Businesses have to overcome numerous challenges to succeed. No wonder you, as a business owner, should be able to effectively speak the language of business. But with so many terms and phrases like ATV and VAT floating around, it can be hard to know exactly what each one means.
But hey! We’ve got you covered! This guide is here to help with that. Below, we’ll take a look at one specific term in particular: ATV.
We’ll explain what those letters stand for and go into detail about what exactly ATV means in finance. Also, we will explore why it matters and how to improve it.
ATV | Meaning and Explanation
Let’s begin with a simple definition and find out what the letters ATV stand for. ATV stands for Average Transaction Value. This is a really important term in the world of business. Even though it might sound quite complex at first, it’s actually pretty simple to understand.
So, what does ATV mean? Well, a business’ ATV is simply the average dollar amount earned by the business per transaction in a given period of time. For example, you can work out your ATV over the course of a year to see the average amount of revenue you made on each and every sale for that year.
Here we should explain that often ATV and AOV get mixed up. But while ATV is the average amount spent per transaction, AOV or Average Order Value is the amount spent per order.
ATV vs 4-Wheeler ATV Values and Prices
Before we proceed, let’s clarify something else. When you look online to find out information about ATV values, you might be a little confused by some of the results…. You might find information about “4-wheeler values”! This is purely a semantic matter, as the acronym ATV is also used for all-terrain vehicles.
But remember that when talking about eCommerce and business metrics, the term ATV only refers to average transaction value… Unless you are selling ATVs and want to check your ATV values.
Why Are ATV Values Important?
So, why is it important to be aware of your ATV? And why is this value so important for modern businesses? Well, there are various key reasons to track ATVs for different periods:
- Evaluating Performance – Your average transaction value for any period is a good metric to evaluate the general levels of performance of your business. It can show you how well you’re doing. Besides, you can compare ATVs for different months or years to see if your company is progressing or regressing.
- Informing Your Strategy – Another big benefit of ATV is that you can use it to inform future decisions. For example, you can look at your ATV and find out which products are or aren’t working well for your business. This can help you make decisions about new products you might like to focus on and old ones to eliminate.
- Pricing Guide – You can also use your ATV as a kind of pricing guide when deciding what price tags to put on other products or services that your business offers. By looking at the average amount that customers spend with you, you can get a general feel for fair, competitive prices to apply to these other items.
Calculating ATV in Business
So, now that you know about ATV values, you might want to know how to actually work out this particular sales metric. It’s relatively simple to calculate your ATV, and you can use the following formula to do so:
ATV = Sales / Number of transactions
In other words, to calculate the average transaction value for a certain period of time, all you have to do is take the total sales figure for that time and divide it by the number of sales transactions made. We can look at a quick example to illustrate this idea:
- A store wants to work out its ATV for the month of January.
- For that month, the store made $150,000 in sales and processed 1,000 transactions in total.
- So, using the formula, we get ATV = $150,000 / 1,000 = 150.
- Therefore, the ATV for this store in January is $150.
How to Increase ATV in Retail
ATV is really important in the retail industry. In fact, many retail stores and businesses want to find ways to boost or increase their ATV (to get more revenue for every item sold, on average). So, how do you do this? Well, there are quite a few methods you can use to potentially increase your retail ATV:
- Changing Prices – Of course, one of the simplest ways to alter your ATV is to change product prices. Increasing prices may lead to a higher ATV if your sales figures remain the same. Or you could reduce prices on certain products and hope that you make more sales this way, which can also lead to a better overall ATV.
- Store Layout – In the world of retail, product placement and positioning inside your store can influence sales. You could try repositioning more expensive items to make them more visible, as well as using smart layouts that encourage customers to browse the whole store.
- Shopping Experience – You may also want to take a look at your customers’ typical experiences when buying from your store or website, and think of ways to improve that. If you can make the whole experience simple and enjoyable, this can lead to a rise in sales, positive reviews, and customer loyalty. Consider also offering installment services to attract customers.
- New Products – Changing your product lineup can also have an impact on your ATV ratings. Adding new, high-priced items can boost the average value of each transaction, as long as those items are successful. You can also choose to eliminate low-priced or poor-performing items.
Need some help with all that? No worries! To help you get a better understanding of your business, cash flow and user insights, we at Tarya Fintech provide advanced technology to help you offer flexible financing to your customers, increase ATV and ROI, and stay ahead of the game. Are you ready to boost your sales? Let’s get started then!