The Side Effects of Increasing Average Revenue per Customer

Well, a couple of the positive side effects… it’s a good thing!

Increasing Average Revenue per Customer (ARPC) over time should definitely be the goal of any Software-as-a-Service (SaaS) or Subscription business (any business, probably).

That said, generating more revenue and higher margins aren’t the only reasons to drive up ARPC; there are two main benefits — side effects, if you will — from generating more revenue from existing customers.

1. ARPC growth among existing customers generally leads to lower churn (per McKinsey & Company research), not simply because those who pay more will stay longer, but because those who pay more over time are usually more invested beyond the dollars they pay.
2. Aggregate ARPC growth across all customers generally comes from building a more diversified customer base – often by moving up-market – rather than simply raising prices on existing customers.

I go into a lot more detail on different strategies and tactics around SaaS Marketing, Pricing, Growth Hacking, etc. on my Sixteen Ventures site.

I help grow SaaS companies at Gainsight by focusing on Customer Success. Follow me on Twitter @lincolnmurphy.