Wednesday, December 12, 2018

All you need to know about Average Revenue per User

Average revenue per user (ARPU) is the measure of average revenue per user. It is also known as average revenue per unit. It is usually calculated on monthly or yearly basis. ARPU is very important measurement for all type of businesses but mostly used by subscription based service provider company’s i.e telecommunication and internet service providers (ISP). It provides a close view of the revenue per user device or unit and help companies to pursue revenue growth as a result of promotions and ads on services.

How to find ARPU?

It is used for financial analytics. The equation to determine ARPU is:

ARPU = Total revenue / total number of users

It depends upon a time period, typically monthly and yearly. But number of users is usually taken as average because their numbers fluctuate in a specified period.

Some uses of ARPU

  • Telecommunication companies measure ARPU based on per device. In case of telephony services, ARPU could be based on number of calls per unit time..
  • Cable service providers measure ARPU based on per connection
  • E-commerce based companies measure ARPU based on per cart
  • Social media companies measure ARPU based on per investor
Dilemma of Increasing Revenue by Maintaining ARPU

One of the difficulties faced by all service providers to increase revenue is by maintaining ARPU either by existing customers or new customers. If number of subscriber’s increases or existing subscribers do not maintain service subscriptions in a specified period or show less interest. Then revenue decreases and eventually ARPU decreases. The problem is how to maintain ARPU.

What’s the solution?

As competition in the market increases, telecommunication service providers must behave as watchdogs on revenue flow. Prudence technology specialized in Oracle, provides a billing analytical system which helps service providers to unlock valuable information about revenue flow. It takes company’s analytical capability to a new level.

The solution provides a complete understanding of the customers by covering all products and services. It enables telecommunication service providers to penetrate deep into billing related metrics like billing revenue, payments, collections, adjustments and more. This billing and analytic software solution has built-in reports and dashboards which covers billing revenue, billing efficiency, consumer metrics, prepaid metrics, usage metrics etc.

Under billing revenue category, this software covers some key aspects of revenue. For example total revenue, ARPU, collections and adjustments. It also answers some of the following basic questions which help to maintain ARPU:
  • What is the total revenue across various dimensions including customer type, product type, plan type etc
  • What is ARPU across various dimensions including customer type, product type, plan type etc
In addition to total revenue, another important parameter in ARPU formula is “Number of customers”. Knowing this parameter from acquisition and churn perspective help telecommunication service providers to make decision at right time i.e. offer promotions to attract new customers or offer different value added services to retain the existing customers. Billing analytic tool answer following questions:
  • What is the rate of customer acquisition across various dimensions like customer type, product type, plan type etc
  • What is the churn rate across above dimensions

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