Average Sale Price (ASP)

What is ASP?

In SaaS, Average Sale Price (ASP) refers to the average price paid by a new customer when they first convert to a paid subscription. It differs from Average Revenue Per Account (ARPA), which refers to the average price paid across all subscribers at a point in time.

ASP can fluctuate significantly from month to month, making it a valuable metric for measuring your sales team's ability to increase deal size. It also serves as an early indicator of whether customer lifetime value (LTV) is likely to grow or decline.

Calculating ASP

ASP is the average price paid by a new customer at the moment they first convert to a paid subscription. Any follow-up expansion or contraction of the account should be ignored.

To calculate ASP, take the total New Business MRR in a given period and divide it by the number of customers who subscribed for the first time in that period.

$$\text{ASP} = \frac{ \text{\textcolor{#007ac4}{New business MRR} in period} }{ \text{\textcolor{#007ac4}{# new customers} in same period} }$$

Example

You acquire 10 new customers in May:

• 3 purchase a Gold Plan for $100
• 7 purchase a Silver Plan for $50.

Total revenue from new customers: $650. Divide it by 10 (the number of new customers in that same period). Your Average Sale Price is $65.

Tracking ASP

Tracking ASP is crucial for understanding sales performance, pricing effectiveness, and customer behavior. While ASP provides a high-level metric, its value increases when segmented by factors such as:

• Subscription plans (e.g., comparing ASP across different pricing tiers)
• Geographies (e.g., ASP differences between North America and Europe)
• Sales channels (e.g., ASP for self-serve vs. sales-led signups)
• Customer segments (e.g., startups vs. mid-market vs. enterprise customers)

For larger SaaS businesses, segmenting ASP by sales teams or account managers can also reveal performance variations and help optimize sales and pricing strategies.

Segmenting ASP by sales funnel

The chart below shows ASP over time for two different sales funnels, the self-serve funnel (represented in cyan), and sales-led funnel (represented in black).

In this example, the sales-led funnel has a significantly higher ASP than the self-serve funnel throughout the entire period.

This chart suggests that when a sales rep is involved in the initial purchase, the average sale price is meaningfully higher than when a customer independently purchases.

Segmenting ASP by geographies

With ChartMogul you can quickly define your sales regions by selecting the regions you want to look at or compare.

Understanding ASP by region can help you in building fair sales targets for your team.

Let’s say you have two sales teams, the first covering the United States and the second covering the EMEA region. By segmenting your ASP by region, you can identify the average sale price for each region.

If the ASP is significantly higher historically in North America than EMEA, your sales targets should reflect this.

Why is Average Sale Price important?

Average Sale Price is useful for measuring efforts to increase the average deal size of new subscribers. It provides an early indication of whether customer lifetime value (LTV) is likely to increase or decrease in the future.

Sara Archer, VP of Sales, ChartMogul Everyone wants to close big deals, and it's admirable to want to have a higher ASP. However, set your eye on the right prize: faster MRR/ARR growth. Don't overindex for going upmarket too much; rather, I suggest to ensure you are increasing your ASP at the right clip. You want high value customers that you can retain with just-right pricing. If your ASP is declining with good-fit customers it could signal something major going on in the competitive landscape or with negotiations.

ASP is also a useful financial metric for assessing key business areas. ASP helps you:

Assess sales team performance

ASP helps gauge how effectively your sales team is upselling, cross-selling, and maximizing deal value. A rising ASP indicates that sales efforts drive higher-value contracts, whereas a declining ASP could signal pricing pressure or ineffective negotiations.

Measure pricing strategy effectiveness

If you're conducting pricing experiments or deciding when to raise prices, ASP can help you evaluate whether pricing changes are converting customers to higher-value products or driving them toward lower-tier plans.

Predict future revenue and growth

ASP is an early indicator of whether Customer Lifetime Value (LTV) is likely to increase or decrease, helping SaaS businesses adjust growth strategies accordingly.

Optimize advertising and marketing spend

Understanding ASP across different regions and customer segments can help companies allocate advertising budgets more effectively and target higher-value prospects.

Benchmark against competitors

Comparing your ASP to industry averages can highlight whether you're overpricing or underpricing compared to competitors, allowing for strategic adjustments.

When is ASP too low?

ASP is considered too low when it negatively impacts a SaaS business’s ability to grow profitably. Here are three key signs that ASP may be too low:

1. Customer Acquisition Cost (CAC) exceeds revenue

   If your ASP is not high enough to cover the cost of acquiring a new customer (CAC), your business may struggle to generate sustainable revenue. A low ASP means longer payback periods and higher financial pressure to acquire more customers at scale.

2. Customers consistently choose lower-tier plans

   If most customers are opting for entry-level plans rather than mid-tier or premium options, it suggests that your pricing strategy may not be effectively communicating the value of higher-priced offerings. This can limit revenue potential and reduce overall customer lifetime value (LTV).

3. Revenue growth is stagnant despite increased customer acquisition

   If you're acquiring more customers but revenue growth remains slow, a low ASP could be the culprit. This indicates that while you’re bringing in new users, they are paying too little for your service to make a meaningful impact on revenue and long-term profitability.

How to fix a low ASP

• Reevaluate pricing tiers to better align value with higher price points.
• Introduce feature bundling to encourage customers to choose higher plans.
• Upsell and cross-sell to increase revenue from each customer.
• Target higher-value customer segments that are willing to pay more.