A price increase applied to an existing customer counts as expansion revenue. It raises recurring revenue from the installed base without adding a logo, which is the standard definition. The harder question is what you do with the number after you book it.
Price expansion and volume expansion are different signals
Volume expansion means the customer bought more. Seats went up, consumption went up, or a second product was added. That says the product earned more room inside the account.
Price expansion means the customer pays more for the same thing. That says you have pricing power, which is worth having, but it says nothing about deepening adoption. Reporting both under a single expansion figure hides which one carried the quarter.
| Source | What changed | How repeatable it is |
|---|---|---|
| Price uplift | Rate per unit | Once per renewal cycle, bounded by what the market absorbs |
| Seat growth | Number of users | Continuous, tied to adoption and customer headcount |
| Product add | Products owned | Bounded by catalog size |
| Usage growth | Consumption | Continuous, tied to workload |
Forecast the two on different logic
Contractual escalators are scheduled. You know the percentage and the effective date at signature, so they model as booked revenue with a timing assumption rather than a probability.
Discretionary increases are proposals. Each one has an acceptance rate, a negotiation range, and a downside where the account contracts or leaves instead. Modeling them at full value because last year's increases stuck is how an expansion plan misses. Build them with an acceptance rate drawn from your own history and the number stops flattering you.
A forecast that separates these two holds up better across the quarter. Blending them produces a single expansion line that looks stable right up to the renewal cohort where the increase gets rejected, and that failure shows up in forecast accuracy with no obvious cause.
Watch the lagged cost
The revenue arrives immediately and the reaction arrives at the next renewal. That gap makes price increases look cheaper than they are for one or two quarters.
Two measurements close the gap. Track gross churn for accounts that took an increase against a control group that did not. Track downgrade volume in the two renewal cycles after the change. If the increase cost more in churn and contraction than it added in rate, net revenue retention will show it before the expansion line does.
Label the line in the waterfall
The practical fix is a field on the revenue change record that names the driver, populated at the time of the change rather than reconstructed later. Price, seats, usage, and product each get a value. Once the retention waterfall carries that label, the question of whether a price increase counts as expansion stops mattering, because you can read either version of the number in seconds and answer for both.
Frequently Asked Questions
Does a price increase count toward net revenue retention?
Yes. NRR compares the ending revenue of a starting cohort against its beginning revenue, and a price increase raises the ending number without adding a customer. A company can post NRR above 100% on pricing alone while every account holds flat on seats and products, which is the reason the two sources belong on separate lines.
Is a contractual escalator different from a discretionary price increase?
In the ledger they are the same expansion dollars. In a forecast they are not. An escalator written into the contract is known revenue with a known date. A discretionary increase proposed at renewal is a decision with churn risk attached, so it carries a probability rather than a certainty.
How do you separate price expansion from volume expansion?
Compare the revenue change against the unit change. Same seats or same usage at a higher rate is price expansion. More seats or more usage at the same rate is volume expansion. Accounts that moved on both need the change decomposed before either figure enters a trend line.
Can a price increase raise NRR and damage retention at the same time?
Yes, and the lag hides it. The increase lands this period and the cancellations land at the next renewal date, so a quarter can show record expansion while seeding a churn problem two quarters out. Track the churn rate of accounts that absorbed an increase against accounts that did not.
Put these metrics to work
ORM builds custom revenue forecast models that turn concepts like is a price increase expansion revenue? into prescriptive action for your team.
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