Net recurring revenue retention (NRR) — or the revenue your customer base brings in — speaks volumes about your business’s well-being and growth potential.

However, developing a high NRR rate isn’t possible without reducing churn and understanding your customers at a deeper level.

Most companies already have the data to grow profitability with current customers. They're just not using it.

Here's how to grow your NRR rate.

Corinna Owens, Chief Evangelist Officer, purple cork, offers these actionable steps to improve your customer experience while increasing your annual recurring revenue.

What is net revenue retention?

Net revenue retention (also known as net dollar retention or NDR) measures the recurring revenue you drive from your existing customer base over a given period.

It considers your customers’ upgrades, downgrades, and cancellations to show how valuable your existing customers are to your business.

NRR differs from gross revenue retention (GRR), which doesn't account for KPIs such as customers' upgrades and downgrades.

NRR also differs from customer churn rate. “Churn means a customer is gone completely,” shares Corrina. NRR considers customers who downgrade while remaining active subscribers.

Why is net revenue retention important in B2B sales?

For SaaS companies, tracking NRR is vital for getting an overview of their business’s health and customer loyalty.

Corrina explains:

Because NRR is calculated using multiple SaaS metrics like expansion revenue, churn, and retention, it gives a more in-depth picture of your company’s performance than other metrics like churn rate and GRR can.

NRR is also a key metric for determining your growth potential. Plus, it tells you how effective your churn prevention and upsell and cross-sell strategies are.

Lastly, NRR is an important metric for measuring the quality of the deals your sales team is closing. Because if your customers are churning fast, it could be because your reps aren’t bringing in users who are well-aligned with your ideal customer profile — indicating you have a pipeline generation problem.

How to calculate net revenue retention

Use this formula to calculate your net revenue retention rate over a period of time:

In this formula:

• Starting monthly recurring revenue (MRR) is the total revenue from the previous month

• Contraction MRR is the recurring revenue lost to downgrades

• Expansion MRR is the recurring revenue added from upgrades

• Churn MRR is the lost revenue (due to cancellations)

For example, if you’re starting MRR is $2,500 and you lose $700 to downgrades and $250 in churn but add $1,000 in expansion MRR, your NRR will be:

NRR = 2500 – 700 – 250 + 1,000/2500 x 100% = 102%.

8 ways to increase net revenue retention

Improving your NRR depends on two key factors:

• Centralizing and regularly reviewing first-party data

• Building relationships with your customers

The goal is improving customer experience with your product and team. Here are practical steps to build that strategy. Use these practical tips to start building out a strategy for increasing your NRR rate.

1. Create an accessible dashboard for tracking net recurring revenue

“Before you launch any tactic or program that’s going to help solve that [NRR] metric, make sure that your DevOps has something in place [say a Tableau or Salesforce dashboard], to track it against an Excel spreadsheet,” Corrina explains.

Making your NRR rate visible helps measure campaign performance and aligns teams around a shared metric. When everyone can see the same number, they work toward the same goal.

 An easy-to-read NRR dashboard is also a great source for detecting red flags such as mass cancellations early on. This lets you address issues early, before they impact revenue.

2. Steward your account data to better understand your customers

Next, centralize and regularly review your data to better understand your customers and product usage.

“SaaS companies underutilize their first-party intent data,” notes Corrina. This includes product data and website and marketing analytics that tell you:

• How your customers are using your tool. As in, which features do they use the most? Which ones do they struggle with?

• Which content your target audience and customers are consuming — for example, the emails they’re opening and links they’re clicking.

• What customers are doing on your website, such as the pages they’re visiting and how long they’re staying on each one.

Use this data to refine your product and understand customers’ buying intent.

For example, let’s say tracking your data tells you a champion user at an account has left to take on a new role at a different organization and is now visiting your pricing page. In such a case, the data indicates their interest in buying from you again. Reach out to them immediately.

Corrina recommends using UserGems’ champion tracking for this. Cobalt used this playbook too — driving $1.7M in new business pipeline. In fact, 8% of Cobalt’s new logo revenue growth in 2022 came from UserGems-sourced pipeline.

3. Host deal review office hours

Another effective way to use your first-party data and to reduce churn is to find out which deals are at risk.

Once you’ve identified accounts that are at risk of churn, host a cross-team meeting for creating a strategy to save the deal.

Corrina calls these meetings “deal review office hours” and shares:

“These are designed to tackle an account that needs ‘all hands on deck.’ Peers across different teams (enablement, sales, solution engineers, legal, product marketing, account-based marketing, customer success, and executive sponsors) [work together to think] of any angle we may not have approached yet to ‘save the deal.’"

“This hive mind produces ideas for other account deal teams, and the specific seller gains a Swiss army knife of support with action items they can immediately take. The innovation and inspiration from these meetings is worth every minute.”

4. Invest in solving more of your customers’ problems

Educating customers about your product’s various use cases is particularly helpful for SaaS companies that start off as a one-trick pony but add multiple features over time.

Instead of mass educating customers about the ways they could use your tool though, get specific about the exact features that’ll help them from an individual standpoint.

To do so, build relationships with champions at paying accounts.

Have one-on-one conversations with them to understand how they’re using your tool and what their goals and struggles are. From there, explain more ways they can use your tool to hit their targets.

Taking such a customer-first approach boosts their experience with you — showing them that you’re invested in their success. It also gives you an opportunity to effectively upsell and cross-sell to your current customers.

5. Use referrals as a spark to strengthen customer relationships

It’s also important you build relationships with your customers in more ways than educating them about your product.

For instance, connect with them on social media to have conversations, use referrals as gifts to strengthen your relationships, and so on.

“Just try and get to know them,” advises Corrina.

For example, if your audience is predominantly in marketing and sales and they’re active on LinkedIn, start following them there.

6. Evangelize new champions inside old accounts

When a new employee fills a past champion’s role, they typically have less familiarity with your tool than the previous user. They use the product less frequently, increasing the risk of churn over time.

Prevent churn by educating new users before they disengage.

Corrina shares:

Creating more champions at an account lets you “[…] create stickiness [and helps you] become a product inside an organization that most users know, leading to new opportunities and repeat customers.”

Ultimately, the approach increases retention metrics including your customer lifetime value (LTV).

7. Don’t rely on one champion in a target account

Whether it’s a champion at a paying account or an interested prospect at a target account, make sure you multi-thread.

That is: build relationships with multiple users and interested folks at an account to keep the deal alive and well in case your point of contact leaves.

Corrina agrees, “You cannot depend on one sole champion, or one sole person internally because they could leave.”

The solution?

Plus, by training new users at old accounts, you can grow more champions at an account, effectively boosting your NRR rate.

8. Build an active community to connect customers and prospects

If you have the resources, Corrina suggests investing them into community building.

Besides helping you build stronger relationships with your customers and target buyers, community building lets you:

• Humanize your brand as community members engage with folks from your organization

• Provide more value to your existing customer base as they connect with more people in their space

• Leverage voice of customer marketing to bring in new customers as paying customers explain to potential buyers how your tool helps them

For the last two, Corrina recommends:

“Creating an environment that facilitates a connection between a peer at another organization can double or triple your resources. Your champions that are staunch users of your platform can connect with your customers who aren't utilizing it to its fullest.

“This can happen by way of:

• Matching programs (match peers to their peers where they can connect on a call and chat without having to reach out to their sales rep for permission)

• Creating mini-roundtable events that facilitate a conversation around the topics you know matter most to them (you wouldn't believe how many times I've heard ‘I had no idea your product had that feature’ come out of those events!)”

Taking such a proactive approach to community building makes it useful both as a user retention and customer acquisition channel.

Use net revenue retention to reduce churn and grow predictable revenue

In short, grow your net recurring revenue by:

• Making your NRR rate visible

• Creating more champions at paying accounts

• Educating users about more product use cases specific to their goals

• Studying data to understand customer behavior and detect at-risk deals

Use UserGems to track champions moving in and out of customer accounts. This is useful for training new users at old accounts — reducing churn in the long haul.

Reach out to alumni customers when they join new organizations. This gives your sales team warm leads to target who are likely to convert since they already know (and hopefully love) your product.

In fact, deals with these alumni customers can more than double your win rates — and even grow deal sizes by up to 54%.

Schedule a demo to see how UserGems tracks champion movement and converts alumni into pipeline.