Why Does NRR Matter?
Posted: Sat Dec 07, 2024 9:43 am
Understanding industry benchmarks and how your NRR rate compares to them allows you to figure out if your growth tactics are working and if you're on the right track. Before we dive in, it is worth mentioning that benchmarks can vary depending on a company's size and growth stage.
A solid NRR for a SaaS company should be above 100%, but high-performing companies can reach NRRs of even 140%. SMBs, on the other hand, usually have an NRR of 90%. Anything below that indicates that something isn't working as it should.
Slack, Snowflake, Twilio, what do these companies all have in common? An NRR above 100%, indicating scalable, predictable growth.
While the subscription industry continues to be regarded as incredibly fast-growing, being part of a volatile economy has made many SaaS leaders abstain from a “grow-at-all-costs” perspective to a more focused approach in achieving a sustainable expansion. This means paying more attention to your existing customers and their needs rather than putting all your efforts and resources into winning new users. To clarify, without working hard on customer retention and user acquisition, while a crucial part of securing company growth, might cost you more than you can handle.
Simply monitoring your MRR is not enough.
High churn rates and account downgrades can have a albania telemarketing serious impact on your company's growth because they often indicate issues with your pricing strategies, onboarding processes, and even the overall customer experience. By looking solely at your monthly earnings and getting excited about the high acquisition rate, your business performance is at a standstill in the long run.
That's why NRR is a game-changer and rests at the heart of sustainable growth. With NRR tracking your entire history with an existing customer gives you access to the good and bad of that relationship. Retention is the soul of the subscription industry, so the higher that rate is, the better it will be for your SaaS company.
4 Net Revenue Retention Best Practices
1. Reduce Customer Churn
Churn is bad news for any SaaS business, but working hard to reduce it will pay off. Since revenue churn can impact all things revenue, it's safe to say that NRR is one of its victims. Before we get into how you can improve your churn rate, it's important to understand that there is voluntary and involuntary churn. Each has specific causes, and fixing them will result in less lost revenue.
It’s possible your subscribers are saying goodbye due to increased friction when operating with your product. Perhaps your product might be outdated and no longer serves the needs of your users. Your customer support, or better said, the lack of it, could also be causing account cancellations. An ineffective pricing strategy is another reason to consider if you're losing customers.
A solid NRR for a SaaS company should be above 100%, but high-performing companies can reach NRRs of even 140%. SMBs, on the other hand, usually have an NRR of 90%. Anything below that indicates that something isn't working as it should.
Slack, Snowflake, Twilio, what do these companies all have in common? An NRR above 100%, indicating scalable, predictable growth.
While the subscription industry continues to be regarded as incredibly fast-growing, being part of a volatile economy has made many SaaS leaders abstain from a “grow-at-all-costs” perspective to a more focused approach in achieving a sustainable expansion. This means paying more attention to your existing customers and their needs rather than putting all your efforts and resources into winning new users. To clarify, without working hard on customer retention and user acquisition, while a crucial part of securing company growth, might cost you more than you can handle.
Simply monitoring your MRR is not enough.
High churn rates and account downgrades can have a albania telemarketing serious impact on your company's growth because they often indicate issues with your pricing strategies, onboarding processes, and even the overall customer experience. By looking solely at your monthly earnings and getting excited about the high acquisition rate, your business performance is at a standstill in the long run.
That's why NRR is a game-changer and rests at the heart of sustainable growth. With NRR tracking your entire history with an existing customer gives you access to the good and bad of that relationship. Retention is the soul of the subscription industry, so the higher that rate is, the better it will be for your SaaS company.
4 Net Revenue Retention Best Practices
1. Reduce Customer Churn
Churn is bad news for any SaaS business, but working hard to reduce it will pay off. Since revenue churn can impact all things revenue, it's safe to say that NRR is one of its victims. Before we get into how you can improve your churn rate, it's important to understand that there is voluntary and involuntary churn. Each has specific causes, and fixing them will result in less lost revenue.
It’s possible your subscribers are saying goodbye due to increased friction when operating with your product. Perhaps your product might be outdated and no longer serves the needs of your users. Your customer support, or better said, the lack of it, could also be causing account cancellations. An ineffective pricing strategy is another reason to consider if you're losing customers.