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Lifecycle

Upgrade and downgrade

A subscription moving between plans, with proration, entitlement changes and revenue effects that differ by direction.

An upgrade moves a subscription to a higher plan, usually immediately, with proration charged for the remainder of the period. It produces expansion MRR.

A downgrade is normally deferred to the end of the current period, because the customer has already paid for it. It produces contraction MRR when it takes effect, not when it was requested.

The asymmetry is deliberate and is worth stating on the change screen. It is also worth reporting downgrades at request time as well as at effective time, because a queue of scheduled downgrades is a forecast the revenue numbers will not show for another month.

Related terms

  • Proration Charging or crediting for part of a billing period when a subscription changes mid-cycle.
  • Expansion MRR Additional recurring revenue from existing customers: upgrades, added seats, add-ons and contracted usage growth, excluding anything from new customers.
  • Contraction MRR Recurring revenue lost from customers who stayed: downgrades, removed seats, dropped add-ons and reduced commitments.
  • Entitlement What a customer is allowed to use because of the plan they are on: which features, and up to what limits.