Net Revenue Retention (NRR)

Net Revenue Retention solves a fundamental business problem: distinguishing between growth that comes from new customer acquisition versus growth that comes from keeping and expanding existing relationships. Think of it like this—if you have $100 in recurring revenue from existing customers at the start of a period, NRR tells you what percentage of that $100 you still have at the end, after subtracting churn but adding upsells and cross-sells.

Here's the math in plain terms: Start with your revenue from existing customers (not new ones). Subtract what you lost to cancellations and downgrades. Add what you gained from existing customers upgrading to higher tiers or buying more features. Divide that net number by your starting revenue. An NRR above 100% means your existing customer base is growing in value; below 100% means it's shrinking.

In marketing AI tools, this shows up constantly. A customer might start with a basic generative AI platform for copywriting ($5,000/year). Six months later, they add image generation, video tools, and analytics—now they're paying $15,000/year. That expansion is captured in NRR. Conversely, if three other similar-sized customers cancel, that's the churn side of the equation.

For CMOs evaluating AI vendors, NRR is a hidden signal of product-market fit and customer satisfaction. A vendor with 120% NRR is retaining customers and expanding within them—suggesting the product delivers real value. One with 85% NRR is losing more than it's gaining from existing accounts, which often precedes broader market problems.

When you're buying an AI tool, high NRR from the vendor suggests they're solving real problems and customers see ROI. Low NRR might mean the tool isn't sticky, support is weak, or the product roadmap isn't meeting evolving needs—all risks for your investment.