Net Revenue Retention (NRR)

What Is Net Revenue Retention (NRR)?

NRR, also known as Net Dollar Retention (NDR), measures the revenue growth generated by your existing customer base over a specific period.

It considers factors like upgrades, downgrades, churn, and expansion, providing a more accurate picture of sustainable growth than traditional metrics like annual recurring revenue (ARR).

How To Calculate Net Revenue Retention (NRR)?

NRR = [(Starting Recurring Revenue + Expansion Revenue) - Churned Revenue] / Starting Recurring Revenue x 100%

Include:

• Starting Recurring Revenue: Subscription revenue at the beginning of the period.
• Expansion Revenue: Upsells, cross-sells, and price increases during the period.
• Churned Revenue: Revenue lost due to cancellations, downgrades, and non-renewals.

An Example Of Net Revenue Retention (NRR)

A company starts a month with $10,000 in recurring revenue.

They generate $2,000 in expansion revenue (upsells) and lose $1,000 in churned revenue.

NRR = [($10,000 + $2,000) - $1,000] / $10,000 x 100% = 110%

Insights On Net Revenue Retention (NRR)

NRR helps you:

• Evaluate the health and efficiency of your customer retention efforts.
• Identify opportunities to increase customer lifetime value.
• Predict future revenue growth based on existing customer behavior.
• Benchmark your performance against industry standards.

Additional Considerations For Net Revenue Retention (NRR)

Track NRR by customer segment, subscription plan, or product to identify areas for improvement.

Analyze NRR alongside other metrics like customer churn rate and customer lifetime value for a comprehensive view.

Use rolling periods (e.g., quarterly) to account for seasonality and fluctuations.

What Are The Strategies For High NRR?

Deliver Exceptional Customer Experiences

Build loyalty and reduce churn through excellent service and support.

Offer Compelling Expansion Opportunities

Provide upsells, cross-sells, and product upgrades that address customer needs and drive further value.

Implement Churn Prevention Strategies

Identify at-risk customers and proactively address their concerns.

Promote Customer Success

Invest in initiatives that help customers achieve their goals with your product.

Gather And Act On Customer Feedback

Understand customer needs and pain points to improve your offerings and retention strategies.