Measuring buyers

For many years, one of the key measures for communications and network companies has been ARPU … the Average Revenue Per User (or Unit). It’s often used to track growth and the contribution of revenue sources.

You calculate it by dividing the total value of the revenue you receive from a sales channel and by the total number of customers in that channel.

But like all averages it has its dangers. If customer A spends £120 a month and customer B spend £80 then the ARPU is £100. Decisions made about the relative merits of each customer might lead to the wrong conclusion.

Still, it has a certain merit in that it gives you a basis to compare different strategies and is easy to calculate.

So, could it be used for Procurement? Would the average spend per supplier , buyer or employee tell you anything useful?

Perhaps not in itself … but used as a benchmark to compare organisations in the same sector it might be of value. If two Local Authorities has spend of £20m per buyer and £50m per buyer, would this prove a useful starting point from which to investigate differences in practices, systems or approaches?

What do you think? Please post your comments and suggestions below.