How to improve revenue per user
Revenue per user is the most direct lever for growing revenue without needing more customers. Most founders default to 'get more users' when they should be asking 'how do I get more value from existing users?' Improving ARPU by 20% has the same impact on revenue as growing users by 20% - but it's usually easier and faster. The key levers are pricing, upsells, and expanding the use case.
What is revenue per user?
Revenue per user (ARPU - average revenue per user) measures how much revenue each user generates on average, typically per month. For SaaS, this is average subscription revenue. For e-commerce, it's average order value times purchase frequency. ARPU growth means you're getting more value from existing users.
Formula
total revenue / total active users (for a given period)Benchmarks
ARPU varies dramatically by business model. For B2C SaaS, $10-$30/month is common. B2B SMB SaaS ranges from $50-$200/month. B2B mid-market hits $500-$2,000/month. What matters more than the absolute number is the trend - ARPU should be flat or growing. Declining ARPU means you're attracting lower-value users or your pricing isn't keeping up with value delivery.
How to improve revenue per user
Review your pricing annually. Most startups underprice by 2-3x. If nobody complains about your pricing, it's too low.
Add a premium tier with features that power users need. The existence of a premium plan also anchors your standard plan as good value.
Introduce usage-based pricing that scales with customer success. Customers pay more as they get more value - a natural alignment.
Build cross-sell and upsell flows triggered by usage milestones. When a user hits a threshold, suggest the relevant upgrade.
Offer add-ons and extras that supplement the core subscription. Canva's add-on stock photos are a great example.
Test price increases with new customers first. Existing customers stay on their current plan while you learn what the market will bear.
Problems that affect revenue per user
Your pricing is too low and you're leaving money on the table
Nobody complains about your price. Everyone converts immediately. That's not a good sign - it means you're undercharging. Patrick Campbell at ProfitWell analyzed thousands of SaaS companies and found most are underpriced by 20-40%. When Wistia raised their prices by 2x, they lost fewer than 5% of customers. You're growing revenue linearly when it could grow exponentially, and every month you wait is money you'll never get back. The fix isn't scary - most founders who raise prices wish they'd done it six months earlier.
Existing users never spend more over time
Your revenue per user is flat. Once they subscribe, that's it - no upgrades, no add-ons, no usage growth. You're missing the biggest lever in SaaS: net revenue retention. The best SaaS companies (Slack, Datadog, Snowflake) have net revenue retention above 120%, meaning they grow revenue even without new customers. If your NRR is under 100%, you're on a treadmill - every churned dollar has to be replaced by a new customer. Expansion revenue is 3-5x cheaper than new customer acquisition and it compounds over time.
Users keep downgrading to cheaper plans
You launched tiers to grow ARPU but users migrate down, not up. Higher plans feel overpriced for what they add, and the features you thought were premium turn out to be nice-to-haves. This is more common than you think - Baremetrics wrote openly about struggling with tier design before settling on a usage-based model. The core problem is usually that premium tiers are packed with features users want once a month, not every day. If your daily workflow is identical on both plans, there's no reason to stay on the expensive one. Basecamp solved this by having one price for everything, but if you need tiers, the features on each tier need to reflect daily usage patterns, not aspirational use cases.
You have no idea what users are willing to pay
You guessed your price, picked a round number, or copied a competitor from two years ago. You've never actually asked users what they'd pay, so you might be 2x too low or 2x too high and you'd have no way of knowing. ProfitWell analyzed pricing at 5,000+ SaaS companies and found that companies who do pricing research even once per year grow 2x faster than those who set-and-forget. The good news: willingness-to-pay research isn't academic. A Van Westendorp survey takes 4 questions and 30-50 responses. You can run it with a Typeform in a weekend. ConvertKit, Buffer, and Baremetrics all publicly shared how simple pricing research transformed their growth. The worst pricing strategy is the one you never revisit.
Your pricing is based on the wrong value metric
You charge per seat but value comes from usage. Or you charge flat-rate but power users extract 100x more value than casual ones. The wrong value metric means you're either leaving money on the table with heavy users or scaring off small ones who'd pay if the entry point was lower. ProfitWell's research across 5,000+ SaaS companies found that aligning your value metric with customer value perception is the single highest-impact pricing change you can make. Slack charges per active seat (not total seats), which feels fair. Mailchimp charges per contact, which scales with the value you get. Snowflake charges per compute second. The right metric grows as the customer grows, without feeling punitive.
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