Average Contract Value is crucial for assessing revenue per contract, aiding in refining pricing, forecasting revenue, and identifying upsell opportunities. It guides product managers in strategic decision-making, ensuring alignment with growth objectives and sustainable success through customer segmentation and relationship building.
Methodology:
- Data collection and verification,
- Revenue recognition per contract,
- Normalisation of contract duration,
- Comprehensive revenue aggregation,
- Contract count and segmentation,
- Calculate the Average Contract Value,
- In-depth analysis for strategic insights.
Benefits:
- Sales strategy optimisation,
- Revenue forecasting and planning,
- Customer segmentation and value analysis.
Limitations:
- Variability across customer segments,
- Potential neglect of smaller contracts,
- Short-term vs long-term value trade-off.