If your business focuses not on one-time purchases, but on the constant use of the product, assessing the effectiveness of the project is much more difficult. Conversion here is not a criterion. Why? Imagine the situation: the client acquired a premium account for 2 weeks, and then "merged" and switched to the service of competitors. The profit that such users bring may be less than your costs of promotion and advertising. In this case, they use a special business metric - ARPU for analysis.
What it is
Average Revenue Per User - this is the average income from one attracted customer. Using this indicator, you can see how much money users usually "pour" into your services for the entire time they are used.
We give an example. The cost of a subscription to the popular streaming service Yandex.Music is 200 rubles. per month. Cheap, right? But in a year, an active listener brings 2400 rubles to the company, for 3 years - already 7,000. And this is not the limit. And for a person, these costs are almost imperceptible. But if the same amount had to be paid right away, even for the “eternal” premium access, there would be much less people willing.
And one more thing that needs to be said, talking about what ARPU is. This concept should not be confused with the “average check” - a key indicator of retail performance. From the point of view of Revenue Per User, an order for $ 100 and $ 10 for $ 10 is the same thing. But for high rates, purchases should be made by existing customers.
Formula ARPU. Find out the true value of your subscribers
Ideally, it is regular customers who should bring the company the highest percentage of profits. The more and more they buy, the less your advertising and marketing costs will be.
How to count ARPU? Its general formula is as follows: ARPU = S / A, where S is the total revenue from the entire network, and A is the number of your subscribers / subscribers.
This metric is directly related to only one element of the marketing mix - price. The more expensive the subscription and connection of additional functionality, the higher the average income from the client.
Some marketers advise tracking the dynamics of changes every month. But the potential of ARPU is fully revealed only in long-term strategic planning. Why do you think so? Not all new customers will continue to work with you, most of them are “casual passers-by”. If you want to focus on developing relationships with active subscribers, you need to analyze longer periods - 3 months, six months, a year. In this case, it is advisable to consider only those who made purchases 2 or more times.
Effective work with the metric: setting the right goals
By and large, to consider the average ARPU for the company as a whole is pointless, especially if you work with several segments of consumers and offer them completely different services.
To extract the maximum of useful information from the analysis, first of all, you need to choose a direction and formulate specific tasks. Why can I use ARPU?
- Researching different sales channels. You can determine where the most “money” clients come to you from (advertising on the Internet, cold calls, recommendations of partners, etc.). You will also see which channels have low efficiency and only devour the marketing budget.
- Evaluation of the effectiveness of an advertising campaign. In this case, ARPU is calculated separately for each project. For example, you can compare the income from users attracted from 2 landing page, "sharpened" for different stocks. By comparing several campaigns, you get a more or less clear picture of what your customers like / dislike.
- Analysis of the popularity of products. Here ARPU is considered in dynamics, that is, how the average income per subscriber for a certain period (month, quarter, year) has changed. Actual if you have recently changed tariffs or added new services.
Of course, the list is not complete. In the same way, you can compare the ARPUs of different customer segments (for example, youth and customers older than 35 years) or individual regions. After that, the most difficult stage begins. You need to analyze the results and find key factors that influence the increase or decrease in ARPU.
Underwater rocks
Novice Internet entrepreneurs often ask: what kind of ARPU should be? What to compare with? In fact, optimal values, even approximate, do not exist. It all depends on the specifics of the niche and the company itself.
Firstly, not everyone needs this metric. In IT and telecommunications, ARPU can be considered one of the key performance indicators. Mobile operators, developers of online games and applications, Internet providers - all of them strive not to attract as many new customers as possible, but to "squeeze" the maximum out of each user. But if you sell one training course, the income from all users will be the same.
Secondly, the average income per user can only be an auxiliary indicator. It does not display the status of your business and possible problems. What is ARPU? This is a metric that shows how much subscribers spend, but not your profit. The calculations do not take into account the costs of advertising and traffic, taxes, etc. Therefore, even high values do not guarantee that you will get a plus.
5 marketing levers to boost ARPU
Another significant drawback of this business metric is that it does not give an idea that, in addition to prices, affects the level of income. But replaying competitors by “pulling” only one lever is impossible. A huge number of factors influence consumer behavior. And the main task is to make sure that he does not choose between your company and competitors, but between the options that you offer. How to achieve this?
Range of services and options
It should be updated as the needs of the target audience grow. It’s more convenient for people when everything can be done in one place. A prime example is Internet service providers. Now almost all of them offer cable TV services. The client connects both, and the other - ARPU is growing. Rent a Wi-Fi router - higher income. He doesn’t know how to configure it - another plus.
Do not be afraid to introduce new services. Even if the demand for them is low, you will not lose potential customers, and this is much more important.
"Filling" tariffs
Move on. How to get users to buy additional services? The easiest and relatively cheap way is to include them in the price of basic tariff plans. This is actively used by mobile operators. Even if in fact you only need good 3G Internet, you will get minutes of calls and SMS to it. However, the more opportunities a tariff provides, the higher its value in the eyes of the consumer. So, you can significantly increase the cost of your services.
There is another approach, when the user chooses the options that he needs, and pays separately for each item. This works great when standard tariffs are of sufficient value in the eyes of the client and differ from competitors' offers. What is the plus? The user does not feel that they are imposing something - it seems to him that he makes his own choices and can refuse certain services at any time. In practice, usually no one does this, but connecting options can quietly increase the cost by 1.5-2 times.
Together - cheaper
Packages - one of the most powerful tools to increase the ARPU of the subscriber. Usually they include 2-3 elements:
- Lokomotiv is the basis; A popular product with consistently high demand.
- "Wagons" - new or little-needed services that need to be brought to the market.
The discount is of great importance. The package price can be 70-80% lower than the cost of the same services separately. There are more often fixed packages that include services with specific parameters: for example, the Internet 50 Mbps and 100 channels.
You can combine products at a price ("Economy", "Standard", "Premium") or adapt them to different segments of consumers. The second option is often used by banks. For example, at UniCredit Bank, motorists can receive a 3% cashback at gas stations, and travelers can save bonuses and exchange them for airline tickets.
But in order to truly personalize your offer, it is better to give the user the opportunity to choose the appropriate option for each service. The discount in this case is calculated individually according to a certain algorithm.
Service packages can and should be combined with tariff options.
Target Mailings
Remember to keep in touch with existing customers. Indeed, for those who already use your services, it is much easier to offer a more expensive tariff or additional features. For example, by making a selection of subscribers who monthly consume the largest amount of services, you can offer them an exclusive tariff plan, which is only 50 rubles. more expensive, but several times more profitable than the current one.
It’s great if in your account on the site users can fill out information about themselves - marital status, availability of children, etc. These data will help you create personalized offers for each group.
Bonus Programs
And another effective way to increase ARPU. Everyone knows what it is - the client receives a personal card, on which bonuses are “dripped” onto each purchase. Subsequently, they can receive a discount or exchange for other services. In addition, with the help of such programs it is possible to increase sales of certain products by offering several times more bonus points for them.