Net Revenue Retention (NRR)
SaaS
Revenue
What is Net Revenue Retention?
Net revenue retention is the “macro” metric that most companies track and public SaaS companies report. It measures the total change in recurring revenue from a pool of customers over time. Implicitly, net revenue retention captures the negative impact of lost customers, but also the positive impact of price changes, cross-sells, up-sells, and growth in usage or seats within the installed base of customers.
Net Revenue Retention Formula
Net revenue retention = (Recurring revenue of active accounts a year ago + expansion of recurring revenue – churned recurring revenue – downgrades) / (Recurring revenue of active accounts a year ago)
Net Revenue Retention Unit
Net Revenue Retention is expressed as a percentage (%).
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More about Net Revenue Retention
Net Revenue Retention (NRR) is a crucial metric for understanding the true growth and stability of a subscription-based business. It measures the percentage of recurring revenue retained from existing customers over a specific period, factoring in upgrades, downgrades, and churn. Delving into NRR provides insights into customer satisfaction, product value, and long-term revenue potential. Let’s explore the significance of NRR, how to calculate it, and strategies to improve it for maximizing business success.
How to visualize Net Revenue Retention?
Net Revenue Retention can be visualized as a data card, showing the current value of the NRR. Or you can use bar charts to see trends and to compare your current NRR with previous time periods.
Net Revenue Retention visualization examples
Net Revenue Retention
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Recommendations to improve Net Revenue Retention
- Improve Customer Onboarding Process: Streamline the onboarding process to ensure that customers are able to quickly and easily understand how to use the software. This will reduce churn rates and increase customer satisfaction, leading to higher net revenue retention.
- Offer Personalized Support: Provide personalized support to customers to help them get the most out of the software. This will increase customer loyalty and reduce churn rates, leading to higher net revenue retention.
- Implement a Loyalty Program: Implement a loyalty program to reward customers for their continued use of the software. This will incentivize customers to stay with the company and increase net revenue retention.
- Regularly Update and Improve the Software: Regularly update and improve the software to ensure that it remains relevant and valuable to customers. This will increase customer satisfaction and reduce churn rates, leading to higher net revenue retention.
- Offer Flexible Pricing Plans: Offer flexible pricing plans to customers to ensure that they are able to choose a plan that best fits their needs. This will increase customer satisfaction and reduce churn rates, leading to higher net revenue retention.
