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Average Revenue Per User (ARPA)

Description:

The average monthly recurring revenue from a paying customer.

Use:

Compare month-to-month performance per customer. Estimate how many customers you need to reach and acquire to achieve a certain MRR. Get a crude overview of which plans/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 User (ARPU), Average Revenue Per Customer (ARPC), Average Revenue Per Paying User (ARPPU)