In a world where acquiring new customers often comes at a hefty price, retaining existing ones is vital for sustainable growth. Imagine spending thousands (if not more) on a new customer only to lose them after the first renewal cycle. Painful, right? 

That’s why retention metrics like Net Revenue Retention (NRR) and Customer Retention (CR) have become the shining stars of SaaS growth strategies, ensuring businesses don’t just survive but thrive.

But what is the difference between Net Revenue Retention (NRR) and Customer Retention (CR), and why are both metrics important for SaaS companies to track and optimize?

That’s what we’re going to answer today. 

What is net revenue retention (NRR)?

Definition

Net Revenue Retention (NRR) is a key retention metric that measures the total revenue generated from your existing customer base, accounting for upgrades, downgrades and churn. 

Unlike customer retention, which tracks the number of customers you keep, NRR focuses on the revenue impact of those customers, providing a holistic view of how well your business is expanding and retaining value within its current client portfolio.

The formula for calculating NRR:

For example, if you start the month with: 

• $100,000 in recurring revenue
• $20,000 from upsells
• Lose $10,000 to churn

Your NRR would be:

Importance of NRR

In the SaaS world, net revenue retention is a critical indicator of sustainable growth. 

Why? Because it shows how much value you’re extracting from your current customers without relying on new customer acquisition. 

With acquisition costs on the rise, especially in competitive markets, a high NRR reflects strong customer success practices, such as delivering value, upselling relevant features, and minimizing churn.

NRR is particularly crucial for understanding your business's health because it reveals:

• Resilience: High NRR offsets churn and revenue loss.
• Scalability: A growing NRR indicates you're effectively scaling revenue within your customer base.
• Predictable growth: It’s a reliable metric to forecast revenue growth, independent of new sales.

Key metric for growth

Achieving an NRR over 100% signals that your business is growing through upsells and cross-sells. This means your existing customers are contributing more revenue than what’s being lost due to churn or downgrades. 

For instance, many top-performing SaaS companies boast NRRs of 120% or more, demonstrating their ability to generate consistent value while fostering loyalty.

Current leaders are:

• Snowflake (135% NRR)
• Bill.com (131% NRR)
• GitLab (129% NRR) 

In a nutshell, net revenue retention isn’t just about tracking retention—it’s a lens into your customer success strategy and its impact on SaaS growth. A higher NRR is a clear indicator that you’ve built a product your customers can’t live without.

What is customer retention (CR)?

Definition

Customer Retention (CR) is a critical retention metric that measures how effectively a company keeps its customers engaged and active over a specific period. It focuses on the number of customers who remain loyal, avoiding churn and continuing to derive value from your product or service. 

CR is a direct reflection of how well your customer success strategies address customer needs and build trust.

The formula for CR:

For instance, if you start the quarter with:

• 200 customers
• 50 new customers
• Lose 20 due to churn

Your CR would be:

Purpose

At its core, customer retention is about building a loyal customer base that drives SaaS growth. Loyal customers not only continue their subscriptions but often advocate for your brand, reducing your dependency on costly new customer acquisition. 

A strong CR means:

• Lower churn: Keeping customers is more cost-effective than acquiring new ones.
• Long-term relationships: Satisfied customers are more likely to stay and explore additional offerings.
• Revenue stability: Retained customers provide a predictable revenue stream, complementing metrics like net revenue retention.

Proactive vs. reactive

While CR often reflects past performance, it should be approached as a proactive strategy. Waiting for churn to happen and reacting afterward is costly and inefficient. 

Instead, invest in customer success initiatives that strengthen relationships before churn becomes a threat. Proactive retention strategies include:

• Regularly gathering customer feedback and acting on it.
• Offering personalized support to address individual needs.
• Monitoring product usage to identify and resolve potential frustrations early.

By taking proactive steps, you lay the foundation for long-term customer loyalty, ensuring your retention metrics consistently improve. 

Key differences between NRR and CR

Focus area

The main distinction between Net Revenue Retention (NRR) and Customer Retention (CR) lies in their focal points:

• NRR: Is about revenue-focused retention, capturing the financial impact of your existing customers. It includes upsells, cross-sells, and the offset of revenue lost from churn or downgrades, providing a clear lens into how much revenue your business retains and grows within its customer base.
• CR: Is a customer-focused metric, tracking the percentage of customers retained over a specific period. It’s a straightforward way to measure customer loyalty and identify potential churn risks.

Value proposition

• NRR: Reflects financial stability and expansion opportunities. A high NRR indicates your ability to not only retain but grow revenue from your existing customers—crucial for SaaS growth.
• CR: Highlights customer satisfaction and loyalty. Strong CR demonstrates that your customers are happy with your product and customer success efforts, laying the groundwork for long-term relationships.

Both metrics are essential in understanding how well you’re retaining value, whether it’s through your revenue streams (NRR) or the customers themselves (CR).

Why both metrics matter

Complementary insights

While net revenue retention and customer retention are distinct, they work together to paint a full picture of your company’s health. 

CR shows how many customers you’re retaining, but NRR adds depth by revealing how much revenue those customers contribute. 

A business might retain a high percentage of customers (high CR) but struggle with stagnant revenue if upsells or expansions aren’t happening (low NRR). Conversely, high NRR with low CR could signal dependency on upsells to make up for churn.

Together, these retention metrics answer critical questions:

• Are your customers satisfied and sticking around?
• Are they contributing increasing value to your bottom line?

Decision-making

Using NRR and CR in tandem empowers businesses to prioritize customer success initiatives and make informed product improvements. For example:

• Low CR, High NRR: Focus on reducing churn by identifying and addressing customer pain points, such as onboarding challenges or product gaps.
• High CR, Low NRR: Prioritize upsell opportunities and improve your value proposition to encourage customers to invest in additional features or services.

Incorporating both metrics into your SaaS growth strategy ensures a balanced approach to retention, combining customer loyalty with revenue expansion.

Strategies to improve NRR and CR

Strategies to Improve Net Revenue Retention (NRR)

NRR is about driving revenue growth from your existing customer base. Here’s how to do it:

Focus on upselling and cross-selling

Leverage customer data to identify opportunities for upsells (enhanced versions of their current plan) or cross-sells (complementary products). Use personalized recommendations based on their usage patterns and pain points to offer meaningful upgrades, making it hard to say no.

Create personalized product experiences

Tailor your product to meet specific customer needs by offering customizable features or recommending workflows. A personalized experience shows you’re invested in their success, increasing their likelihood of expanding their engagement with your offerings.

Proactive account management

Assign dedicated customer success managers (CSMs) to larger accounts to guide them toward milestones, identify upsell opportunities, and ensure they derive ongoing value from your product.

Strategies to improve customer retention (CR)

CR focuses on keeping customers loyal and engaged. Strengthening CR ensures your business maintains a stable customer base over time.

Strengthen customer support and engagement

Prompt, high-quality support can make or break customer loyalty. Ensure your support team is well-trained, empathetic, and proactive in addressing customer concerns. Pair this with regular touchpoints like email campaigns, webinars, or user communities to keep customers engaged.

Proactive churn prevention strategies

Identify at-risk customers before they churn by analyzing behavior, such as reduced logins or unutilized features. Use this data to intervene early with tailored support or incentives.

Build a strong onboarding process

The first few weeks are crucial for retention. Ensure new customers feel confident using your product by providing onboarding sessions, tutorials, or in-app guidance. A smooth start reduces early churn and sets the stage for long-term loyalty.

Conclusion

Retention metrics like Net Revenue Retention (NRR) and Customer Retention (CR) are the central to understanding your SaaS growth. While NRR drives revenue expansion through upsells and cross-sells, CR ensures you maintain a loyal, satisfied customer base. 

Together, these metrics offer a complete view of your business’s health, empowering you to prioritize customer success and make data-driven decisions.

Ready to take your customer success game to the next level? Explore the Customer Success Collective’s retention Masterclass to improve retention, drive revenue, and grow your career. Learn actionable strategies and insights from industry experts who’ve been there and done that.

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