Software and internet platforms
Net revenue retention (NRR)
How much recurring revenue a group of existing customers brings in a year later.
Facts checked against sources onWhat does Net revenue retention (NRR) mean?
Net revenue retention (also called net dollar retention) compares the recurring revenue from a group of customers today with the revenue from the same customers a year ago. It counts upgrades, subtracts downgrades and churn, and ignores new customers. Example: customers who paid 100 of ARR a year ago now pay 110, after 18 of expansion, 3 of downgrades and 5 of churn, so NRR is 110 percent. Above 100 percent, the company grows even if it wins no new customers. Gross revenue retention (GRR) is the same idea without the upgrades, so it can never exceed 100 percent; here it would be 92 percent.
Where does it come up in case interview prep?
- Retention and cohorts: why keeping customers beats winning themLesson in Customers and growth: the economics of marketing
- How software and SaaS companies workLesson in Software and SaaS
- SaaS unit economics: ARR bridge, NRR, CAC payback, and rule of 40Lesson in Software and SaaS
- Software and SaaS: players, trends, regulation, and how to crack the casesLesson in Software and SaaS
- Cybersecurity economics: breach risk, SaaS and servicesLesson in Cybersecurity
- Cybersecurity: players, trends, rules and casesLesson in Cybersecurity
Related terms
- Annual recurring revenue (ARR)The yearly value of all active subscription contracts at a point in time.
- Churn and retentionThe share of customers who leave in a period, and the share who stay.
- CLV (customer lifetime value)The profit a customer is expected to bring over the whole relationship.
- Rule of 40A software company's growth rate plus its profit margin should add up to at least 40 percent.
- CAC payback periodHow many months of gross profit it takes to earn back the cost of winning a customer.
- Gross merchandise value (GMV)The total value of goods or services sold through a platform.
- CPM (cost per thousand impressions)The price an advertiser pays for 1,000 views of an ad.
- CPC (cost per click)The price an advertiser pays each time someone clicks an ad.
Learn it in context
See Net revenue retention (NRR) at work in a lesson from Customers and growth: the economics of marketing, with checks as you go.
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