It is calculated by dividing the amount of total income by the number of clients or users in a given period of time, which can be weeks, months or years.
ARPU can be used to track a company's growth and revenue.
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“Average Revenue per User” and “Average Revenue per Unit”: What’s the difference?
When we talk about “Average Revenue Per User”, we measure the average revenue per user; that is, the company can use this measurement to estimate the amount of money it can earn per customer. To calculate it, divide the total revenue number by the total number of users.
As for the “Average Revenue per Unit”, what it measures is the average per unit. This index is widely used by companies that sell tangible products and that can estimate how much money they will receive for the sale of a unit of product. It is calculated by dividing the total number of revenues by the number of units sold.
The importance of ARPU
Through this metric, it is possible to identify different factors such as changes in behavior or trends in user groups over a period of time and compare them with the activity of other segments. In addition, it is possible to distinguish which prices are most chosen by users and which products or services are the least consumed by them.
The importance of ARPU is that it allows for short- and long-term planning. If we need to increase the MRR ( Monthly Recurring Revenue), emphasis will be placed on users who pay higher amounts.
With high ARPU numbers, you can optimize your customer LTV (lifetime value) goals and thus have a long-term outlook for success. Variations in ARPU influence the Churn Rate. The higher the ARPU, the lower the customer churn rate.
Financial Health
It could be said that ARPU is a signal that indicates whether a company is on the right path and whether the direction it is headed in is the one that will lead it to meet its objectives.
If the ARPU is very low, it will be necessary to make great efforts to increase the number of customers or improve the product or service to increase its monetary value and obtain greater returns. On the other hand, a high ARPU indicates progressive growth with the possibility of planning a business evolution in the near future.
