The relationship with a customer typically includes several stages. For example, they may start by signing up for a free trial, then purchase a subscription, upgrade to a different plan, downgrade that plan, cancel, and eventually re-subscribe.
Let’s take a look
Imagine your company offers the following subscription plans:
In addition to the Gold and Silver paid plans, you also offer a free, time-limited trial.
Now, let’s look at a fictional subscribers — Tetoko — and see how ChartMogul uses MRR movements to organize and report on changes the company makes to its subscriptions.
Tetoko subscribes to four Gold yearly plans. You bill them $2,000. ChartMogul classifies the MRR as New Business with a value of $166.67 ($2,000 / 12).
A few days later, Tetoko adds two Silver monthly plans. You bill them $60. ChartMogul calculates the MRR as $60 and — because this is an additional subscription for an existing customer — classifies it as Expansion (and not New Business).
Two weeks later, Tetoko realizes they don't need the Silver plan and cancels their subscription mid-cycle (before the current billing period is over). Since they have another active subscription, ChartMogul classifies the $60 in MRR as Contraction (rather than Churn).
As Tetoko approaches the end of the first year of their yearly Gold subscription, they decide to reduce spending by canceling their subscription.
As this was their last active subscription, ChartMogul classifies the cancellation as Churn and reports the churn at the end of the current billing period (since they’ve already paid for the entire year).
Great news, Tetoko re-subscribes! This time, they choose three Gold monthly plans. As a former paying subscriber, ChartMogul classifies the MRR as Reactivation with a value of $150.