What is Average Revenue per User (ARPU?)
Before defining what Average Revenue per User is, it is crucial to understand that it deals with revenue and users, measured as total income divided by the average total number of users. So, the correct definition of the average revenue per user is the revenue generated per user. Some will define it as the average revenue generated per unit. ARPU plays a crucial role in many activities for the company.
- They allow for the proper management of a company.
- Control of investors.
ARPU is prudent in the analysis of the company’s ability to generate revenue per customer level. The idea will define the growth of the company.
Below are the critical features of Average Revenue per User (ARPU)
- The monthly recurring revenue (MRR).
- The lost MRR from the churned customers.
- The account upgrades.
- The account downgrades.
- The number of customers that have paid for the service within a month.
Application of Average Revenue per User (ARPU)
ARPU has a broad appeal to the company. The Revenue per User Average, as a measure, has a role in telecommunication sectors such as Verizon and many other companies. The companies employ the ARPU to track the amount of revenue that every user generates. Verizon, for instance, uses the ARPU to track the amount the phone users make to the company.
The ARPU values are important in analysis and forecasting! The subscriber-based companies will use the measures to forecast the future expectations of revenues. The Non-subscriber-based company’s reports their Revenue per User Average measurements to the investors! The ARPU numbers will be helpful for investors who may wish to invest. Investing aims at returns; hence, you need ARPU forecasting!
Advantages of Average Revenue per User (ARPU)
The measurement of ARPU has many benefits to the users. It is essential in tracking month-to-month subscriptions. You need to understand the performance of your users on a month-to-month basis. You can even adjust the period tracking according to your wish.
- Revenue per User Average will give a more natural way to compare the revenue you earn against your competitors! It’s limelight for a better strategy in business.
- Revenue per User Average will also help you in identifying the customer acquisition channels!
- Forecasting the monthly revenue is made simpler by the measurements. Every business will wish to predict the monthly growth of income.
- The Revenue per User Average will help you in discovering opportunities for upselling.
- It helps in understanding the needs of your customers. It will help you understand the monetization plans that your customers will prefer.
Disadvantages of Average Revenue per User (ARPU)
- The biggest demerit of using the ARPU is that it can quickly become a vanity metric. It would help if you tracked it in the context of other parameters, such as total revenue.
- It would help if you had subscription apps together with the In-app purchases.
In summary, Revenue per User Average measurements are crucial requirements for business planning. Investors will use the Revenue per User Average in investment decisions. It also helps your management team in coming up with better managerial strategies. Revenue per User Average is undoubtedly the best business strategy that every company needs, whether subscriber or non-subscriber-based! It’s a perfect way to forecast future revenue!