What is Average Selling Price?
Average Selling Price (ASP) is the average price a given product is sold for. This metric can be applied narrowly to a product or service or, more broadly, to an entire market. It's a common metric, often used to compare businesses or channels and is particularly interesting as a reflection of what consumers will pay for similar products or services.
How to calculate Average Selling Price?
ƒ Sum(Product or Service Revenue) / Count(Products or Services sold)
A luxury watch maker is able to demand an ASP of $3,900 per watch by selling 20 watches at $3,000 and 5 watches at $7,500 each month. Compare this to a high volume watch manufacturer, who sells 2,500 watches at $50 and another 7,500 at $30 each; resulting in an ASP of $35.
More about this metric
The term ASP tends to be used more for moderate to high volume businesses, such as retail, food services, and technology, but its use is seen in almost every type of business.
ASP can be a good indication of the effectiveness of a company’s sales team, the company’s position in the market, and how much the market has been commoditized. Unlike other revenue related metrics, ASP is highly visible to customers and needs to be understood and leveraged by both marketing and sales. It can be an effective way for sales executives to compare how different parts of their team are performing. ASP can vary significantly between companies and segments (such as target users and geography).
For SaaS companies, ASP is the average price a new customer pays when they first subscribe to the service. This is often referred to as average revenue per new account and is a segment of ARPA.
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