Gross renewal rate is a customer retention metric that marks the percentage of customers who renew their contracts during a specific period.
Gross renewal rate considers downgrades or contraction MRR, and churned revenue (cancellations), but doesn’t account for expansion revenue (unlike Net Renewal Rate).
Renewal rate is the inverse of churn; if your gross renewal rate is 95%, then your gross churn is 5% (for example).
To calculate gross renewal rate, you need to subtract all the downgrades and churn from monthly recurring revenue (MRR) at the start of the month, divide that by MRR at the start of the month, and multiply by 100.
Here's the formula:
Gross Renewal Rate = [(MRR - Churn - Downgrades) / MRR] * 100
Here’s an example of what it looks like:
Customer stickiness is in direct correlation with gross renewal rate. The likelier customers are to stick with you, the higher your GRR will be.
You can also look into these retention metrics:
Some churn is impossible to prevent even if you’re doing everything right.
Working on churn prevention and keeping it down to a minimum is the next best thing — and a realistic strategy.
Pricing, poor experience, and lack of value are the most common reasons customers switch over to competition. Some common churn management strategies include:
“False advertising” may be a strong way to word it, but customers sometimes look for alternatives because you’ve created a wrong impression about your product.
Be clear about what it can and can’t do, what use cases it matches the best, and that keyword intent in your content/ads is precise and truthful.
The maximum GRR value is 100% — the closer gross renewal rate gets to 100, the better.
However, a 100% GRR is impossible to have month after month; you should always expect some customer churn.
A more realistic goal for an enterprise SaaS company is a median GRR of about 90%; SMBs can afford to target a slightly lower GRR, about 80%. The median GRR values to strive for may vary, depending on company size and business model.
Gross renewal rate only accounts for MRR, churn, and downgrades, while net renewal rate focuses on expansions and upgrades.