The average selling price is a term that refers to the price at which a good or service is sold, but as its name indicates, it is an average price. That is why for companies, the average selling price usually indicates what marketing strategy a company should follow.
Let’s learn more about these most common metrics to track due to their importance for any type of business.
What is the average selling price?
The average selling price is the average cost for which a product is sold. This metric can be applied narrowly to a product or service or, more broadly, to an entire market.
It is one of the most common sales indicators as it is used to compare companies or channels and is interesting to monitor because it reflects what consumers will pay for similar products or services.
For example, if a company sells hundreds of thousands of cars each year at different prices, the average price is calculated by taking the total revenue earned from sales, dividing that amount by the total number of units sold.
How is the average sales price calculated?
To calculate the average sales price, all you have to do is divide the net sales by the number of products sold.
For example, if you sold 100 units and had net sales of $20,000, the average sales price of your products is $200.
Uses of average selling price
The term average selling price tends to be used more for businesses with moderate to high volume, such as retail, food service, and technology, however, its use is seen in almost all types of businesses.
The average sales price can be a good indicator of the effectiveness of a company’s sales team, the company’s position in the market and how crowded the market has become.
Unlike other revenue metrics, average sales price is highly visible to customers and should be understood and leveraged by both marketing and sales.
It can be an effective way for sales executives to compare the performance of different parts of their team.
Keep in mind that the average selling price can vary significantly between companies and segments.
For SaaS companies, the average price is what a new customer pays when they first sign up for the service. This is often referred to as average new account income.
If you want to view this and other metrics such as gross margin or cost of goods sold, you can do so through a sales dashboard. This will allow you to monitor the health of your business and be able to detect trends or any problems to act in time.
A dashboard is the ideal tool to quickly see what is happening in different areas of your business. It allows you to have data from various sources to be able to read your information in real time.