Understanding and increasing ARPU
Average Revenue per User is the key to sustainable e-commerce growth.
Average Revenue per User (ARPU) is one of the most important metrics for evaluating and managing e-commerce businesses. Unlike AOV, which only looks at individual transactions, ARPU captures the total value of a customer.
ARPU vs. AOV vs. CLV: The differences
These three metrics are often confused but measure different things:
- 1 AOV (Average Order Value): Average value per order – regardless of customer.
- 2 ARPU (Average Revenue per User): Average revenue per customer in a time period – accounts for repeat purchases.
- 3 CLV (Customer Lifetime Value): Total value of a customer over the entire business relationship – forward-looking.
ARPU = AOV x Purchase Frequency. A customer with $80 AOV and 3 purchases per year has an annual ARPU of $240.
Why ARPU is crucial for your growth
ARPU determines how much you can spend on customer acquisition. The simple formula is:
Maximum CAC = ARPU x Profit Margin
With $300 ARPU and 30% margin, you can invest up to $90 for customer acquisition and remain profitable.
Strategies to increase ARPU
There are three main levers to increase ARPU:
- 1 Increase purchase frequency: Email marketing, loyalty programs, personalization, subscriptions.
- 2 Increase cart value: Cross-selling, bundles, upselling, minimum order values.
- 3 Extend customer lifetime: Excellent service, community building, regular new arrivals.
Analyze your ARPU by customer groups. Often the top 20% of customers generate 80% of revenue. These high-value customers deserve special attention and dedicated programs.