Explain the difference between NRR and GRR, and why a company tracks both.
What the interviewer wants to hear
- GRR counts churn and contraction only, capped at 100%
- NRR adds expansion, can exceed 100%
- Both exclude new customers
- GRR shows base stability, NRR shows growth from base
- Strong NRR can hide weak GRR
Model answer
Both metrics look only at revenue from customers who existed at the start of the period, ignoring new customers. Gross revenue retention measures how much of that starting revenue we kept after churn and downgrades, so it can never be above 100%. Net revenue retention also adds expansion, such as upsells and extra seats, so it can go above 100%. For example, if we start at 100,000, lose 15,000 to churn and downgrades and gain 20,000 in expansion, GRR is 85% and NRR is 105%. We track both because NRR shows growth from the base, but a strong NRR can hide a leaky bucket if a few large accounts expand while many others leave. GRR shows how healthy and sticky the core product really is.
Can you answer it under time pressure?
Take a timed medium round and get scored on every answer.
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