What is Average Sales per Customer?
Average Sales per Customer is an important CRM metric that helps ecommerce businesses understand how well they are doing when it comes to acquiring and servicing customers. This metric helps measure the efficiency of product pricing, marketing, product assortment, and customer service.The average sales per customer can be calculated by taking the total sales generated divided by the total number of customers.
Formula
The formula for average sales per customer (often referred to as Average Revenue Per User or ARPU in business metrics) is:Average Sales per Customer = Total Sales Revenue / Number of Customers
Example
If a business generated $50,000 in total sales over the course of a quarter and had 200 customers, then the average sales per customer would be $250. If Average Sales per Customer decreases it can be an indication of a disconnect between the business offering and what customers want.
Why is ARPU important?
Average Sales per Customer is a key metric that offers insights into customer spending behavior, profitability, and product appeal. Higher average sales indicate successful upselling or cross-selling strategies, desirable product range, and effective pricing. This metric directly impacts the company’s bottom-line, making it essential for forecasting revenue and planning business strategies. Additionally, tracking changes in average sales can identify customer preferences and market trends, supporting efforts to enhance product offerings, pricing, and marketing.
Which factors impact ARPU?
Average Sales per Customer is influenced by several factors. The range and quality of product offerings can significantly impact this metric, as customers tend to spend more when they perceive high value. Pricing strategy also plays a key role; optimal pricing can enhance sales volume and total sales. Effective cross-selling and upselling strategies can drive customers to buy more during a single transaction. Customer service quality can foster customer satisfaction, prompting more purchases. Marketing effectiveness, especially in terms of personalization and understanding customer needs, can stimulate customer spend. Finally, overall customer experience, which includes ease of navigation on the website or in-store, payment options, and after-sales service, can influence how much a customer spends per transaction.
How can ARPU be improved?
Boosting Average Sales per Customer hinges on understanding influencing factors. Improve this by refining product pricing to suit target markets, thus attracting customers. Also, think about product assortment and value to boost revenue. Continual marketing cultivates brand familiarity and customer loyalty, potentially raising sales. Quality customer service fosters positive experiences, increasing satisfaction and promoting repeat sales.
What is ARPU’s relationship with other metrics?
Average Sales per Customer is related to various ecommerce metrics such as Customer Lifetime Value (CLV). CLV tracks how much revenue a customer has generated over their lifetime with your business and it is directly influenced by Average Sales per Customer. In addition, Customer Acquisition Cost (CAC) is another metric that relates to Average Sales per Customer. CAC measures how much, on average, it costs to acquire a new customer and can be influenced by Average Sales per Customer as it is a crucial factor in determining a customer’s customer journey. Overall, Average Sales per Customer is a powerful metric that can be used to measure customer experience and effectiveness of ecommerce strategies.
