Net Revenue Retention

Measures the percentage of recurring revenue retained from existing customers, considering upgrades, downgrades, and churn.

Net Revenue Retention

Measures the percentage of recurring revenue retained from existing customers, considering upgrades, downgrades, and churn.

Net Revenue Retention

Measures the percentage of recurring revenue retained from existing customers, considering upgrades, downgrades, and churn.

Formula

NRR = ((Revenue End of Period - Downgrades + Upgrades) / Revenue Start of Period) * 100

Know your metric

Importance of

NRR

  1. Customer Loyalty and Value Indicator

Net revenue retention highlights the effectiveness of customer retention strategies and the added value gained from existing customers through upsells and cross-sells.


  1. Predictability in Revenue

High net revenue retention provides predictable recurring revenue, which is crucial for sustainable growth in subscription-based models like SaaS companies.


  1. Benchmark for Performance

It serves as a benchmark for customer satisfaction and product/service relevance, indicating how well a company meets market and customer needs.

Drawbacks of

NRR

  1. Complex to Calculate

Calculating net revenue retention can be complex, especially if there are numerous variables affecting revenue from existing customers, such as discounts, churn, and additional purchases.


  1. May Mask Individual Problems

While overall retention may be high, this metric might mask issues such as the loss of key accounts or dissatisfaction in certain customer segments.


  1. Influence from External Factors

External factors like economic downturns or increased competition can negatively impact net revenue retention, making it difficult to maintain.

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