Strategies to Increase Average Revenue Per User Or ARPU

→ What is Average Revenue Per User or ARPU ?

ARPU means how much money can be expected to be generated per individual consumer

→ Importance of Average Revenue Per User or ARPU :

1. Profit Generation Capability: Determines the ability of the business to generate revenue from the users. Increasing ARPU indicated growth in revenues
2. Comparison with Competitors: Companies in the same industry will use ARPU calculations to examine how well they are doing compared to the competitors
3. Financial Forecasting: ARPU can be used in Financial Modeling for a business- In forecasting future revenue
4. Understanding Customers: With ARPU, customer segments can be examined separately, based for example on location or customer tier to determine which are performing best and which might need a boost
5. Direct Impact on ability to Scale: If ARPU is lower than your customer acquisition cost- This doesn’t leave any room for paid ad spends or customer support without affecting your profitability & long-term business viability

→ Proven Strategies to increase Average Revenue Per User or ARPU :

1. Build Large Growth Potential for your app: While trying to increase ARPU — think of your business from the ground upwards i.e. does your business have enough growth potential? Example: Mailchimp- as the users’ email marketing strategies succeed, their email lists grow. Bigger email lists require an upgraded account.
2. Try Dynamic Pricing Model- Charge the right amount and adjust your pricing accordingly: Experiment with different pricing models and keep an eye on your ARPU to see how changes impact your revenue. Adjustments such as lowering pricing tiers, or applying new pricing for new customers can be made.
3. Segment Customers- Learn who to Ignore: Segment customers based on the likelihood they are to progress to the higher-paying tiers/spend a lot. Low-growth potential customers- Investment in these customers will not reap impactful rewards. Top growth potential customers- Invest in them while delivering outstanding value to this tier with the aim of selling your premium-priced product.
4. Identify key touch points for Up-selling and Cross-selling: Use A/B testing to identify key times of day, month and even year, where up-selling and cross-selling are most effective. Think of it as a game, to analyze users’ past behavior for the identification of key turning points where users are most likely to benefit from an upgrade. Example: Evernote sends emails when the customers are nearing their storage limit
5. Integrate Rewarding Video- Ads into your app: CTRs for rewarding video ads are 4–5x higher than Display Ads giving users reasons to engage
6. Nudge non-paying users towards IAPs (In-app Purchases): A study has found that users who watch rewarding videos are more likely to make an In-app purchase (IAP). Use rewarding videos or video ads to encourage users who haven’t paid for an IAP
7. Experiment with Ads Placements in your app: If you are going to have ads in your application, timing is everything. You don’t want your ad to interrupt the user experience. A/B testing can help you optimize your ad placements. Make sure to also cap the frequency that users are seeing ads in your app.
8. Leverage Deep Linking: With deep linking strategy you can route users directly to in-app content- even through Install. App users convert 3x better than mobile web users
9. Encourage Social Sharing: Social Sharing positively influences virality and retention (app users are likely to use and — keep using- an app their friends are using). Integrate Sharing options into your app so that users can easily share content → Increased engagement, new users, higher LTV!
10. Drive New Referrals and Offer discounts: Discounts positively affect both monetization (ARPU) and retention to boost LTV. Referrals are a low-effort, low-investment way to generate new users, bringing down the cost of user acquisition as your customers are doing the work for you. Example of an app referral flow where a new user receives a referral via SMS, clicks through to the app, and is automatically rewarded with the promotion.
11. Prioritize User Re-Engagement: Re-engaging users and driving them seamlessly back to the app through smart banners, email campaigns, and retargeting ads are all great ways to boost the user retention. Example- Tata Cliq used dynamic re-targeting (Criteo) based on ML to use right ad at the right moment in the shopper journey so that customer would be encouraged to complete the shopper journey within the app rather than just browse and leave and purchase a similar product from the competitor.
12. Get Push Notifications Right: Push Notifications helps to increase engagement and retention. Recency & frequency of communications from an app encourage users to re-engage and ultimately convert. Be careful to not overdo it, and be sure to personalize your messages — otherwise, you could see your push notifications having the opposite effect on users.
13. Add-ons, Value Metrics and Upgrades: Any way you can absolutely increase the amount of revenue from your customers month over month should be considered. The easiest way to do this is to make sure that a value metric is central to your pricing strategy to bake in expansionary revenue. An alternative to this strategy is to make sure you have a clear add-on and upgrade strategy.
14. Ensure your retention is on point (especially for Large customers): Leaking customers (especially large ones) will reduce your customers and your total revenue. Make sure you’re running a proper retention process.
15. Targeting Right Customer Personas: You can deflate your ARPU by targeting too many small, distracting (and expensive) low revenue customers. Make sure you quantify your buyer personas properly and target the right ones for growth.
16. Product Bundles: Bundling products to offer maximum value at a great price is a marketing tactic we see every day in the world of e-commerce and B2C.Example : In SaaS- creating packages that include a range of add-ons can be a great way to subscribe new users at a higher ARPU than they would by merely opting into a standard plan. It is an effective way to increase ARPU of existing customers, such as being introduced as a special offer when subscription renewal time rolls around.
17. Reduce Customer Churn: Reduce Customer Churn- Means to ensure your customers stick around longer. This can also mean a higher CLTV, more opportunities to upsell and cross-sell, and a better chance to increase your ARPU in the process. Loyal customers who won’t churn are an extremely valuable asset to your company, especially when it comes to increasing your ARPU.
18. Data driven Customer Experience & Personalization: Personalization should evolve to include data driven recommendations based on location, device, viewing preferences, demographics and behavior. Extensive use of customer analytics and machine learning techniques to provide automated recommendations. Example- Telecom companies use ML to provide automated service recommendations like Plan selection, value added services, data, content, etc.
19. Gamification to Increase ARPU: Gamification into existing product can help increase ARPU. Example- Eg: Sony brought #1 Game show- Who wants to be a Millionaire- onto the mobile app. Sony Pictures used Upshot.ai to improve product experience and increase ARPU. ARPU went up by 28%. Upshot.ai leveraged: 1. Behavioral Tracking using mobile app analytics 2. ML Based data insights 3. Push notifications and In-app messaging