If you have a physical business or do online e-commerce
sales, you probably already know that metrics and KPIs hide valuable
information to improve your business model, marketing strategies, customer
service, and other critical elements. In this sense, one of the most important
(and often overlooked) is the average bill, which is closely related to sales
and profitability.
What is the average
check?
The average bill,
also called the “average ticket price” or “average bill,” refers to how much
money a customer spends on purchases in your business and is an important piece
of information in e-commerce.
That is, this
indicator reflects the average cost of an invoice or ticket.
For example, if
Company X invoices € 72,000 and has a total of 800 sales, its average bill
would be € 90.
Many clients spent
twice, three times, and up to ten times more, while others spent only a
fraction; the average bill serves as a guideline for how much a typical
customer spends on you.
There are customers
who buy the highest quality products or solutions in large quantities, while
others choose one or two and always get the cheapest. With both, you make a
profit, but of course you want to know how to make more by increasing sales or
increasing your profit margins.
Why calculate the
average check?
The simple answer
is that what is not measured cannot be improved, so if you want to show the
best sales and profit margins, calculating this metric is important for making
decisions that lead to changes in your business.
However, there are
three specific reasons (let's call them profit) for calculating the average
check:
Increase profit
margins
This is not the
same as having an average entry cost of € 120 and making a profit of € 30
rather than € 39.
It is well known that
the profit margins of all products or services are different. From operational
tasks to market situations, they affect the cost of a product or service, and
therefore profit.
By knowing the
average ticket price, you can make data-driven decisions that will improve that
margin.
You can decide to rise
or decrease the number of items in stock. He may be changing prices or
orienting his marketing efforts towards new products or services. In any case,
increasing the profit margin without sacrificing sales is always a good
decision.
Increase
global turnover
Once you know the
average ticket price, you can more confidently make decisions that will lead to
a higher score.
For example,
applying up-selling and cross-selling strategies will be more successful if you
know how much money your company is making from an average purchase, because
then you can better measure the real impact your company experiences when
customers add more products to your products. ... car or they are decided by
those of higher rank.
In addition, if you
are listing products for sale or seasonally, you can calculate the average
ticket price for that time and thus know if you are now invoicing more or less
than before, in addition to the fact that the product is out of stock. and
increased turnover for a long time. ...
This allows you to
determine if your offers are leading to cross-selling or if customers only come
for a product at a low price. You can also learn about the effectiveness of
impulse sales.
BOGOF-style ad
strategies (2 x 1), best prices per dozen, discount coupons and mixed sales all
impact overall billing.
Calculating the
average check will help you draw conclusions about consumer behavior in
relation to these products or services.
Finally, if you are
setting sales goals, the average check will help you know the approximate
amount of sales you must make in order to achieve or even exceed that goal.
Reduced
transportation and other costs.
This is an indirect
benefit of improving your average check score, but it is equally important to
it.
If you anticipate
shipping costs, the average ticket price will help you know what is the minimum
amount you need to set in order to assume that these costs are profitable.
Every sale you make
when a customer adds an item to their cart to receive free shipping is a sale
that lowers your costs and also increases sales and profits.
In addition,
shipping materials such as bags and packages, and stationery for tickets or
invoices can lower costs in the long run by increasing this rate, especially if
their cost rises as customers list more items and services one at a time. and
the same ticket. ...
How to calculate the average check
The upright news is
that this is one of the easiest business metrics to calculate. Formula:
Total sales
(expressed in currency) / Number of customers = Average bill.
Let's go back to
the example of Company X, which invoices € 72,000 (total sales expressed in
currency) and has made 800 sales in total (total number of customers), so its
average check value is € 90.
72,000 / 800 = 90
Agree that in the
previous quarter alone, company X had an average check of 90 euros. But in the
next quarter, he made more revenue and sold to fewer customers, so the cost of
his average ticket went up.
However,
calculating this metric makes more sense when you add another variable to it to
contextualize this metric.
For example, your
average ticket varies from month to month and from year to year, you yourself
decide in what period of time to calculate it according to your needs.
Establishing consistent periods of time will help you know your progress.
In addition, you
can calculate other demographic variables such as the gender or age of the
customer so you can get to know your ideal customer even more and change your
customer identity and other marketing elements to better suit your audience.
While this is a
simple calculation, it becomes difficult when you have many clients or when you
are in charge of an SME and have a lot of responsibilities.
But there are tools
that can help you manage this and other metrics even automatically.
