Arpu - what is it and how to influence this indicator?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

If your business is focused not on one-time purchases, but on the constant use of the product, it is much more difficult to evaluate the effectiveness of the project. Conversion here is not a criterion. Why? Imagine the situation: a client purchased a premium account for 2 weeks, and then "merged" and switched to a competitor's service. The profit that such users bring may be less than your promotion and advertising costs. In this case, a special business metric is used for analysis - ARPU.

What is this

Average Revenue Per User - this is the average income from one attracted client. With this indicator, you can see how much money users usually "pour" into your services over the entire period of use.

Let's give an example. The cost of a subscription to the popular streaming service "Yandex. Music" is 200 rubles. per month. Cheap, right? But for a year, an active listener brings the company 2,400 rubles, for 3 years - already 7,000. And this is not the limit. Moreover, for a person, these costs are almostimperceptible. But if the same amount had to be paid immediately, even for "eternal" premium access, there would be much fewer people who would like to.

And one more thing that needs to be said about what ARPU is. This concept should not be confused with "average check" - a key performance indicator in retail. From the point of view of Revenue Per User, an order for $100 and $10 for $10 is the same. But for high performance, existing customers must make purchases.

ARPU formula. Find out the true value of your followers

Ideally, it is regular customers who should bring the company the largest percentage of profits. The more often and more they buy, the less your advertising and marketing costs will be.

How to calculate ARPU? Its general formula is as follows: ARPU=S/A, where S is the total revenue from the entire network, and A is the number of your subscribers/subscribers.

This metric is directly related to only one element of the marketing mix - price. The more expensive the subscription and connection of additional functionality, the higher the average income from the client.

Some marketers advise tracking the dynamics of changes every month. But the potential of the ARPU indicator is fully revealed only in long-term strategic planning. Why do you think? Not all new clients will continue to work with you, most of them are "passers-by". If you want to focus on developing relationships with active subscribers, you need to analyze morelong periods - 3 months, half a year, a year. In this case, it is desirable to take into account only those who made purchases 2 or more times.

Effective work with metrics: setting the right goals

By and large, it makes no sense to calculate the average ARPU for the company as a whole, especially if you work with several customer segments and offer them completely different services.

To extract the maximum of useful information from the analysis, first of all, you need to choose a direction and formulate specific tasks. What can ARPU be used for?

1. Research different sales channels. You can determine where the most "money" customers come from (advertising on the Internet, cold calls, referrals of partners, etc.). You will also see which channels are underperforming and eating up your marketing budget.
2. Assessing the effectiveness of an advertising campaign. In this case, ARPU is calculated separately for each project. For example, you can compare the income from users attracted from 2 landing pages "sharpened" for different promotions. By comparing several campaigns, you will get a more or less clear picture of what your customers like/dislike.
3. Analysis of product popularity. Here, ARPU is considered in dynamics, that is, how the average income per subscriber has changed over a certain period (month, quarter, year). Relevant if you have recently changed tariffs or added new services.

Of course, the list is not complete. In the same way, you can compare ARPU of different segmentscustomers (for example, young people and customers over 35 years old) or specific regions. After that, the most difficult stage begins. You need to analyze the results and find the key factors that affect the increase or decrease in ARPU.

Pitfalls

Starting internet entrepreneurs often ask: what should be the ARPU? With what in general to compare? In fact, there are no optimal values, even approximate ones. It all depends on the specifics of the niche and the company itself.

Firstly, not everyone needs this metric. In IT and telecommunications, ARPU can be considered one of the key performance indicators. Cellular operators, developers of online games and applications, Internet providers - they all strive not to attract as many new customers as possible, but to "squeeze" the maximum out of each user. But if you sell one training course, the income from all users will be the same.

Secondly, the average revenue per user can only be an auxiliary indicator. It does not display the status of your business and possible problems. What is ARPU? This is a metric that shows how much subscribers spend, but not your profit. The calculations do not take into account the cost of advertising and traffic, taxes, etc. Therefore, even high values do not guarantee that you will be profitable.

5 marketing levers to increase ARPU

Another significant drawback of this business metric is that it does not give an idea of what, besides prices, affectsto the level of income. But it is impossible to outplay competitors by "pulling" only one lever. Consumer behavior is influenced by many factors. And the main task is to make sure that he chooses not between your company and competitors, but between the options that you offer. How to achieve this?

A range of services and options

It should be updated as the needs of the target audience grow. People are more comfortable when everything can be done in one place. A good example is internet service providers. Now almost all of them offer cable TV services. The client connects both - ARPU grows. Renting a Wi-Fi router - higher income. Doesn't know how to set it up - another plus.

Don't be afraid to introduce new services. Even if the demand for them is low, you will not lose potential customers, and this is much more important.

"Stuffing" tariffs

Let's move on. How to force users to buy additional services? The easiest and relatively cheap way is to include them in the cost of basic tariff plans. This is actively used by mobile operators. Even if, in fact, you only need a good 3G Internet, you will receive minutes of calls and SMS as a load. However, the more opportunities the tariff provides, the higher its value in the eyes of the consumer. This means that you can significantly increase the cost of your services.

There is another approach, when the user chooses the options he needs and pays separately for each item. This works great when standard rates have enough value inin the eyes of the client and differ from the offers of competitors. What's the plus? The user does not have the feeling that something is being imposed on him - it seems to him that he himself makes a choice and can refuse certain services at any time. In practice, no one usually does this, but the inclusion of options can quietly increase the cost by 1.5-2 times.

Together is cheaper

Packages are one of the most powerful tools for increasing a subscriber's ARPU. Usually they include 2-3 elements:

• "Locomotive" - the basis; a popular product with consistently high demand.
• "Wagons" - new or little demanded services that need to be brought to market.

Discount matters a lot. The package price can be 70-80% lower than the cost of the same services separately. More common are fixed packages, which include services with specific parameters: for example, Internet 50 Mbps and 100 channels.

You can combine products by price ("Economy", "Standard", "Premium") or adapt them to different consumer segments. The second option is often used by banks. For example, at UniCredit Bank, motorists can receive a 3% cashback at gas stations, and travelers can save bonuses and exchange them for air tickets.

But in order to truly personalize your offer, it's better to give the user the opportunity to choose the appropriate option for each service. The discount in this case is calculated individually according toalgorithm.

Service packages can and should be combined with tariff options.

Targeted emails

Remember to keep in touch with existing customers. After all, it is much easier for those who already use your services to offer a more expensive tariff or additional features. For example, by making a selection of subscribers who monthly consume the largest volume of services, you can offer them an exclusive tariff plan, which is only 50 rubles. more expensive, but several times more profitable than the current one.

It's great if users can fill in information about themselves in their personal account on the site - marital status, having children, etc. This data will help you create personalized offers for each group.

Bonus programs

And another effective way to increase ARPU. Everyone knows what it is - the client receives a personal card, on which bonuses are "dropped" with each purchase. Subsequently, for them you can get a discount or exchange for other services. In addition, with the help of such programs, you can increase sales of certain products by offering several times more bonus points for them.