not. Retailers can use this number to restructure strategy, and alter focus as and when required.
• Assessment of Pricing Strategies: As with product strategies, pricing strategies too can be tweaked based on average transaction value.

A high ATV means that customers are either purchasing products in large quantities, or that the more expensive products from the selection are in popular demand.