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ARPU: What it is, why it matters, and how to improve it

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The ultimate goal for any ISP is to be as profitable as possible—but in an increasingly saturated industry, that’s becoming difficult to achieve by traditional methods. How are you supposed to achieve your growth goals when there’s more competition, there are fewer potential subscribers to go after, and it’s more expensive to acquire them?

To help, let’s explore a key metric for ISPs, average revenue per user (ARPU)—what it is, how it contributes to your business, and what you can do to improve it.

What is ARPU?

ARPU refers to the overall value each individual subscriber brings into your business.
Often, ARPU calculations include other aspects that contribute to your revenue, including account upgrades or downgrades and lost MRR from churn. It shouldn’t include any free or trial services or inactive subscribers.

Why does ARPU matter?

Technically, you should always think about ARPU—but of course, there are high-priority times, too. As we mentioned earlier, when a business reaches a critical saturation point within its market, it becomes more difficult—and less practical—to continue pursuing new subscribers with the same gusto.

Simply put, there always comes a point where there just won’t be as much bang for your buck as there once was.

When you reach this critical point, it becomes more profitable to shift your focus away from acquisition and toward increasing the value of each individual account. After all, even if you can’t add new subscribers, you still have revenue goals—so you need to consider how you can increase the value each existing subscriber brings to you.

When should ISPs worry about ARPU?

ARPU can help you identify trends in your subscriber base—like which price points are the most popular, which demographics are going for upsell options, and more. It also illustrates whether your pricing model is sustainable for the market you’re in.

It can also give you a benchmark for other key metrics including average support spend. This is especially important when you think about how much variance there can be between tiers of support; for example, while a self-service interaction might cost a few dollars, a call can cost up to $45—and an escalation or truck roll can tack on another $130. If your ARPU can’t cover these costs, even if they don’t happen very often, that’s problematic.

As a vendor to nearly 100 ISPs around the world, we have a unique view into a wide variety of providers’ metrics—and one pattern we see is that the fastest-growing ISPs all have meaningful month-over-month ARPU growth along with solid yearly subscription growth. Done right, that growth can be an enormous boost for an ISP’s revenue.

Jason Moore, CEO, RouteThis

How can ISPs increase their ARPU?

The best way to increase your ARPU is to increase the value you offer subscribers. For many ISPs, WiFi is a metaphorical gold mine for this; subscribers’ increasing dependence on WiFi means there’s a huge opportunity to increase ARPU by improving the WiFi experience. This can come in a few forms:

Paid priority support and managed WiFi

Last year, over half of consumers reported having daily issues with their WiFi networks. In many cases, they also reported not bothering to call in for help resolving those issues because of the time and effort involved.

If that says one thing, it’s that subscribers need help managing their networks—and they need the solution to be simple.

By offering options for paid priority support and managed WiFi services, ISPs can deliver an easier way for subscribers to resolve their WiFi issues.

Higher plans

It’s a rare person indeed who hasn’t had at least one issue connecting to Zoom since the start of the pandemic. Even now, people continue to work and attend school remotely, putting strain on their networks like never before. In fact, 85% of consumers report relying on their home WiFi more than before, and over a third of them are using WiFi for an additional seven to 10 hours per day.

To help manage these higher loads, subscribers are going to need bigger plans than before. They’ll need more bandwidth and more speed. By introducing a wider range of plans that can meet these needs (at an appropriate price point, of course!), as well as pinpointing and targeting the subscribers that need those plans, ISPs can increase their ARPU.

Home network upgrades

Did you know? Over half of consumers have at least one WiFi dead spot in their homes. The last few years have shown subscribers exactly where their home networks are lacking, which presents an incredibly unique opportunity for ISPs to help them expand those networks.

By expanding their offerings to include solutions like pods and network extenders, ISPs can help subscribers get the best possible WiFi experience while simultaneously increasing their ARPU.

Better retention rates

Fact: Last year, 49% of consumers considered changing their ISP because of poor WiFi experiences. Keeping subscribers on board is essential for better revenue, and a solid retention strategy starts with the experience they receive.

To improve this experience, first consider where subscribers are running into issues with their WiFi networks. Are they having connection issues? Dead spots in their home? Trouble getting answers from support? This can give you an idea of where to improve your service and support.

RELATED READING

Get the full picture of this data with our new whitepaper here.

As a bonus, the rapport you’ll build with a retention strategy is conducive to better upsell rates, too.
Erin Penney
Erin Penney
Erin Penney
Erin Penney

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