What is Average Selling Price (ASP)?

The average revenue per new client is represented by the Average Selling Price (ASL), often referred to as the Average Sales Price (ASP), and is a crucial measure for SaaS companies.  This data provides insight into your company’s financial posture, market position, and pricing plans.  

The average starting pricing (ASL) of a product or subscription service that is made available to new clients is determined by taking into account several aspects, such as the product line, lifecycle stage, and distribution channels.  To ensure a thorough understanding, measuring ASL across many channels (e.g., Sage, DealHub.io, Directive Consulting) is helpful.   

Although average subscription length (ASL) and average revenue per user (ARPU) are important SaaS metrics, they evaluate distinct facets of user behavior.  ASL provides information about customer retention tactics by focusing on the typical length of time a new customer stays a subscriber.  

In contrast, average revenue generated per user (ARPU) is a measure of how well monetization tactics work over a certain length of time.  A complete understanding of ASL and ARPU can have a substantial impact on the sustainability of a SaaS business model.

• Collect the necessary data: To compute your ASL, you will need access to your MRR and the number of new sales within the selected period. 
• Determine the overall MRR: Add together all of your regular monthly income from new clients during the selected time frame. 
• MRR divided by sales: To find the average sales price, divide the total MRR by the number of new sales. 

For example, your January ASL would be $100 ($1,500 / 15) if your business brought in $1,500 in MRR from 15 new clients. 

Keep in mind that ASL is a dynamic statistic, therefore monitoring it on a frequent basis can help you understand your pricing and subscription-based revenue model.  

Your ASP can be greatly impacted by a number of factors: 

• Pricing plan: A key factor in establishing ASP is the pricing plan you have selected, such as usage-based, tiered, or flat subscription pricing. 
• Product Differentiation: A plan’s features, functions, and value proposition impact customer decisions and, in turn, impact average service price (ASP). 
• Target Market: The price that your target client segments are willing to pay is strongly influenced by their unique needs and willingness to pay. 
• Marketing and Sales Initiatives: A higher average sales price (ASP) is a result of high-value clients being drawn in by effective sales and marketing tactics. 
• Competitive Landscape: Both your own pricing decisions and client expectations may be impacted by the pricing strategies of your rivals.  

ASP increase is a crucial tool for increasing revenue.  Here are a few tried-and-true tactics: 

• Enhance Your Pricing Approach: Try out various price structures and tiers to determine the optimal combination of revenue maximization and client acquisition. 
• Upselling and cross-selling: Expanding available product options for existing clients, including add-ons and upgraded plans, could have both customer experience and revenue implications for the organization.
• Boost the Segmentation of Customers: Improve your comprehension of your target market and target particular consumer segments with pricing and messaging that emphasize the value proposition that appeals to them the most. 
• Improve Value Proposition: Clearly state the benefits and issues your product resolves.  Customers are more likely to invest when there is a compelling value offer that supports increased prices.   
• Effectively Negotiate: Give your sales staff the knowledge and assurance they need to successfully negotiate prices and close agreements at higher ASPs. 

Precise computation of ASP is essential for making well-informed decisions.  Consider these challenges: 

• Not Taking Promotions or Discounts Into Account: Take into account any incentives or discounts provided to new clients, as these might have a big influence on your real average selling price. 
• Including in the computation the customers who churned: To prevent distorting the data, concentrate only on new customers that were gained during the specified time frame, leaving out churned customers. 
• Neglecting to Take Various Customer Segments into Account: For a more realistic picture, separate your ASP estimates based on the numerous customer categories you serve, each with its own set of needs and pricing sensitivity.
• Ignoring the Effects of Free Trials and Freemium Business Models: Make sure your calculations take into consideration the conversion rates from free trials or freemium models to paid subscriptions if you offer such services.

Comparing your average sales price (ASP) to industry averages gives you important information with which to assess your performance.  The following resources are available: 

• Industry Summaries: Reports containing ASP statistics for various segments and verticals are frequently released by SaaS research companies and trade journals. 
• Competition Analysis: To learn more about your rivals’ average selling prices, examine data that is readily available to the public from them, such as investor reports or pricing pages.
• Online Communities: Participate in online forums and communities with other SaaS experts to share knowledge and discover the ASP benchmarks in your sector.