What is contraction revenue?

Contraction revenue is a revenue metric that reflects the decrease in revenue from existing customers over a certain period. This can occur due to subscription cancellations, downgrades of plans, reduction in purchase volumes, or discounts.

For a product manager, it is important to monitor contraction revenue to understand how well the product retains customers and how the revenue from the current user base is changing. A high level of contraction revenue may indicate problems with the product or competition.

Example: if a subscriber had a $100 monthly plan and downgraded to a $70 plan, then $30 is the contraction revenue for the company.