The democratization of e-commerce has been a major advantage for consumers and businesses alike. Easy-to-use e-commerce platforms like Shopify and WooCommerce—plus the emergence of simple, but powerful enterprise payment solutions—have made it possible for anyone to throw their hat into the multi-trillion-dollar global e-commerce market. Simply pick your platform and integrate a payment gateway Shopify or WooCommerce site can use, and you’re in business.
But of course, making your e-commerce site successful is another challenge altogether. In most cases, success will hinge on how well you can leverage valuable customer data. E-commerce sites on the most basic frameworks can provide a mind-boggling array of analytics data that can, in turn, be used to support marketing and site optimization campaigns.
However, even with easy access to analytics information, many e-commerce site owners have yet to understand the value of this data. Even when they do, it’s not always clear what certain metrics measure. This is especially true with Average Revenue Per User, or ARPU.
What is ARPU?
In simple terms, ARPU is a key performance indicator (KPI) that measures the total site revenue divided by the number of users over a given period. It’s often used interchangeably with Customer Lifetime Value (CLTV), but these are two distinct metrics. To be clear, CLTV measures the estimated total revenue generated by a customer over the period they associate with your brand. When comparing the two, ARPU tends to be more useful for gaining an idea of a site’s short-term performance while CLTV tends to be more useful for assessing the value of long-term customer relationships.
Why Do E-Commerce Businesses Need to Master ARPU?
Understanding ARPU can help you identify your site’s short-term marketing and revenue generation performance. It can also be used to gauge how well your site is retaining customers and how well your new product offers are performing. In all these cases, knowing what your ARPU numbers mean can help sustain your business’s short-term profitability.
10 Tips to Increase ARPU
1) Offer a Payment Gateway that Accepts All Digital Payments
Consumers depend on a diverse range of digital payment solutions, ranging from credit cards, e-wallets and, in the case of customers based in the Philippines, QR Ph payments. This means that your site’s payment gateway must accommodate these and other methods that your local buyers are likely to use.
To avoid hassles, use popular e-commerce frameworks for your site and integrate a trusted payment gateway like Maya Checkout through readily available plugins. This will avoid potential security holes while also offering visitors a familiar and seamless payment experience, increasing your ARPU with minimal effort.
2) Implement Upselling and Cross-Selling Strategies
Set up your checkout process so that it offers related or higher-end products on the shopping cart page. Provided that the offers are actually relevant, this approach can significantly boost purchases, resulting in a higher ARPU.
3) Create Bundled Offers
Bundled product offers remain popular in online retail since they directly appeal to a widespread desire for value-added offers. When done right, this approach may increase ARPU as well as goodwill among your customers.
4) Introduce Loyalty Programs
Loyalty programs can strongly incentivize customers to make more frequent purchases, thus increasing your e-commerce store’s ARPU. For these programs to work, however, the payoff of joining the program must be worthwhile. Use sales and site data to identify your customers’ common preferences and pain points so that you have a strong incentive for your program.
5) Invest in a Better Web Experience
Improving your website’s overall experience will reduce bounce rates and encourage more visitors to go through with their purchases. A user-friendly interface, fast loading times, and credible trust signals should all lead to conversions, setting your site up for repeat purchases and better ARPU numbers.
6) Personalize Your Marketing
Your analytics and sales data can be used for personalized marketing campaigns on social media, email, and banner ads. Look up what products best complement each other and offer tailored recommendations to encourage additional purchases.
7) Lean into Email Marketing
Personalized emails based on customers’ previous purchases are a relatively simple way to boost your ARPU. What’s more, even if customers don’t purchase your email reminders and recommendations, emails can still serve to keep your brand at the top of their minds, thus boosting the chances of a future purchase further along their journey.
8) Consider a Subscription Model
Subscription models can lead to consistent revenue as well as a higher ARPU. This model isn’t suitable for all products or offers, so make sure it makes sense for your business before going all-in.
9) Optimize Your Pricing Strategies
Finding the right pricing strategies can be tricky, but it’s necessary to gain a consistent ARPU. Use surveys and experiment with tiered pricing or demand-based pricing to determine the optimal price points.
10) Leverage Customer Reviews and Testimonials
If your analytics show long average visit durations but poor conversions, it could be because your visitors don’t trust your site or products.Legitimate social proof can influence visitors who are on the fence to commit to a purchase, thereby increasing your ARPU.
Secure Your Business’s Growth with a Better ARPU
ARPU isn’t the only metric you should be looking at, but it should be one of your main KPIs if you’re focused on immediate growth. Fortunately, improving ARPU isn’t usually a matter of gaining a larger customer base. In many scenarios, it involves making the most of the customers you already have. Implement the tips mentioned above, and you should eventually see an improvement in your ARPU as well as a boost in repeat business.
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Content credit: Yves Estrella
