What is average revenue per user?
Average revenue per user metric measures the amount of revenue generated on average from each customer or user. This metric gives you an idea of how much the average customer spends on your company.
How to calculate average revenue per user?
To calculate average revenue per user (ARPU), divide the ‘total revenue generated’ in a particular time frame by the ‘total number of paying customers or users’ and you’ll get your answer in your preferred currency.
Formula for calculating average revenue per user
Real-life example of average revenue per user
Let’s say you own a company that has generated $100,000 in the last year. In the same year, you had 1,000 customers.
Then, your ARPU will be: 100,000/1,000 = $100
This means, each of your company’s customers contributed $100 in revenue on average.
What’s an average average revenue per user? (benchmark)
There’s no single answer to this question as it is likely to fluctuate based on location, industry, and pricing model.
In the mobile games industry, the average ARPU is around $1.96. However, WeChat – the Chinese social media app – has an estimated ARPU of $7.00.
The subscription-based apps & SaaS tend to have a higher ARPU than other revenue models which come in at around $0.04 per month.
To set a benchmark ARPU for your business, the best option might be to study your competitors as well as big names within your industry.
Most importantly, you should aim for a higher ARPU than what you currently have.
Ways to increase your average revenue per user
- Increasing selling price: Increasing your average selling price per unit is an obvious way to increase your ARPU but study your customers before doing so as, they might not be ready for a price increase and you can rather lose your customer base.
- Using upselling and cross-selling: Upselling and cross-selling strategies are a great way to increase the average value of a customer transaction while offering them better solutions.
- Reducing customer churn: By actively reducing customer churn, you ensure your customers stay with you for longer. This means, a higher CLV ad more opportunities to increase your ARPU.
Also Read: Related Metrics
- Net Promoter Score
- Customer Churn Rate
- Customer Lifetime Value
- Customer Retention Rate
- Repeat Purchase Rate
- Customer Satisfaction Score (CSAT)
- Renewal Rate
- Customer Acquisition Cost
- First Contact Resolution Rate (FCR)
- Free Trial Conversion Rate
- Daily Active Users (DAU)
- Monthly Active Users (MAU)
- Referral Program ROI
- Upsell Rate & Cross-sell Rate
- Viral Coefficient
- Participant Share Rate
- Invitation Conversion Rate
- Net Dollar Retention
- Product Adoption Rate
- Sessions per User