Strategies for Stabilizing (and improving!) GRR and NRR in 2024

Six ideas improve both GRR and NRR in 2024.

DEAR STAGE 2: The NRR and GRR data shows that the ecosystem really struggled in these areas in 2023, and that 2024 hasn’t been much better. A bit better, but not by a huge margin. People are trying to figure out how best to stabilize and right size here, and are wondering who should own these numbers, where should that team sit, who to hire, incentives, etc. What are you seeing and what’s your advice to Founders who are wrestling with this problem? ~Topline Hosts

DEAR TOPLINE HOSTS: Ok, I’m cheating this week… this question was the first question posed to me on Topline Episode 62, and the discussion took us down a few paths worthy of a recap. It’s true that many companies are struggling with retention right now and founders are often left wondering who should own these critical metrics, where those teams should sit, and how to structure incentives effectively. 

Before diving into solutions, it’s crucial to diagnose the root of your retention issues. Are you primarily dealing with logo churn (customers are leaving entirely), or are you struggling with account growth and expansion? Consider two companies with 100% NRR: 

• Company one: charges a flat fee for every customers, no upsell mechanism, 0 logo churn

• Company two: land and expand motion growing customers regularly, 20% annual logo churn

These businesses may have the same NRR, but have very different underlying businesses. Understanding whether the problem lies in retaining customers or expanding within existing accounts will guide your approach. 

Here are six specific ideas for you to consider as you work to stabilize and improve both GRR and NRR in 2024:

1. Get Exec Alignment on North Star Metric

Retention and customer growth are not *just* for CS. To drive meaningful improvement, executive alignment on a north star metric is essential. Whether it’s NRR, GRR, or another key indicator, having a unified goal ensures that everyone is working towards the same objective, facilitating cohesive strategy and execution. Make it clear that retention is critical to the business and ensure one metric is front and center message in weekly updates, during team meetings and all hands! 

2. Deliver Value 

Whether you’re addressing churn or expansion, understanding the unique and quantifiable value you provide to customers AND ensuring you deliver on that value is critical. This starts with understanding your customer journey and identifying key touchpoints where value is realized. Your executive team should be engaging with customers regularly to gather feedback - again, not a CS-only job. Ensuring that your product consistently delivers on its promises helps build loyalty and reduces churn.

3. Narrow Your ICP

A refined Ideal Customer Profile (ICP) is crucial for improving retention. Evaluate your existing customer base to identify patterns among those with high retention rates - which segments are outperforming? If you’ve read Dear Stage 2 before you’ve probably heard me expound on the value of Leading Indicators of Retention (LIR). Trusting the data and narrowing your ICP to focus on these high-retention segments allows you to tailor your marketing, sales, and customer success efforts more effectively, enhancing overall retention.

4. Explore Pricing Models and Upsell Mechanisms

Do you have something to upsell? If your model is seat/unit based and you are relying on your customers to grow for upsell, that’s a very difficult place to sit in the current environment. Consider if your pricing is aligned with the value delivered and if your product packaging meets customer needs. Explore different pricing strategies that could drive a more natural upsell path. Can’t find one? It’s time to start brainstorming on short and long term product roadmap changes that can drive new value levers for your customers. 

5. Compensate Sales on Retention

Incentivizing your sales team to focus on retention as well as acquisition can make a significant impact. Structure compensation plans that reward sales reps not only for closing new deals but also for the retention and expansion of existing accounts are becoming the norm. If your sales team is compensated (at least in part) on the first year renewal, they are going to adhere more closely to your ICP, support activation/adoption and drive healthier long term customer relationships. 

6. Dedicated Leadership

Having dedicated leadership focused on retention (and growth!) is crucial. This could be a Chief Customer Officer, VP of Customer Success or Head of Account Management. Regardless of title, this leader should have the authority and resources to drive cross-functional initiatives aimed at improving customer retention and growth. A dedicated leader ensures that retention remains a priority at the highest levels of the organization and creates a healthy check/balance for your new business sales leader. 

If you have time this week, tune in to Topline Episode 62 to hear the full convo!

Until next week!