Average revenue per unit (ARPU)

The average revenue per unit is a benchmark that helps eCommerce businesses with inventory management and sales analysis. It is a metric that is flexible and can help business owners who sell a variety of products understand their sales numbers. This article will outline what the ARPU is, how it works, and how to maximize performance.

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What is the average revenue per unit?

The average revenue per unit is the amount of money a company makes from selling one of its products on a unit basis. Typically, the metric is used by companies selling physical products as opposed to subscription service providers and software as a service (saas) companies. The data point represents the average revenue per user that a seller receives. Analyzing this metric allows eCommerce businesses to assess their customer base, profitability, and revenue generation.

ARPU allows business owners to determine the amount of revenue generated by one user in a given time period. By analyzing this unit of measure, companies can learn about their active users, find trends in their total revenue, and learn insights about the business to implement a better strategy moving forward. ARPU analysis can help improve a company’s revenue, pricing, and inventory management strategy.

How to calculate your average revenue per unit

Calculating ARPU for a given period of time involves taking the Monthly Recurring Revenue (MRR) figure and dividing it by the number of active customers that your business has. To gain the best insights, businesses often batch groups of customers separately, like new customers vs. existing customers.

The average revenue per unit (ARPU calculation)

Average revenue per unit = Total revenue / total units sold

What is a good average revenue per unit?

Most companies measure their ARPU on a monthly basis. There is no absolute number, as it varies for all industries. For example, some eCommerce industries have a high ARPU relative to sectors like the mobile phone games industry which has a typically low figure. When determining the effectiveness of your company’s ARPU, it is important to ensure that you are measuring the proper time frame and comparing your results to other companies in your niche.

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What is a bad average revenue per unit?

Similarly, there are not objectively bad ARPU numbers. Unless your financial statements show that you are losing money on each product, it is important to reflect on your number of units sold or the total number of users within the context of your sector and demographic target.

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Average revenue per unit KPI examples & templates

You can add your average revenue per unit in some of our templates!

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See this KPI in action here!

Ecommerce report template

A report with all the most important metrics for your ecommerce site, like shopping cart abandonment, click-through rate, and revenue.

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Executive report template

This dashboard template is filled with metrics your C-suite will want to see. Show them your revenue, new customers, churn rate, and more. You can also add some customer satisfaction KPIs, gross margin, or customer data to have a better overview.

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Google Analytics report template

Check the number of customers, traffic, customer journey through your website, and more with this easy-to-use GA template.

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Average revenue per unit best practices

If your company’s revenue growth is dependent on achieving a higher ARPU metric, follow these guidelines and best practices.

Customer retention

Focus on fostering returning customers and repeat buyers to reduce churn and build trust and loyalty for your brand. This will help you optimize your pricing strategy and more in order to eventually raise your ARPU.

Upselling

Find ways to add more value to your product by adding features, bundles, and more so that you can raise prices and get more out of every purchase.

Maximize social media marketing

Engage with your audience and build new audiences by developing a strong social media presence. Feature bundles and special offers and build anticipation for new products and releases so that your customer base will purchase your product in an optimized manner.

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