ARPU – Average Revenue Per User
ARPU = total revenue / number of active customers. A metric common in SaaS and subscription businesses. eCommerce version: ARPU = annual revenue / active customers (= one-year LTV).
In practice
ARPU shows how much each customer is worth on average. A business with 1,000 customers and ARPU of $220 = $220,000 in revenue. To keep ARPU high: upsell, bundling, subscriptions. To grow: increase both ARPU and customer count.
Common misconception
'ARPU = AOV.' No. AOV is the average per transaction. ARPU is the average per customer over a period. A customer who bought 5 times at AOV $28 = ARPU $140. A customer who bought once at AOV $110 = ARPU $110. High ARPU requires both frequency and AOV.
How to fix it
Low ARPU? (1) Increase AOV — a free-shipping threshold, bundles, (2) Increase frequency — subscriptions, loyalty, win-back, (3) Segment by ARPU — who are your highest-ARPU customers? Court them, (4) Analyze churn — customers who left lower average ARPU.
Example
Supplement store: ARPU $95/year (average). Three segments: subscription ($215/year), repeat non-subscribers ($135), one-time ($40). Shifting 15% of repeat customers to subscription raised overall ARPU to $110.
Priority
Calculate ARPU by segment, not just the overall average. Low ARPU + high churn = a product problem. Low ARPU + low churn = an upsell opportunity. The distinction is critical.
Related terms
Keep learning. Metrics that touch the same area:
- UpsellMarketingOffering an upgraded or pricier version of the product a customer is choosing. Upgrading from Basic to Pro, or from a medium bottle to a large one. Raises AOV without adding a new product.
- ROI – Return on InvestmentFinanceA general profitability metric: (net profit / investment cost) × 100. Different from ROAS — it includes all expenses.
- AOV – Average Order ValueFinanceTotal revenue divided by number of orders. The biggest lever for increasing revenue without more advertising.
- LTV / CLV – Customer Lifetime ValueFinanceTotal expected profit from a customer over the entire relationship. A healthy LTV:CAC ratio is 3:1.
- Gross MarginFinance(Sale price - COGS) / sale price × 100. The basis for every pricing and advertising decision.
- COGS – Cost of Goods SoldFinanceThe direct cost of producing or acquiring products sold. Includes: product + import shipping + customs + packaging.
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