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What Is Revenue per User?

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  • Written By: Jim B.
  • Edited By: Rachel Catherine Allen
  • Last Modified Date: 06 November 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Revenue per user is a statistic used in the service industry to measure how much revenue is generated by each customer cultivated by a company. This measurement, usually used by companies who have subscribers to their service, is calculated by dividing the total amount of revenue generated in a certain time period by the amount of people who used the service in that same time period. Among the companies who might be interested in knowing the Revenue Per User (RPU) are internet, telecommunications, and cable companies. A company can study this number, compare it to the revenue it generated in previous months or to the revenue generated by other similar companies per customer, and see what adjustments need to be made.

Companies must attempt to generate revenue by whatever means they have at their disposal. If companies rely on subscribers for their revenue, they must figure out how to maximize the revenue they get from every single subscriber. Those companies that accomplish this will likely have a high valuation and, as a result, will be coveted by investors. Studying the revenue per user is one way to highlight the relationship between customer and revenue.

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As an example of how this statistic works, imagine a company that measures its revenue monthly and gets its revenue from subscribers to its service. In a single month, the company generates $100,000 US Dollars (USD). During that same period, the company has a total of 2,000 subscribers. To calculate the revenue per user, the $100,000 USD worth of revenue is divided by the 2,000 customers to yield a quotient of $50 USD. That means subscribers, on average, paid $50 USD in that particular month for the services provided.

From this example, it becomes clear how the revenue per user calculation would be important to service providers. One effective way to use this metric is to compare it to the company's previous totals for months already past. In this way, the company can see if it is improving on its revenue generation tactics. Another way to use RPU is to compare it to the totals of market competitors.

Once a company has analyzed its revenue per user, it must decide how it can improve the total. There are many ways that the various service providers can do this. For example, cell phone companies can add different features like texting services of internet-ready packages to try to generate more revenue. Cable companies might add movie channels that can attract customers and drive up the amount paid each month. If the RPU goes up in subsequent periods, whatever methods that were chosen will have been successful.

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