ARPPU (average revenue per paying user) is a metric that indicates the average revenue a paying customer generates during a certain time. Owners of mobile apps often use it to identify audience segments that actively spend money inside their apps.
In this article, we’ll uncover the difference between ARPPU and ARPU and find out how to calculate and increase ARPPU.
ARPPU vs. ARPU
If your business is related to mobile apps or advertising, you’ve probably heard such acronyms as ARPPU and ARPU. These two metrics are mainly used for measuring app revenue. Let’s now find out what makes them different.
ARPPU is a metric that measures revenues from paying users. In this case, paying users are people who actively spend their money on a specific service. The measurement focuses on customers’ activities that make up a recurring revenue, for example, in-app purchases and freemium games. Business owners should know the recurring revenue a product generates during a month and the number of customers who actively use and pay for it to correctly estimate their profits.
While ARPPU pays more attention to paying users and the money they bring to businesses, ARPU (average revenue per user) is about the profit SaaS, subscription-based services, or app owners earn from paying and non-paying users. Entrepreneurs divide their total revenue by the number of customers to accurately estimate the necessary measure.
The metric is also used to determine the performance of a product or service: in a particular region, during a certain month or week, or the number of paid and organic installs. Moreover, it helps figure out whether a specific campaign was successful. To do it, companies compare the ARPU of different campaigns to detect which advertising managed to attract more paying users.
Now that you know the difference, let’s find out how to calculate the measure.
How to Calculate ARPPU
To estimate your average revenue per paying user, you need to have two essential indicators: monthly recurring revenue and the number of active paying users. Divide your revenue by the number of paying users to get your company’s ARPPU.
Let’s imagine that your app brings $2000 every month. The revenue you obtain comes from your active visitors. Say, you have 20 paying users. Now when you have the necessary measures, let’s calculate the ARPPU of your product or service:
$2000 / 20 = $100
The result demonstrates that one paying user provides you with $100 revenue per month.
Now that you are acquainted with the estimations you need, it’s time to move to the next section to explore the ways to improve this metric.
How to Increase ARPPU
Having a high ARPPU is crucial since it defines your number of loyal users who bring stable revenue every month. Besides, it indicates that your business, sales, and marketing proposition are in good financial condition and obtain value from users. Use our effective tactics to improve your ARPPU.
- Consider cross-selling and upselling. A great idea to increase your revenue and APPU is to offer users some additional features. For this purpose, you need to determine your users’ key pain points and put your efforts into upselling (try to persuade your customers to upgrade their accounts) or cross-selling (let users explore your additional services, for example, if you have another subscription type, encourage your customers to switch to it).
- Update your content. Even the most value-driven apps, services, and other products eventually bore regular users or leave them unsatisfied. With this course of events, you should always be ready to offer your clients something new to stay up-to-date. To do everything in time and according to your plan, create a schedule of content releases to stick to it. Don’t forget about non-paying users as well since your content should be engaging and interesting for all your clients.
- Sell premium services. If you have a lot of valuable experience, understand the market, and have long and strong relationships with your paying customers, consider offering them premium services. For this, you need to focus on your main active paying customers to understand their wants, needs, and preferences. Offer them a special membership, premium support, or some other services available only for VIP clients that will meet their desires.
- Increase the price of your product. The easiest way to improve your ARPPU is to increase the price of your product or service. However, it might have some negative consequences, which means that you need to increase your price wisely. Show your clients that your improved product is worth a new cost. Otherwise, your customer churn rates might increase drastically.
- Inform your users about new releases through app store updates. If you aim to reactivate your users, it’s better to distribute your new content as an update in app stores. It allows clients to notice and explore your releases.
With this metric, you’ll have a full understanding of the level of customer loyalty your business has, its financial performance, and how much money each paying customer brings into your company each month.
Last Updated: 21.03.2023