What is it?
ARPU reveals how much revenue each customer generates within a given time, typically monthly or annually. It helps assess pricing strategies, track customer engagement, and uncover growth opportunities through upselling or premium offerings. A rising ARPU suggests that your customers see value, signaling growth, while a decline may indicate the need to rethink pricing or improve your product.
How to Calculate it?
Calculating ARPU is incredibly simple. Take the total revenue generated over a specific period and divide it by the total number of users during that same period. This straightforward calculation helps founders understand how much each customer is contributing to the business on average, making it easier to assess pricing strategies, product value, and growth opportunities.
Why it Matters?
ARPU provides crucial insights into the financial health and growth potential of a startup. It helps gauge whether pricing models and customer engagement strategies are effective. A high or increasing ARPU indicates strong customer value and potential for profitability, while a declining ARPU may signal the need for adjustments in pricing, product offerings, or customer retention strategies.
