Marketing Canvas - ARPU

In a nutshell

ARPU[1] stands for Average Revenue Per User. It’s calculated by dividing total revenue by the number of active users in a given time frame. Usually a month. By “active user” we ordinarily mean a paying customer. It is an important and straightforward metric as it helps you to compare yourself against competitors, segment your customer base and forecast. All else equal, the company with the higher ARPU is more profitable. This metric is also important for companies selling products as it reminds these companies that they should track their revenues in terms of customer spendings and not boxes sold.

In the Marketing Canvas

In the Marketing Canvas, we have identified 6 main categories for building your Marketing Strategy: Customers, Brand, Value Proposition, Journey, Conversation and Metrics. Each of these categories, have 4 dimensions which means that a total of 24 dimensions (6 by 4) are defining your Marketing Strategy.

ARPU is one of the 4 dimensions of the Metrics category.

How to use it?

I came from mobile telecom businesses where ARPU was and still is a holly word. What’s your ARPU? What’s the impact on ARPU? How to grow the ARPU? … As a marketer, if you impact negatively the ARPU of your customer base, you probably won’t stay long in the position!

ARPU stands for Average Revenue Per User. It’s calculated[2] by dividing total revenue by the number of active users in a given time frame. Usually a month. By “active user” we ordinarily mean a paying customer. It is an important and straightforward metric as it helps you to compare yourself against competitors, segment your customer base and forecast. All else equal, the company with the higher ARPU is more profitable.

This metric is important because it shows (if you are capable to measure it) that your business is customer centric. Indeed, you are able to identify which clients are strongly contributing to your revenues (top 10%) and which ones are poorly contributing to your revenues (bottom 10%). It is also telling you what elements are contributing to your revenues for each client. Building your strategy on improving your ARPU is certainly key if you want to grow your business.

In the Marketing Canvas, we ask you if your ARPU is contributing to your goals. Low ARPU (compare to competitors) means that each new client (in the current situation) will bring you less revenue that one new client for your competitors. It is thus a brake. Changing it could be through acquiring more high value customers through a stronger brand and enhancing the value of your value proposition.

Question

Is the ARPU of your users helping you achieve your goals?

Sources

  1. Definition, Investopedia, https://www.investopedia.com/terms/a/average-revenue-user-arpu.asp

  2. HUBSPOT, ARPU: How to Calculate and Interpret Average Revenue Per User, https://blog.hubspot.com/service/arpu

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