How Usage-Based Billing Can Improve Net Revenue Retention (NRR)

In the world of SaaS, few metrics are as scrutinized by investors, boards and founders as Net Revenue Retention (NRR). It’s the clearest signal of product-market fit, customer satisfaction, and revenue resilience. While many factors influence NRR, one of the most powerful is your pricing model, specifically, Usage-Based Billing (UBB). Indeed, done right, UBB is not just a pricing strategy—it’s a revenue growth engine.

What Is Net Revenue Retention (NRR)?

Net Revenue Retention (NRR) measures how your recurring revenue from existing customers changes over time. It accounts for four core factors:

• MRR – Monthly Recurring Revenue

• Expansion – Revenue gained from increased usage or upgrades

• Contraction – Revenue lost from downgrades

• Churn – Revenue lost from customer cancellations

NRR = (Starting MRR + Expansion – Contraction – Churn) / Starting MRR

A strong NRR (typically above 100%) means you’re growing revenue even without adding new customers. Leading SaaS companies often exceed 120% NRR, thanks to scalable pricing models that grow with usage—and usage-based billing plays a critical role in achieving that.

How Usage-Based Billing Drives NRR

1. Expansion: Expand Revenue Without Requiring Sales Touch

With usage-based pricing, your revenue scales alongside your customers. As customers consume more of your product, your MRR increases—without needing sales to intervene.

This creates organic expansion: increased usage leads to more revenue. It’s the opposite of flat-rate models, where high-value users might pay the same as low-value ones.

Even better, UBB fits naturally into a Product-Led Growth (PLG) strategy. As users adopt more features or onboard new teams, your pricing model captures that growth—automatically and in real time. Expansion isn’t just about more usage, it’s about faster adoption of new capabilities—UBB rewards both.

2. Churn: Reduce Risk by Aligning Cost with Value

Customers are more likely to stay when pricing matches the value they receive. With subscription models, users often feel locked into paying for features or capacity they don’t use—leading to dissatisfaction and, eventually, churn.

Usage-based billing removes that friction. Customers pay only for what they use, making pricing feel fair, flexible, and aligned with their actual needs. That transparency builds trust and significantly reduces churn.

3. Contraction: Minimize Downgrades Through Flexibility

When budget pressure hits, subscription-based customers often look to downgrade or pause licenses. In contrast, UBB adjusts dynamically. If usage dips, spend drops too—without needing contract negotiations or downgrades.

This flexibility minimizes contraction. Customers can scale down without leaving. And when usage rebounds, revenue follows.

How Meteroid Helps You Drive NRR

Whether you're just starting to experiment with usage-based pricing or scaling a mature usage model, Meteroid gives you the infrastructure to do it right and thus to drive your NRR.

Interested in how Meteroid can help you turn your billing into a growth engine? 👉 Contact us to learn more.