What is the ARPU Metric?
ARPU stands for Average Revenue Per User. It represents the average revenue generated per unique customer who made a purchase. It's calculated by dividing the total revenue from all transactions by the number of unique customers who made a purchase. This metric provides a straightforward view of the average revenue generated per paying customer.
This metric is available for the clients who have access to ChurnIQ. You can find it in the Cleeng Dashboard under ChurnIQ.
How is it Calculated?
The formula for calculating ARPU is:
ARPU = (Total Transaction Revenue) / (Total Paying Customers)
- Total Transaction Revenue: The sum of all revenue generated from completed transactions.
- Total Paying Customers: The number of unique customers who made a purchase.
How to Use the ARPU Metric in a Subscription Business
The ARPU metric is useful for understanding the average revenue generated per paying customer. You can use it to:
- Assess Average Customer Value: Monitor ARPU to understand the average revenue generated by each paying customer.
- Evaluate Pricing Strategies: Analyze ARPU to determine the impact of pricing changes or promotional activities on revenue per customer.
- Identify Customer Spending Trends: Track ARPU over time to identify trends in customer spending behavior.
- Forecast Revenue: Use ARPU to predict future revenue based on anticipated customer numbers.
FAQs
What’s the difference between ARPU (Simple) and ARPS?
The key difference lies in the user base used for calculation.
- ARPU (Simple) considers all active accounts, including free, trial, and paid users.
- ARPS focuses only on active paying subscribers.
As a result, ARPS provides a clearer measure of revenue per paying customer, while ARPU (Simple) offers a broader view that includes all active accounts, regardless of their payment status.
How does ARPU differ from Average Transaction Value (ATV)?
ARPU measures the average revenue per customer, while ATV measures the average value of each transaction. One customer can have many transactions.