Post by bitheeranidas00742 on Nov 8, 2024 23:16:02 GMT -6
As we have already noted, the ARPU metric shows the ratio of the product cost and value. However, this is not all. This indicator can be used for other purposes.
Compare companies or projects. For example, you can compare yourself with competitors. The effectiveness of this approach is indicated by the fact that investors request this indicator. Or, if you have two projects, the metric will help determine the most effective of them. IMPORTANT! You can only compare companies and projects that have a similar target audience.
See how customers react to price changes. ARPU is a wordpress web design agency good way to illustrate how users react to increases in the cost of goods or services. For example, you can understand how people react to changes in the price of a monthly subscription in an app.
Assess the effectiveness of the acquisition channel. If you launch advertising campaigns, then using the metric, you can determine the best channels for attracting new customers. You will see how your income has changed depending on the audience you brought.
Identify the most profitable audience segments. You will be able to segment customers and calculate the profit that comes from each group. This way, you will understand who brings you the most income and focus on these users, which will help you grow in the future.
Make a forecast for the future. ARPU will help create hypotheses related to attracting new and retaining regular users. This will help evaluate the return on investment for an advertising campaign and calculate its revenue.
As you can see, this tool will help you solve many problems.
How to calculate ARPU?
Calculating the ARPU metric is easy. To do this, take the revenue value for a certain period of time and divide it by the number of active users for that period. The value can be calculated for different time periods: day, week, month, quarter, and so on.
EXAMPLE. For clarity, let's do a quick calculation. Let's say that 1,000 people used the app this month. This number includes all users: newbies, regular users, with a subscription to different tariffs, without a subscription, on a trial period, etc. The income was $5,500. To calculate the ARPU metric, we take the income of $5,500 and divide it by the number of active users - 1,000. The resulting indicator is $5.5.
How to evaluate the results?
In the example from the previous chapter, we got a result, but how to interpret it? Is $5.5 good or bad? The answer is that there is no optimal metric. But there is a rule: if ARPU decreases, the company needs to attract more new customers.
IMPORTANT! You can only evaluate the metric within the framework of your own business or by comparing it with the results of other companies that have a target audience similar in characteristics and size.
How is it different from LTV?
In this article, we want to introduce you to another metric — LTV. It shows the profit that a specific customer brings you over the entire period of cooperation. That is, in essence, LTV allows you to calculate the value of a customer for a company, and ARPU — the overall state of affairs for a specific period.
How to improve ARPU?
As we have already said, there is no optimal metric, as well as no limit to perfection. To improve the show, you can use a lot of tools. Here are some of them.
Cross-sell, up-sell and down-sell mechanics. These are the most popular ways to increase the average check. Study them in more detail and apply them in practice. For example, if you work on a subscription system, you can focus on increasing the motivation of customers to switch from a free period to a paid one.
Increase the value of goods and services. There is a simple pattern: the faster the user understands the value of your product, the more likely he is to stay with your company seriously and for a long time. Therefore, increasing the value of goods and services in the eyes of buyers will have a positive effect on your company's income.
Optimize your advertising campaigns. Using the ARPU metric, you can compare the results obtained from running ads on different platforms. Identify the best campaigns and optimize them to attract more target customers.