Average revenue per user

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Average revenue per user (ARPU) or in some cases average revenue per account (ARPA) is what each customer/account pays on average to the SaaS company.

How to calculate ARPU?
ARPU = Total revenue / Number of users

You can calculate ARPU for any time period. Most companies do this on a monthly basis to align with MRR.

Why calculate ARPU?
ARPA can mean different things depending on your business model. Here's what it looks coo email list like for various types of SaaS companies.

Subscription Model : For a typical user-based subscription business, ARPU would be consistent and therefore not as revealing. For example, if you have a single $10 subscription plan for all users, your ARPU is $10.

Despite its simplicity, this number can be useful. You can use this data to adjust subscription rates, redesign subscriptions, offer additional tiers, etc.

Corporate Customers : If you serve corporate customers, ARPA is more meaningful than ARPU. For example, for a corporation with 100 users, each paying an ARPU of $8 per month, the revenue for this account would be $800. Another corporation with 200 users will generate $1,600 in revenue, even though the ARPU remains the same.

You can use this metric to develop marketing strategies.

For example, you can target corporate accounts with the most users. Or you can focus your account-based marketing (ABM) efforts on increasing wallet share.

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Usage-based pricing : Usage-based pricing is where a fee is charged for each activity rather than a fixed subscription. If $2 is charged for each event scheduled on the calendar, the ARPU can vary depending on the type of user.

Average revenue per user helps you validate your pricing model and build a strategy around increasing user activity on your product.

How to improve ARPU?
There are two common ways to increase ARPU:

Increase the price : Simply increase the subscription fee for each user
Increase Usage : Establish a usage-based pricing model and encourage the customer to use your product more.