Average sales price (ASP), also called average selling price, is a SaaS metric that refers to the average initial price of a product or subscription service sold to a new customer. ASP may vary by product line and the product life cycle and is measured as the average sales price of the product across multiple distribution channels, specific offering within a company, customer segment, or even across the market as a whole.
By tracking and analyzing ASP, it can tell you what sales strategy to employ. Additionally, management and marketing professionals may be able to gain a deeper understanding of when it is appropriate to increase sales and marketing (S&M) spending, reduce prices, expand to new markets, or even as simple as redesigning product packaging and messaging.
How to calculate average sales price
Calculating the ASP of a product or service can be found with the formula:
Keep in mind that Total Revenue could be based on your customer segments or product types. Customer Count needs to match the breakdown of Total Revenue. To clarify as a formula:
A good practice for management teams and marketing professionals is to monitor the change in the ASP over time. To do this, set a certain time period for calculating changes in ASP.
Example ASP for a SaaS company
In the below example, let’s assume a SaaS company offers a mix of products and services with the following ASPs:
From this information, we can infer that Product B is the company’s cash cow in terms of revenue generation. Assuming product A and Product B have similar expenses, in this scenario the company may be inclined to focus on growing the customer base of Product B.
In addition, knowing the ASP of different products and services can help companies identify upsell opportunities. Not only does average sales price show investors whether a company is betting on the right products to generate increasing revenue, tracking this metric also offers downside protection, as understanding the value of individual offerings can allow companies to focus on the most profitable products in tough economic times. Expanding on the previous example, the SaaS company would add a pricing column for the different products and services.
While Product A has an upsell opportunity of $20 per customer per month (from $50 to $70), Product B has an upsell opportunity of $300 per customer per month. This means the example SaaS company should be paying much more attention to upsell opportunities for customers of Product B.
How to track and analyze ASP and other SaaS metrics in real-time
SaaS companies can transform reporting, decision-making, and board meetings with real-time metrics tracking and analysis. You can track and analyze average sales price and other SaaS metrics using See Sage Intacct SaaS Intelligence – see it in action with our on-demand product tour. We’ll walk you through how our SaaS metrics dashboards can help you calculate critical KPIs and empower you to communicate the trends you’re seeing and the story behind the numbers with transaction records.
