What is Net Revenue Retention (NRR)?
Net Revenue Retention (NRR) is a financial metric that measures the percentage of recurring revenue retained from existing customers over a specific period, including upgrades, downgrades, and cancellations. NRR provides insight into how well a company is retaining and growing revenue from its current customer base.
How to Measure Net Revenue Retention (NRR)?
NRR is measured by:
Starting MRR: Determine the MRR at the beginning of the period.
Expansion Revenue: Add revenue from existing customers who have upgraded or expanded their subscriptions during the period.
Churn and Downgrade Revenue: Subtract revenue lost due to customer churn and downgrades.
NRR Calculation: Divide the adjusted revenue by the starting MRR, then multiply by 100 to get the NRR percentage.
How to Improve Net Revenue Retention (NRR)?
To increase NRR:
Focus on Customer Success: Provide excellent customer support and success programs to ensure customers are getting value from your product, reducing churn.
Expand Offerings to Existing Customers: Encourage customers to upgrade or purchase additional products/services through targeted marketing and sales efforts.
Monitor and Address Churn Risks: Regularly analyze customer behavior to identify at-risk accounts and intervene with personalized retention strategies.
Incentivize Long-Term Commitments: Offer discounts or incentives for customers who commit to longer subscription periods, increasing retention and NRR.