ARPU, The User

"Users" are the generators if revenue when we are talking about ARPU (Average Revenue Per User). A correct calculation of the ARPU depends on understanding the term "User".

Any customer bringing revenue within a defined period is part of the total users of that period. It is the understanding of the ARPU within the company that determines their view of a user. For example, when we analyze the various stages that a subscriber account go through, we use terminology such as active, inactive, suspended, connected, etc... By dividing the Total revenue over any specific characteristic or a sum of characteristics, the ARPU results vary.

On another hand, we used to calculate the ARPU without taking into consideration the incoming fees collected from interconnection and that made the ARPU lesser than what it really was. Adding to that, a company may opt to divide the revenue of a certain period over the beginning of period number of customers or the end of period number of subscribers causing sometimes a huge variation between the two ARPU figures. So why do companies differ in calculating their ARPU?

When it comes to a mature product such as the one offered by the mobile telecom industry, it is hard to suggest that the lack of knowledge is the reason for over or underestimated ARPU although I know that in some developing markets this is still the case. However, in most cases I faced, ARPU was used to reflect a certain management approach.

For example, declaring a low ARPU calculated based on Revenue within a time period divided by the end of period total of subscribers (including suspended subscribers who are not generating revenue in that specific period) was used to deter some competition from entering the market by showing non-attractive financial indicators. On other occasions, figures were manipulated to show a higher ARPU in order to attract investors.

When I calculate the ARPU, l aim to analyze this indicator in order to formulate a strategy and be able to measure its success. Often, I look at services ARPU differentiating between voice and data, or differentiating between one type of service or another looking at VPN ARPU versus F&F (Family and Friends). The more information I have the better will be my ability to formulate new offers and services to the users while still focusing on the company's profitability.

Although a big fan of ARPU, I do recognize that markets are different. Due to increased competition and variety of services we need sometimes to look beyond this indicator. The profit that a company makes is not only measured by higher revenues, it also includes lowering the costs. AMPU (Average Margin Per User) represents the difference between ARPU and ACPU: AMPU = ARPU-ACPU. It may sound as a fancy indicator for some companies while being a necessity in others. The key for your success in your career is your ability to adapt to market trends, and to do so you have to able to "read" the market by applying the applicable tools and indicators such as the ARPU, the AMPU or any other indicator that relates to your specific to your case.


Article Source: http://EzineArticles.com/?expert=Osman_Habbal