Net Revenue Retention Rate (NRR) and Gross Revenue Retention Rate (GRR) both measure customer retention in SaaS businesses, but they account for different aspects of customer behaviour. NRR calculates the total revenue retained from existing customers over a period, including expansion revenue from upsells, cross-sells, and price increases, as well as contraction from downgrades, potentially exceeding 100% if expansion outpaces churn. GRR, conversely, only measures the revenue retained from existing customers without including any expansion revenue, focusing purely on how well a company retains its existing business and always capping at 100%.
A SaaS company should highlight Net Revenue Retention Rate when speaking to investors or showcasing overall business health, especially when the company has strong upsell motion. For instance, a collaboration platform with an NRR of 115% demonstrates that not only are customers staying, but they're also expanding their usage, signalling strong product-market fit and growth potential. However, the same company should examine Gross Revenue Retention Rate when specifically evaluating churn issues or product satisfaction, as it reveals customer retention problems that might be masked by expansion revenue in the NRR. If the collaboration platform has a GRR of only 75% despite the strong NRR, it indicates that while some customers are significantly expanding, many others are leaving—a potentially serious issue requiring immediate attention to the core product experience.
