67% of customer success professionals believe their all-important customer success score is inaccurate. This is an alarming stat for such a vital customer-metric. Customer satisfaction is the first step to the long journey of building loyal customer relationships. The longevity of any company is directly related to customer satisfaction, which in turn, is dependent on your capability to deliver solutions to their problems. A customer health score gives you access to the insights you need to serve your customers to your best ability.
In this article:
- What is a customer health score?
- Why is customer health score important to businesses?
- The basic composition of a customer health score
- Parameters to measure customer health score
- The best ways to measure Customer Health Score?
- Customer health check questions
- Who maintains a customer health score?
- How to improve your customer health score?
What is a customer health score?
The customer health score is a metric where a business scores its customers based on the likelihood of an outcome and predicts the customer’s likelihood to churn or continue to stay on and grow. In other words, customer health scores allow you to predict how your relationship with a given customer may change in the near and long future. You can use this information to improve the way you interact with the customer base. A good customer health scorecard will indicate the quantitative well-being of an account/ customer and offer a metric to gauge account health.
Why is customer health score important to businesses?
Like the LTV:CAC ratio, a customer health score is another vital metric to evaluate the customer-relationship. Successful business leaders insist that it is important to keep an eye on the relationship with the customer account through regular touchpoints and interactions. The business must focus on several parameters to take advantage of the health score and provide a “good service.” Now it’s important to note here that “good service” means different things to different customers.
The better service you provide, your customers are more likely to spread positive word-of-mouth. Customer referrals are incredibly powerful and can be a real game-changer. It will not only help you retain the old customers but help you acquire new customers. When the customer’s needs are met, and their expectations are exceeded, the customers turn into free marketers for your business.
The basic composition of a customer health score
Some key aspects that businesses measure as a part of their customer health score:
Measuring engagement
When customers use the product or service more frequently, the value the customer derives from it also increases. The duration of engagement, frequency, smoothness and efficiency is important to measure.
Capturing real-time and relevant data
Technical advancements have allowed businesses to use tools and analytics that reads and compares data with speed and accuracy in real-time. Everything is so momentary and fast-paced that companies need to act within a time frame to get the benefits.
Analysis of data into meaningful insights
The key point here is not to make assumptions based on ‘gut’ but to make educated choices based on data analytics to lower the risk of loss.
Flexibility
Every business has its features and characteristics. The health score model needs to be adaptive and flexible to adjust to new products/services or market trends.
Parameters to measure customer health score
Duration index
The duration, quality, and frequency of engagement of every customer need to be captured and appropriately measured.
Retention index
This is a measure of the number of times a user comes back to the product/service. Taking the example of an app, the frequency of app usage could be higher on particular days or a particular time of the day.
Performance or rating index
The performance of the product/service needs to be measured for calculating an accurate customer health score. Play Store/ Apple store could provide a Rating Index which can be picked up directly.
Loyalty index
Loyalty is a measure of continuity of usage over a longer period. The users are termed as loyal if they continue using the product for at least a month. The number of features used in the product or service is also important as the user is maximizing its value.
Net Promoter Score (NPS) index
A satisfied user is likely to recommend the product or service to others. The NPS index tracks the customer satisfaction levels over a defined period.
Every business entity is unique and has its requirements. Hence, there should be enough space to incorporate specific parameters to curate the customer health score as there cannot be a standardized Customer Health Scorecard because different companies care about different outcomes. So the idea of a one-size-fits-all approach will not work.
Best ways to measure and track Customer Health Score?
Let us now look at some basic steps to measure customer health score and the best possible way to go about it for any business:
What is the expected outcome?
A customer’s health score is based on a particular outcome—churning, renewing, or upselling. The outcome prediction is based on the data collected over the last few months in your company. Depending on the low or high retention rate of customers, you may predict a churn or upsell, respectively.
Navigating the green and red flags
A predictive signal or flag is the behaviour or behavioural pattern that’s related to the outcome you’ve selected. You need to observe what behaviour may indicate that a customer is liable to churn. It includes customers barely using the product in recent weeks or only using a narrow range of features. In this case, the customer is highly liable to churn.
Best way to go: Challenging your assumptions. There may be a significant amount of churn among customers who use your product often; in this case, you’ll need to adjust your signal selections.
Assigning weights to your signals
You must assign a weight to every signal as they have unequal importance to your business and the health score. The measurement of each signal is important for an accurate health score.
Best way to go: Hold regular meetings with your customer service representatives. They interact with the customers more intimately and will be able to provide insights into what signals hold more weight over the others.
The health score scale
Once we have scored each account individually, we need to benchmark them against each other to form a health score scale. It helps to distinguish between different ranges and categories of customers. In this way, each customer’s score communicates a meaningful message about their relationship with your company.
Best way to go: Segment your customers based on their health score.
Customize your business strategy
The entire point of customer health scoring is to improve the company’s relationship with each customer in a mutually beneficial way. You must plan the next step after the data collection and analysis. You could offer unhealthy customers discounted prices or free access to additional features as bait or motivate your healthy customers to upgrade to a premium subscription.
Best way to go: Keep updated with trends in the market.
Customer health check questions
Some of the topics you must include in your customer health score quiz is:
- Active user trend
- License utilization
- Critical unresolved tickets
- Frequency of new conversations
- CSM input
- Sales inputs
- Revenue trend
- Due to invoices amount
- Days since last renewal
- Frequency of usage
- Depth of usage
Who maintains a customer health score?
In the fourth quarter of 2020, CSM Practice reported customer health score survey results from close to 200 of US-Based SAAS companies. According to the report, the types of organizations that most commonly maintain a customer health score are:
- 31% companies with a large customer success team.
- 7% of companies that have more than 100 customers.
- 30% SaaS vs On-Premise or services organization.
- Companies where CSMs manage less than 60 accounts.
The survey results show a clear impact of health scores for organizations looking to manage account churn risk or teams with high-touch engagements. However, companies with high-tech or low-touch companies must also look into customer health scores for better results.
How to improve your customer health score?
Record your customer interviews
Scrap your old customer interview meeting notes and replace them with emotionally nuanced meeting recordings and transcripts. We aim to beat meeting fatigue with timestamped highlights for easy meeting navigation, and easy-sharing with our Slack integration. Simply install the tl;dv Google Meet Chrome Extension, or sign up for Beta here!
Speak to customers
A great way to find out what issues the customers might be facing is directly talking to the customers. It could be done through pop up message bots, social media engagements, physical or virtual help desks based on your product/ service or customer feedback on various sites and blogs.
Identify usage patterns
Observing usage patterns of the customer can shed light on what are the specifications of the product or service towards which the teams should focus their attention. The business can create introductory guides for new/special features it offers and how it can best benefit the customer.
Final thoughts on “Customer Health Score”
The customer health score is an integral part of any business to succeed. It is a powerful tool that supports companies to predict churning and increase product adoption. It helps in revenue growth, enhancing the lifetime value, and tracking customer behavior, trends and satisfaction to help CSMs take meaningful actions to drive the business goals.
Bonus: Here’s a handy little Customer Health Score infographic from the team at UserIQ. ✅
