Calculating NRR in a Usage- and Outcome-based Pricing Model

Usage and outcome based pricing is changing how companies calculate Net Revenue Retention. When pricing is tied to customer behavior, consumption, or value delivered, the math behind NRR becomes less straightforward and the definitions of ARR, expansion, and churn need to evolve.

Dave "CAC" Kellogg and Ray "Growth" Rike break down the challenges and mechanics behind calculating NRR in modern pricing models, including:

• Why the cohort method is the cleanest way to calculate NRR

• When expansion ARR should and should not be included in NRR

• The impact of ramp periods and year one exclusions

• When two year look backs give a more accurate expansion picture

This episode goes deep into the practical realities of NRR in usage based and outcome based models, and explains why clear definitions matter more than ever in today’s AI native SaaS companies.