Renewal Operations
Part of Measuring customer success
Gross retention versus net retention
Compare gross and net revenue retention using one starting cohort. See what each formula includes, why both matter and what to check before interpreting them.
Gross revenue retention (GRR) shows how much recurring revenue an existing customer cohort kept after cancellations and reductions, without credit for growth in those accounts. Net revenue retention (NRR) adds expansion to the cohort's result. Read them together: NRR can exceed 100% while churn and contraction still weaken the starting revenue base.
Use the same starting cohort
Choose a period and identify the customers paying at its start. Record their starting monthly recurring revenue (MRR), then classify movements from that group during the period. New customers acquired later do not belong in either calculation.
| Movement | GRR | NRR |
|---|---|---|
| Full cancellation | Subtract | Subtract |
| Reduced recurring value | Subtract | Subtract |
| Expansion within the cohort | Exclude | Add |
| New customer acquired during the period | Exclude | Exclude |
A movement-based calculation is GRR = (starting MRR − contraction MRR − churn MRR) ÷ starting MRR. A simple NRR calculation is (starting MRR + expansion MRR − contraction MRR − churn MRR) ÷ starting MRR. Multiply either result by 100 for a percentage.
ChartMogul's movement-based NRR also adds reactivation, while its GRR excludes it. Check how a customer who leaves and returns is treated before comparing reports.
Gross Revenue Retention (GRR) vs Net Revenue Retention (NRR)
- DefinitionMeasures retained revenue from a cohort after churn and contraction, excluding expansion.
- Formula(Starting MRR − Contraction MRR − Churn MRR) ÷ Starting MRR
- Maximum Value100% (cannot exceed due to exclusion of expansion)
- Includes Expansion?No
- DefinitionMeasures total revenue movement from a cohort, including expansion, contraction and churn.
- Formula(Starting MRR + Expansion MRR − Contraction MRR − Churn MRR) ÷ Starting MRR
- Maximum ValueCan exceed 100% when expansion outweighs losses
- Includes Expansion?Yes
See what the rates reveal
In a hypothetical cohort beginning with A$100,000 MRR, suppose A$6,000 is lost through cancellations, A$4,000 through reductions and A$13,000 is added through expansion, with no reactivation. GRR is 90% and NRR is 103% under the stated formulas.
The net rate shows that the cohort's revenue grew overall. The gross rate still shows A$10,000 lost through churn and contraction. These invented figures illustrate the arithmetic; they are not a benchmark.
GRR cannot exceed 100% under this definition because it does not add expansion. NRR can exceed 100% when gains within the cohort outweigh losses. Neither rate tells you how many accounts left; pair the rates with account counts and the movement amounts.
Reconcile before interpreting a change
Check the account identifier, contract scope, currency basis, effective dates and starting MRR. A partial cancellation may be a contraction at customer level rather than full churn.
Billing changes may be classified differently from changes in product scope: ChartMogul groups certain subscription changes that occur within a specified period. Multiple new subscriptions purchased at the same time can be classified as New Business rather than New Business followed by Expansion. Inspect the movement record before saying customers bought more or used less.
Keep the period consistent. A monthly rate and a twelve-month rate cover different amounts of time. If a pricing or reporting rule changed, show the break rather than interpreting it as customer behaviour.
Use GRR to see losses from starting recurring revenue without offsetting gains. Use NRR to see whether revenue from that cohort grew overall. These are period-cohort revenue measures, not rates for accounts whose contracts came due for renewal.
To understand the customer experience behind either result, inspect the affected accounts and what they confirmed. A retention rate records a commercial result; it does not establish its cause.
When to Use GRR vs NRR in Australian SaaS Operations
- Use GRR for:Assessing loss from existing customers due to churn or downgrades. Useful for evaluating customer health and pricing stability in markets like Australia where retention is key to sustainable growth.
- Use NRR for:Measuring overall revenue performance from a cohort, including upsells and cross-sells. Indicates whether your expansion strategy is working—critical for SaaS businesses in Australia aiming to grow via product-led growth.
- Limitation of GRR:Cannot exceed 100%, so it doesn’t reflect growth within accounts. May understate performance if expansion is strong.
- Limitation of NRR:Can exceed 100% even with high churn, which may mask underlying issues. Requires context from account-level data.
