What Is Average Selling Price (ASP)?
The term average selling price (ASP) refers to the price at which a certain class of good or service is typically sold. The average selling price is affected by the type of product and the product life cycle. The ASP is the average selling price of the product across multiple distribution channels, across a product category within a company, or even across the market as a whole.
Key Takeaways
- The term average selling price refers to the price at which a certain class of good or service is typically sold.
- ASPs can serve as a benchmark for entities who want to set a price for their product or service.
- Computers, cameras, televisions, and jewelry tend to have higher ASPs, while books and DVDs have a low average selling price.
- Average selling price is affected by the type of product and the product life cycle.
- Average selling price is usually reported duringquarterly financial results.
Understanding Average Selling Price (ASP)
The average selling price is the price for a product or service in various markets, and is normally used in the retail and technology industries. The established ASP for a particular good can act as a benchmark price, helping other manufacturers, producers, or retailers set the prices for their own products.
Marketers who try to set a price for a product must also consider where they want their product to be positioned. If they want their product image to be part of a high-quality choice, they have to set a higher ASP.
Products like computers, cameras, televisions, and jewelry tend to have higher average selling prices while products like books and DVDs will have a low average selling price. When a product is the latter part of its product life cycle, the market is most likely saturated with competitors, therefore, driving down the ASP.
In order to calculate the ASP, divide the total revenue earned from the product by the total number of units sold. This average selling price is usually reported duringquarterly financial resultsand can be considered as accurate as possible given regulation on fraudulent reporting.
Special Considerations
The smartphone market is a big industry which uses average selling prices. In the smartphone market, the average selling priceindicateshow much money a handset manufacturer is receiving on average for the phones that it sells.
In thesmartphone market, advertised selling prices can differ drastically from average selling prices.
For product-driven companies like Apple, calculations for average selling price provide pivotal information about its financial performance and, by extension, the performance of its stock price. In fact, there's a clear relationship between Apple's iPhone ASP and its stock price movements.
The iPhone's ASP matters even more when considering how each device drives overall profitability for Apple. Apple consolidates its operations under a single profit-and-loss statement (P&L), meaning investors can't tell how costs, such as marketing and research and development (R&D) are spread among the company's various products.
Since the iPhone has the highest gross margin in Apple's device family, the device generates the lion's share of Apple's profits. That makes the iPhone crucial in determining Apple's overall financial performance each quarter.
Examples of Average Selling Price
The term average selling price has a place in the housing market. When the average selling price of a home within a particular region rises, this may be a signal of a booming market.Conversely, when the average price drops, so does the perception of the market in that particular area.
Some industries use ASP in a slightly different way. The hospitality industry—especially hotels and other lodging companies—commonly refers to it as the average room or average daily rate. These average rates tend to be higher during peak seasons, while rates normally drop when travel seems to be low or during off-seasons.
FAQs
ASP is simply calculated by dividing the total revenue earned by the total number of units sold. The average selling price can be used as a benchmark and analyzed by current businesses, new businesses, analysts, and investors.
How do you calculate ASP price? ›
In order to calculate the ASP, divide the total revenue earned from the product by the total number of units sold.
How to calculate the average selling price? ›
To calculate the average selling price of a product, take the total revenue earned from the product or service and divide it by the number of products or services sold.
What is ASP in selling price? ›
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.
What is ASP pricing? ›
For each billing code, CMS calculates a weighted average sales price using the Average Sales Price (ASP) data submitted by manufacturers. • Manufacturers submit ASP data at the 11-digit National Drug Code (NDC) level. • Manufacturers submit the number of units of the 11-digit NDC sold and the ASP for those units.
What is the formula for calculating selling price? ›
Calculate Selling Price Per Unit
Divide the total cost by the number of units bought to obtain the cost price. Use the selling price formula to find out the final price i.e.: SP = CP + Profit Margin. Margin will then be added to the cost of the commodity in order to identify the appropriate pricing.
What does ASP stand for price? ›
The average selling price (ASP) is the typical “street” price of any product. In Gartner communications research, it generally refers to the typical price of a mobile phone.
What is the formula for average price? ›
It is calculated by dividing the sum of all prices by the number of prices. This metric is particularly useful in understanding the overall pricing trends of products or services and is widely used in financial analysis, inventory management, and market research.
How to calculate average sale? ›
To calculate the average sales over your chosen period, you can simply find the total value of all sales orders in the chosen timeframe and divide by the intervals. For example, you can calculate average sales per month by taking the value of sales over a year and dividing by 12 (the number of months in the year).
What KPI is ASP? ›
Track all your Financial KPIs in one place
As a savvy business owner or investor, knowing your product or service's average selling price (ASP) is crucial. The metric can enable you to make informed decisions about pricing strategies, market trends, and revenue potential.
Average Selling Price (ASP) refers to the average price at which a product or service is sold over a specific period. It is calculated by dividing the total revenue generated from sales by the number of units sold.
Are ASP and AOV the same? ›
Yet, it's important to note that AOV in GA4 only reflects the average amount spent per transaction and does not take into account the number of items purchased in each order. If you want to understand the average value of each item sold, you need to use a different metric called Average Selling Price (ASP).
How do you calculate ASP? ›
How is Average Sales Price calculated? To calculate ASP, divide the total MRR generated from new customers by the number of new customers. For example, if a SaaS company earns $1,000 from 10 new customers, the ASP is $100 ($1,000 divided by 10). ASP is presented as a 30-day rolling number.
What is the difference between ASP and average selling price? ›
The average selling price, often abbreviated as “ASP”, represents the average price paid by customers for past sales. To calculate a company's average selling price, the total product revenue generated is divided by the number of product units sold.
What does ASP mean in ASP? ›
ASP stands for Active Server Pages. ASP is a development framework for building web pages. ASP supports many different development models: Classic ASP. ASP.NET Web Forms.
What is the formula for calculating average sales? ›
To calculate the average sales over your chosen period, you can simply find the total value of all sales orders in the chosen timeframe and divide by the intervals. For example, you can calculate average sales per month by taking the value of sales over a year and dividing by 12 (the number of months in the year).
How do you calculate average sales cost? ›
Cost of sales formula
Cost of sales = (Beginning Inventory + New Inventory) – Ending Inventory. You'll need to know the inventory cost method that your business or accountant is using. Different approaches are used depending on how your company manages its costs, which impacts the value of cost of sales.
What is the formula for weighted average selling price? ›
WASP = [Value sales] / [Volume sales].
