Average Revenue Per User (ARPU)

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. More information in How to use ARPU

Target:

Keep an upwards trend. No optimal value. The lower the ARPU, 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 ARPU calculations.

Variations:

In principle, ARPU seems to be a cover-all term for all per-unit revenue metrics.
Can also be calculated per segment e.g. ARPU for new customers, ARPU 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 Unit (ARPU),
Average Revenue Per Paying User (ARPPU)