What is Average Revenue per User ?
The estimated revenue that one active user generates during a specific period.ARPU is a number for apps that includes in-app advertising and in-app purchases in calculating income. App revenue is divided by the number of active users to arrive at this metric, which measures how much money users are generating. ARPU can also be determined by taking into account variables such as the user’s occupation, age, and location. It does not, however, give any information about the user base in detail. While counting ARPU, various things should be kept in mind. One is paying customers versus free users.
This is vital to keep in mind. Of course, you welcome free signups and trial users to your company. However, they should not be included in your ARPU (yet) because they do not generate income. If you had them, your results would be skewed. The second is Upgrades and downgrades. The number of money customers spend changes over time. For businesses with many priced plans or add-on options, this is extremely important. If you keep an eye on your clients’ membership tier movements, you’ll have a better idea of which subscription levels bring in the most money as well as which may be lacking. The third one is customer churn. Churned customers (inactive or no longer present) have an impact on your MRR as well as your ARPU.
Losing a higher-paying customer, on the other hand, will have a greater effect on your ARPU than losing a lower-paying one. In addition, there are various ways through which ARPU can be increased, like tweaking your pricing to attract higher-paying, long-term customers, Rethink your free (or freemium) plans, etc.