Average revenue per user (ARPU) is the measure of average revenue per user. It is also known as average revenue per unit. It is usually calculated on monthly or yearly basis. ARPU is very important measurement for all type of businesses but mostly used by subscription based service provider company’s i.e telecommunication and internet service providers (ISP). It provides a close view of the revenue per user device or unit and help companies to pursue revenue growth as a result of promotions and ads on services.
How to find ARPU?
It is used for financial analytics. The equation to determine ARPU is:
ARPU = Total revenue / total number of users
It depends upon a time period, typically monthly and yearly. But the number of users is usually taken as average because their numbers fluctuate in a specified period.
Some uses of ARPU
- Telecommunication companies measure ARPU based on per device. In the case of telephony services, ARPU could be based on the number of calls per unit time.
- Cable service providers measure ARPU based on per connection
- E-commerce based companies measure ARPU based on per cart
- Social media companies measure ARPU based on per investor
- What is the total revenue across various dimensions including customer type, product type, plan type, etc
- What is ARPU across various dimensions including customer type, product type, plan type, etc
In addition to total revenue, another important parameter in ARPU formula is “Number of customers”. Knowing this parameter from acquisition and churn perspective help telecommunication service providers to make the decision at the right time i.e. offer promotions to attract new customers or offer different value-added services to retain the existing customers. Billing analytics tool answer the following questions:
- What is the rate of customer acquisition across various dimensions like customer type, product type, plan type, etc
- What is the churn rate across the above dimensions