Determining the average revenue per user, or ARPU, serves as an ideal indicator for businesses that base their profitability on the subscriptions they obtain. For example, the one us by streaming, video game and other types of digital content corporations.
gar Higuerey
Jul 12, 21 | 7 min read
What is the ARPU metric and how to calculate it in your marketing and sales plan
Reading time: 6 minutes
ARPU as a general KPI contains certain aspects inherent to this revenue model, such as the standard rate charg for the service, discounts, promotions and, of course, losses—if any—that occur during collections.
In a world where business and digital marketing dominate commercial transactions through e-commerce and online businesses, ARPU has become very important in determining whether an organization is at a break-even point.
Its importance increases especially when we
consider that SaaS companies must compete for every penny within their niche.
Read to the end and discover everything you ne to know about this metric!
What is ARPU?
As we already mention, the Average Revenue per User is a metric whose main objective is to provide the correct information to analyze the growth or decline of an organization in terms of the amount of money it is able to obtain for each client it has.
In other words, it is an exact calculation list of mali consumer email that shows the income receiv from each user for the marketing of products and services. An aspect that allows obtaining a clear perspective on the customer database and the return on investment or ROI of the company’s products.
It differs from other KPIs, such as customer acquisition cost , in that it is the monetary figure obtain with each existing customer and not the cost incurr to attract a new consumer.
The importance of ARPU in business
Through this metric, managers and executives can quickly identify changes in market behavior or trends that have been adopt over a given period.
It also makes it possible to view the prices that best match the tastes and possibilities of customers, as well as discover those products and services that spend the longest time without rotation.
Its importance lies in the fact that a manager
will be able to plan in the short and long term, elements such as monthly income and establish the ideal marketing strategies to increase the money supply or, instead, lower prices to attract more users to their products or services.
Having said all this, it is time to talk about those factors that ARPU can provide to a company and that are truly valuable.
What is ARPU us for?
This KPI is able to give us a deep perspective esker launches new solution to help purchasing departments of user trends and behaviors, however, that is not all. Below are some of the elements that ARPU allows us to access.
Drive growth in Recurring Monthly Revenue and Lifetime Value
The increase in average revenue per customer has a direct impact on monthly recurring revenue ( MRR ) measurements, since if customers have to pay more to receive the same products or services over time, the MRR will increase proportionally.
In addition, the money that consumers contribute to the company each month is a determining variable in the Lifetime Value or LTV , so the ARPU has bz lists a long-term influence on the life cycle of users, but with differences between the concepts that we will explain later.