If you’re an entrepreneur striving to grow your company, you’re likely looking for new ways to increase revenue. There are many different metrics available to measure the success of your business, but one metric is the Average Revenue Per User (ARPU). An ARPU calculation measures the average monthly subscription expenditure per customer. Mobile marketing platforms like AppsFlyer can help you measure and analyze important marketing metrics.
How to Calculate and Interpret Average Revenue Per User
1. Define Your Data
To calculate ARPU, you first need to identify three key pieces of data:
Total Number of Customers – This value is found by adding up the total number of customers your business serves. If you’re a web-based company, this refers to the number of unique visitors you have. If you’re a brick-and-mortar store with ten sales associates, this refers to the number of sales associates.
Average Revenue per Customer – This value is found by calculating the average monthly revenue of each customer. For a given month, you first total up the sum of revenues from all customers and then divide this across the total number of customers.
Average Number of Customers – This value is found by calculating the average number of customers you serve on a given day. If you have a website with a narrow core demographic, this value will differ from the Average Revenue per Customer.
For each month, find the average of the three values. Some businesses may compare this value to previous years’ ARPU, but it can be helpful to look at the data for a single month.
2. Look At the Data
Once you have the data outlined, you can take a look at your numbers. Generally, three metrics are most important when it comes to ARPU:
Average Revenue per Customer – This is the total of monthly revenue divided by total customers. A high ARPU suggests that customers are willing to pay more money monthly for your products or services.
Average Number of Customers – This is the average number of customers served over a given month. If you have a high click-through rate, many people put money into your company, giving it an even higher average number of customers.
Average Revenue per User – This is the average monthly subscription charge for each customer. If your ARPU is low compared to other companies in your industry, this ratio can indicate where you can improve. ARPU vs LTV can help you make this determination.
3. Find Comparisons
To find comparisons, you must first calculate your DPA (Daily Active Users) and DPU (Dedicated User). Your DPA will be the total number of unique users who visited any given day over that month. Your DPU will be the average number of users that went to your site per day within the month.
4. Calculate Your Total Revenue
If you’re only looking at the ARPU data, you can still use it to calculate your total revenue. Just divide your total budget by the average number of customers and the average number of customers.
5. Analyze Your Data for Indicators
Analyzing your data will help you spot key performance indicators (KPI) that you can use to evaluate your company’s growth or success. Some of these KPIs include:
A total number of customers – This tells you the total number of people using your product or service.
Average revenue per customer – This value shows the average amount that each person pays you. If this value is low, then it can indicate that you may have a target audience with little money to spend. If this value is high, people are willing to pay a lot of money for your product or service.
Average revenue per user – This value shows the average amount that your customers are paying per month. If you have a low ARPU, it can indicate that you need to increase the value of your product or service. For example, if you’re selling a $20 product and most clients only buy once a year, you need to increase the value of each sale.
Average expenditure per user – This is the average monthly subscription price for your product or service.
An ARPU calculation can be an important metric to track if you’re looking to improve the revenue of your business. By tracking and analyzing this data, you can understand what your customers want and how you can deliver it to them. Comparing to similar companies, understanding where your business stands is another key way that ARPU can help you grow.