The Value Trap of Legacy Subscription Metrics

Value and Volume Renewal Rates are the markers of legacy B2B subscription metrics. Substribe argues they risk creating a smoke screen around performance issues, holding back long term growth and risking revenue.

B2B information companies have long relied on two legacy metrics: volume renewal rate (the percentage of accounts renewed) and value renewal rate (the percentage of revenue renewed).

Legacy metrics

You are in the legacy camp if you rely on these core metrics:

• Value Renewal Rate:
  • Definition: Renewed contract value divided by renewable contract value. Note – this also differs / there is no standard.
  • Challenge: A blended metric of different performance factors into a single number. Retention, pricing, upsells. Difficult to identify specific improvement areas.

• Volume Renewal Rate:
  • Definition: Percentage of clients renewing, regardless of contract value.
  • Challenge: Treats all clients the same, regardless of size. Masks the impact of losing high-value customers.

The case against Volume and Value

Volume renewal rate is a vanity metric. It counts every renewed account equally. Lose a small client or a giant, it’s all the same in this calculation. That means you can show a healthy renewal rate even as you lose your biggest, most valuable customers. Even when it is segmented into tiers, this measure is not precise.

Value renewal rate is a step up, but it still blends together three things: lost revenue (churn), shrinking contracts (contraction), and upsells (expansion). If you’re losing core business but making up for it with a few upsells, the metric hides your real retention problem.

The case for modern metrics

Modern subscription companies use a more scientific approach, built on three metrics:

• ARR (Annual Recurring Revenue): The total contracted recurring revenue, annualised.
• GRR (Gross Revenue Retention): The percentage of starting revenue you keep from existing customers, excluding any upsell or expansion. This shows your true retention health.
• NRR (Net Revenue Retention): The percentage of starting revenue you keep after accounting for upsell, cross-sell, and expansion. This shows if your existing base is growing or shrinking.

How to use these metrics:

• ARR for overall recurring revenue health
• GRR to measure true retention,
• NRR to measure net growth from the existing base
• Cohort and segmentation analysis for actionable insight

In other words, GRR tells you if your core business is solid. NRR tells you if your base is a platform for growth. Together, they highlight risks and opportunities that legacy metrics miss.

Why change now?

Your teams, your investors and your customers need you to know, with as much precision as possible, where you are mining for long term value.

The world of B2B subscriptions is more complex than ever. Customer needs shift faster, and competition is fierce.

To mine for value in your current and future customer base, you need to know:

• Are we keeping our best customers?
• Are we growing within our accounts?
• Are we building a platform for compounding, high quality growth?

Legacy metrics obscure these answers. Modern metrics reveal them.

We argue shifting to a modern measurement framework also helps internal teams in at least 3 ways:

1. Energises teams when they see the impact of their efforts
2. Transforms decision making with targeted approaches
3. Identifies bright spots of value to attract high growth customers

What leaders should do

• Demand ARR, GRR, and NRR as headline metrics. Insist on seeing these numbers broken out by customer segment, product, and region. And over time – think years, not year on year. This is subscriptions, not events.
• Stop celebrating high volume renewal rates. Instead, focus on what’s happening to your largest, most valuable customers.
• Dig into the drivers behind GRR and NRR. Where are you losing revenue? Where are you expanding? What’s working, and what’s not?
• Use these insights to drive strategy. Align product, sales, and customer success around improving true retention and expansion.

Functional perspectives

Viewed through the lens of functional leaders:

CFO

Volume renewal rate – measuring the percentage of accounts renewed – doesn’t tell the whole story, especially if a large client churns. Losing a small customer is not the same as losing your biggest account. Value renewal is better, but it still lumps together contraction, expansion, and churn, and can mask underlying problems. Examining ARR, NRR and GRR, helps us see what’s really happening to our revenue base”

CRO

“I’ve seen teams celebrate high volume renewal rates while quietly losing their biggest customers. That’s dangerous. GRR tells us how well we’re holding onto our existing revenue, while NRR shows if we’re truly growing our base through expansion. These are the metrics to drive real accountability and focus the team on both retention and upsell…and ultimately inform better acquisition.”

CX

From a customer health perspective, volume renewal rate is a vanity metric. It doesn’t highlight which segments are at risk or where the real revenue is coming from. Tracking GRR/NRR forces us to take a sometimes painful look at churn, contraction, and expansion separately, and to take action where it matters most. I would rather work through the pain, than deal with hope.”

Data Analyst

Volume and value renewal rate were designed for simpler, more homogenous customer bases. Where contract values vary widely, they create what I call a “data blob”. The danger with the data blob is that functional leaders can choose what they want to see. ARR decoded into GRR, and NRR and the elements of the waterfall, give a sharp focus. When combined with cohort and segmentation analysis, they create insights for diagnosing and exploring how to improve performance.”

Value renewal growth dilemma

A 100% (give or take) Value Renewal Rate looks good on paper. But beneath this single number often lies a troubling reality.

The Unsustainable Growth Cycle:

1. Masking churn with price increases. When customer retention declines, raising prices on remaining customers maintains revenue. But there’s a ceiling.
2. Over reliance on acquisition. As existing customer value stagnates, companies invest in costly new customer acquisition. If new customers churn in the first year, it impacts pay back for expensive acquisition and limits renewal and expansion resources.
3. The eventual spiral. Annual subscriptions will only take so much strain before the trap door opens:

A subscription trap door opens when…

• Price increases punish your installed base of customers
• Acquisition costs rise in competitive markets
• Core product issues remain unaddressed

Traditional renewal metrics perpetuate this cycle. Blending different performance drivers into single figures is like driving with a blindfold. That’s OK as long as things don’t change. Ever

Modern subscription metrics break this spiral. They create the visibility needed to balance retention, expansion, and acquisition. With clear visibility into performance drivers, all teams align around specific growth levers. They identify breakthrough opportunities beyond short-term fixes.

Performance visibility gap

Legacy metrics create blind spots with serious operational consequences:

Blind spots:

1. Hidden churn – Price increases mask underlying customer retention issues
2. Unclear growth drivers – Difficulty distinguishing between new business, price increases, and expansion therefore knowing what works, and what needs fixing.
3. Obscured segment performance – Each segment and cohort needs a strategy to roll up to the NRR goal. Tracking how this is changing over time is critical – year on year views are limited and limiting.
4. Late warning signals – No early warning. Leading to reactive rather than proactive responses.
5. Acquisition inefficiency – Difficult to balance acquisition costs against lifetime value leading to an expensive “more is more” approach
6. Focus on now – Subscriptions is the long game. It is hard to unlock value of “future wallet” when all small accounts are bucketed as small accounts. Especially when they are placed in the “set and forget” list of accounts under a spend threshold for value and volume renewal rates.

Resulting operational problems:

1. Misaligned incentives – Sales focuses on acquisition without retention accountability. Risks first and second-year churn.
2. Product roadmap distortion – Product teams build for new customers. Driven by sales pressure, driven by problem 1. Team misses retention enhancements to protect the installed base.
3. Disconnected customer success – Lack of agency in problem areas 1 & 2 leaves CS teams in fire fighting mode. And at risk of cost cutting as a cost centre.
4. “Ghosting” patterns – Look for bumps in the road: at 3 months before renewal; 18 months (you may have escaped the 1st year churn but this is part of the arc); when single contacts leave; when a senior customer leaves; when the client outgrows the existing product even though they say it’s useful (see problem number 2)
5. Static analysis – Year on year views miss longitudinal trends. Aggregated numbers don’t reveal patterns.

Renewal rate illusion

A B2B information provider reports Value Renewal Rates of 90%+. Is this a strong performance?

Value Renewal Rate: 95%

• Base Retention: 70%
• Price Increase: 20%
• Upsells: 5%

Here the 95% Value Renewal Rate appears strong. But the underlying 70% base retention reveals product market fit and/or customer satisfaction issues.

Questions you should seek to answer…

Which segments are bucking the average – where should we invest/divest?

How is base retention trending over a 2 to 3 year period?

Are we pulling the pricing lever too many times (or not enough)?

Why can’t we increase the upsell, is it product or commercial?

Foundational framework

Core Performance Metrics

Metric | Purpose | Traditional Gap Addressed

Annual Recurring Revenue (ARR) | Standardises recurring revenue view |Provides clarity versus blended “contracted revenue”

Gross Revenue Retention (GRR) | Isolates core retention health | Separates retention from price increases and expansion

Net Revenue Retention (NRR) | Tracks total performance from existing customers | Shows expansion potential of customer base

ARR Waterfall | Breaks ARR into components | Provides growth driver visibility

Growth drivers: ARR Waterfall

Component | Definition | Operational Relevance

Starting ARR | Baseline recurring revenue | Performance measurement starting point

New ARR | Revenue from new customers | Acquisition effectiveness

Expansion ARR | Growth from existing customers | Account management and product expansion

Contraction ARR | Revenue reduction from installed base |Value delivery and product-fit warning

Churned ARR |Revenue from lost customers | Retention effectiveness

Ending ARR | Net result after all changes | Your business performance

Performance management perspective:

The ARR waterfall breaks down revenue changes into distinct actions:

• Identifies levers to drive growth
• Creates visibility for each team to see impact on performance
• Allocates resources to highest impact areas
• Clear accountability for specific revenue streams
• Transforms performance conversations from “what happened” to “how we improve”

Customer cohort analysis:

Modern metrics enable tracking changes by segment/cohort over time. They reveal patterns invisible in legacy aggregated views:

Analysis of the Enterprise and SMB data in the example:

• Early warning signals of retention erosion in enterprise segment despite strong headline numbers
• Emerging growth opportunity in improving SMB segment
• Opportunity to apply successful SMB retention improvements to enterprise segment

Without time-series cohort analysis, these critical patterns remain invisible and strategic opportunities missed.

Functional transformation:

Modern metrics transform business operations in these key areas:

Commercial Strategy:

• Move from generic campaigns to targeted acquisition, retention and expansion approaches. Based on cohort performance, over time.
• Allocate commercial resources based on customer acquisition costs (CAC), retention rates, and expansion potential
• Develop segment specific strategies. Acknowledge different optimal GRR/NRR targets based on market dynamics

Product Development:

• Focus feature development on addressing specific retention challenges in underperforming segments
• Prioritise enhancements to drive measurable expansion revenue
• Target investment toward “bright spots” – segments showing strongest expansion potential.

Customer Success:

• Shift from renewal fire fighting activities to ongoing value delivery and expansion
• Implement early warning systems based on relevant usage patterns
• Tailor engagement models to segment specific GRR/NRR objectives

Executive Decision Making:

• Make investment decisions based on clear growth driver analysis
• Set realistic performance targets based on segment-specific metrics
• Balance acquisition costs against lifetime value by segment

Better practice: layered metrics

1. Start with ARR: Know your total recurring revenue, but always unpick the changes in the elements of ARR (expansion and contraction and new revenues).
2. Track GRR and NRR: Understand what’s happening to your existing base- where are you protecting, losing, or growing revenue?
3. Segment by Cohort and Account Size: Analyse by customer segment, contract size, and product line for actionable insights.
4. Supplement with other data: Use Must Have Score (TM) , customer health scores, and product usage analytics to anticipate future changes.

From reactive to proactive management

When B2B information providers implement modern metrics, you should expect operational improvements such as:

Impact: Segment specific opportunities and targeted strategies create more predictable and sustainable growth patterns.

From measuring to performing

The shift to modern subscription metrics creates a foundation for growth through:

1. Performance clarity – Separate different growth drivers for clearer decision-making
2. Proactive intervention – Identify issues while there’s still time to address them
3. Strategic resource focus – Direct investment where it drives the greatest returns
4. Cross functional alignment – Build shared goals across commercial, product and customer success teams
5. Market expansion visibility – See beyond incremental improvements to identify full market potential

What happens when teams reinvent their role, and know which levers drive performance?

Well… we think they develop both the insight and motivation to perform.

To shift from backward looking renewal operations, to forward focused collaboration, you need clear growth visibility.

About Substribe

Substribe specialises in transforming B2B subscription businesses. Through advanced performance analytics and strategic advisory services.

• Transforms invoice data into comprehensive ARR waterfall and cohort analyses
• Implements performance frameworks aligning teams around common metrics
• Identifies specific intervention opportunities improving retention and expansion
• Delivers ongoing performance monitoring tracking improvement

Contact Substribe today for a proof of concept for your subscription challenge.

Methodology: Analysis of 17 B2B information providers, using public disclosures and industry case studies. All examples based on real-world reporting practices and performance patterns. Enhanced with several years of research and development discussions at Substribe expert network sessions “SubsClub” and industry discussions.