It's important to keep in mind that with WooCommerce, a user can be both a guest and a customer. The difference between the two is quite simple:
A guest is a user who makes a single order at your store over their lifetime. They are not registered and do not have an account to log in to for viewing their order history and account details.
A customer is a user who is registered and has an account. If you allow registration from the My Account page, they may have made 0 orders. Alternatively, they could have made multiple orders over their lifetime.
But shouldn't guests be considered customers too? We completely agree, so in Metorik we treat 'guests' as 'customers', automatically linking any orders they've made together. Read more here.
The metric we're looking at today is LTV (lifetime value) or ARPU (average revenue per user). This represents the amount of revenue we receive from users over their lifetime on their stores. It's important to understand this metric for a variety of reasons, like:
- Revenue forecasting (if we know our APRU and average # of new customers each month, it's easy to predict future revenue - ARPU x New Customers).
- Determining if a customer is high value and worth spending extra time supporting.
- Deciding how much to spend on customer acquisition.
That last reason is actually one of the best reasons to invest time in calculating ARPU. If you know each customer is worth $100 on average, and your profit on $100 in revenue ends up being $50, then it's clear that you can spend up to $50 acquiring customers through advertising and other mediums, since it will still be a profitable acquisition.
Now, how do we calculate it?
The simplest way is to take all of the revenue in a period and divide it by the number of customers that made orders in that period. Here's an example:
In a single month, you had revenue of $5000. That $5000 came from 300 orders. Those 300 orders were made by 200 customers. So divide the $5000 by the 200 customers:
Now, that was an easy example. Let's look at another month, where you had revenue of $20000. That $20000 came from 500 orders. 300 orders worth $15000 were made by 200 customers, and the other 200 orders worth $5000 were made by guests. Now, we don't care about the total number of orders made - just the number of unique users who made a purchase. There were 200 customers and 200 orders made by guests, so that makes 400 users in total.
It's important to know which type of users are most valuable though, so you're going to want to look at the APRU for customers and guests separately. To do that, you need to know the revenue received by customers and then the revenue received by guests, and then divide it by the respective number of customers/guests that it came from.
Let's take that example from before.
$20000 in revenue in total. $15000 came from customer orders. So let's divide the $15000 by the 200 customers = $75 ARPU. $5000 came from guest orders. Let's divide the $5000 by the 200 guest orders = $25 ARPU.
Well, it looks like customers are far more valuable here. They made 1.5 orders each on average, while guests only made 1 order each, and ended up spending 3x as much as guests. We could use this information to target customers who register more. It may even make sense to remove guest check out completely, forcing users to register as customers.
Keep in mind: Metorik automatically groups guest orders so they're treated just like customers - learn more.
Now, this is the manual way. You're going to need to use the build-in WooCommerce reports or purchase an exporter plugin to get the data out of WooCommerce to total and analyse. For a small store with an order every couple days, it's a bit of work but totally possible.
An easier option is of course to use Metorik, which does all of these calculations for you instantly in real-time, allowing you to filter your data to get orders just from a certain period and see the overall ARPU, the ARPU for guests and then the LTV of customers who registered in a certain period.
In Metorik's Orders Report, you can see how many guests made orders in a period and what their average order gross was - this number represents the ARPU for guests since they only ever make one order:
In Metorik's Customer Report, which you can filter by the date customer's registered (eg. get all customers who registered in the last 6 months), you can see the average customer lifetime value and a few other similar metrics:
The other important thing to remember when calculating ARPU is to exclude orders that were failed, cancelled, or another status you don't recognise revenue from. This is something that Metorik covers, through an option to exclude certain order statuses (including custom ones) from totals:
If you're doing the calculation manually, be sure to only use the total amount of revenue received from orders you deem successful.
Now that you know your ARPU, get back to running your store so you can keep growing it!