Average Revenue Per User (ARPU)

Description:

The average monthly recurring revenue from a paying customer.

Use:

How to use arpu… you can compare month-to-month performance per customer. Estimate how many customers you need to reach and acquire to achieve a certain MRR. And get an idea of which plans and prices customers prefer.

Target:

Keep an upwards trend. No optimal value. The lower the ARPA, the more customers needed. Downwards trend ok when customers are moving to annual plans and long-term business value rises.

To Improve it:

Adjust plan pricing & marketing. Reduce downgrades, increase upgrades. Offer add-ons and related products to existing customers. Reduce refunds and discounts.

Affects:

Customer Life-Time Value (CLTV)

Formula:

MRR / Number of Paying Subscriptions

Pitfalls:

To get CLTV right, if you include non-paying customers to churn calculations, include them also to ARPA calculations.

Variations:

In principle, ARPA seems to be a cover-all term for all per-unit revenue metrics.
Can also be calculated per segment e.g. ARPA for new customers, ARPA per plan For non-SaaS businesses, calculate it from revenue. For cost-profit comparisons, can include also free plan and trial customers. Can also be calculated per user/seat instead of customer/account/subscription.

Also Called:

Average Revenue Per Account (ARPA),
Average Revenue Per Customer (ARPC),
Average Revenue Per Paying User (ARPPU)

Looking for more info on ARPU? Check out our awesome guide on everything related to ARPU!