Revenue Metrics

Contraction MRR

The monthly recurring revenue lost from existing customers who downgraded their plan but did not cancel entirely.

Contraction MRR captures the partial loss of revenue from customers who reduce their spend — dropping seats, moving to a lower tier, or renegotiating to a lower rate at renewal. These customers are not gone (which would be churned MRR) but they are contributing less. Contraction is often an early warning signal for eventual full churn: a customer who downgrades this quarter because they are using the product less is at elevated risk of cancelling next quarter. Tracking contraction separately from churn allows customer success teams to identify and prioritise at-risk accounts before they reach the cancellation decision. Common causes of contraction include budget cuts, reduced headcount in seat-based products, lower-than-expected usage in usage-based products, and competitors offering lower prices.