ASP vs ARPA
Average Selling Price (ASP) and Average Revenue Per Account (ARPA) reflect different dimensions of sales performance and customer value. ASP calculates the mean price of individual products or services sold by dividing total revenue by the number of units sold during a specific period. It focuses solely on transaction values, regardless of who makes the purchase. ARPA, however, measures the average revenue generated from each customer account by dividing total revenue by the number of active accounts. This metric captures the comprehensive value of customer relationships, including multiple purchases, various product combinations, and additional services like subscriptions, upgrades, and cross-sells that a single account may generate over time.
When managing a retail electronics business, use ASP to analyse pricing strategy and product mix effectiveness. For instance, if your smartphone ASP increases from $600 to $700 after introducing premium models, this indicates successful up-selling regardless of whether purchases came from new or returning customers. Conversely, ARPA is more valuable for subscription-based or relationship-focused businesses. A software company might maintain a stable ASP of $99 for its base product while growing ARPA from $1,200 to $1,800 annually through effective cross-selling of additional modules, support services, and multi-seat licences to existing accounts. While ASP helps optimize individual product offerings and pricing, ARPA provides deeper insights into customer relationship value and the effectiveness of account expansion strategies, making it particularly vital for businesses with recurring revenue models or complex product ecosystems.
Average Selling Price
Average Revenue Per Account
What is it?
Average Selling Price (ASP) is the average price a given product is sold for. This metric can be applied narrowly to a product or service or, more broadly, to an entire market. It's a common metric, often used to compare businesses or channels and is particularly interesting as a reflection of what consumers will pay for similar products or services.
Average Revenue Per Account (ARPA) is the average revenue generated per account per year or month. It is used as an indication of revenue generation capability and the ability to meet targets.
Who is it for?
Categories
Formula
Example
A luxury watch maker is able to demand an ASP of $3,900 per watch by selling 20 watches at $3,000 and 5 watches at $7,500 each month. Compare this to a high volume watch manufacturer, who sells 2,500 watches at $50 and another 7,500 at $30 each; resulting in an ASP of $35.
Consider a company has 1000 accounts and is generating $100,000 in revenue per month. Average Revenue per Account would be, ARPA = $100,000 / 1000 = $100 per account per month
Published and updated dates
Date created: Oct 12, 2022
Latest update: Mar 15, 2024
Date created: Oct 12, 2022
Latest update: Oct 12, 2022