Subscription-based businesses like mobile phone brands and cable companies face specific and differing challenges to increasing revenue growth from other industries. Where retail brands and healthcare organizations often have a mix of one-time and repeat customers, the intent of a subscription model is to ensure that consumers pay a recurring fee every billing cycle. As a result, mobile phone companies and others leverage distinct tactics to increase their revenue.
It’s because of this distinct model that subscription-based businesses have different measures of success. One of the most prominent is average revenue per user (ARPU), which is calculated by dividing total revenue by the number of active users over a specific period. The period used in the formula tends to be a month, but that can change based on how frequently customers are charged. ARPU is a key indicator in the growth rate of every subscription-based business, so brands like telecoms and cable providers will emphasize this metric as a way to determine operational health.
Subscription-based brands constantly seek ways to improve their ARPU number. A recent blog post from WeGrowth outlined a few options, including building the right products, charging the right price, focusing on high value (and avoiding low value) customers, and the all-important cross-sell/upsell. All these strategies can be leveraged in different amounts to increase ARPU. Boiled down is that all the strategies WeGrowth suggests are fundamentally about figuring out the best way to serve customers ensure retention.
What’s missing from the WeGrowth piece is that executing these ARPU-growth strategies requires that brands understand their customers’ behavior and preferences. To do this, they need access to clean, updated customer data and rich analytics to drive decision-making. With up-to-date customer data, subscription-based businesses gain deep visibility into customer behaviors and preferences. With powerful analytics, they can make more nuanced decisions about which offers to send to which customers.
These are the hallmarks of a customer data platform (CDP), a solution that is purpose-built to unify customer data across functional silos and provide the analytical underpinnings that streamline identifying and executing an effective ARPU growth strategy dramatically easier. Here are a couple of examples of how a CDP can drive value when attempting to grow ARPU:
- Streamlining a focus on high-value (and not focusing on low-value) customers – A CDP contains a complete, progressive, always-on 360-degree view of customers. It can track, measure, and report on several important attributes that help distinguish a brand’s best customers from their worst. Once these segments have been established at a level of detail and confidence not possible in traditional data warehouse systems, it becomes easier to identify high-value customers and treat them differently across all touchpoints.
- Cross-sell/Upsell – Identifying the customers with a strong likelihood to add services or increase their monthly fee can be derived from an ever-increasing information set. A CDP that unifies customer data houses all the information necessary to run improved predictive models that can identify those with a high propensity to increase services and take action. The resulting action can include a highly personalized set of offers to be generated through the best channel at the right time.
- Choosing the right added-value products – One of the better ways to increase ARPU is by adding nice-to-haves that aren’t part of the core product. These additional “bells and whistles” can include co-branding and joint venture opportunities with complementary brands. A customer data platform can provide insight into what sorts of opportunities would have the most impact with customers, allowing brands to make better decisions about which added-value products to offer.
Growing ARPU is a core goal of every subscription-based business. To do that effectively, organizations need to more effectively focus on delivering the right offers to the right customers. Only a customer data platform provides the insight into consumer preferences and analytics functionality that forward-thinking brands need to drive ARPU higher and succeed in the long term.