**Average Revenue per User (ARPU)**, sometimes called Average Revenue per Customer (ARPC), is an important metric that businesses track, especially in recurring revenue businesses. ARPU originated in the telecom industry as a way to measure the average revenue generated per mobile phone subscriber, and is now widely used by:

• SaaS companies
• App marketers
• Mobile marketers to evaluate user value and monetization strategies

There is a version of this for non-recurring revenue models like e-commerce but we are not going to discuss that. There are a few ways to look at ARPU, but we are going to focus on two examples:

• Cohort ARPU – the ARPU of a monthly cohort. We will look at how that can improve over time, what levers you can pull to grow the number and challenges associated with each lever.
• Composite ARPU – a composite ARPU of your entire customer base. Composite ARPU lends itself to quicker calculations, back of the envelope analysis.

These positive and negative implications for your business need to be planned for. Key differences between these approaches:

• Cohort ARPU is a faster moving indicator which can change month-to-month with levers discussed below
• Composite ARPU is a slower moving indication of improvement because it averages in all customers

## TL;DR

• ARPU measures the average revenue generated per user or customer
• The formula for average revenue per user is straightforward: divide monthly revenue by the number of users
• There are two distinct ways to calculate and use ARPU
• Cohort ARPU tracks specific groups of users acquired in the same period, making it sensitive to changes and useful for measuring the immediate impact of pricing or product changes