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Salesperson looking at Customer Health Scores
Customer Health Scores can help with retention

How to Create a Customer Health Score That Works

ASEEM CHANDRA | APRIL 29, 2022

A customer’s health score is a composite index that includes critical key performance metrics (KPIs) needed to identify and retain your best customers.

Customer health scores give you a general sense of how well a customer’s relationship with your product is going, as well as forecast future client behavior such as subscription renewal or cancellation.

Customer health scores can be challenging to understand as several metrics can be tracked and included. However, armed with the right data and the ideas we’ll share in this article, you have the tools to create an effective health score for your company at your fingertips!

SEE HOW IMMERSA CAN HELP TURN CUSTOMER HEALTH SCORES INTO LEADS

Defining Customer Health Scores

Customer health scoring metrics help you accurately measure customer health – how well they perform compared to the criteria you set. You might use the following metrics to assess the “health” of your accounts:

  • How frequently they seek support
  • Client feedback about pain points
  • Their participation in your community forums
  • How long they’ve been a client
  • Their account’s evolution over time
  • How often they take part in marketing campaigns

Your customer score formula compresses all of your customer KPIs into a single health score, with each metric assigned a weight based on your business goals.

An effective health scoring system consolidates the wealth of customer data and behavior metrics you collect into a simple score that helps you easily determine what contributes to long term customer commitments, who require immediate attention to avoid cancellation, and how you can increase the acquisition of ideal customers based on your best current customers.

Why is a Customer Health Score Important?

Customer Health Score Strategy
Customer Data Strategy is key to improving your customer health score

Customer Data Strategy is key to improving your customer health score.

For most businesses, customers are the best sales and marketing team around as few messages have more weight in convincing prospects to contact you than word-of-mouth referrals.

At the same time, generating long-term commitment from your current clients by satisfying their needs and surpassing their expectations is one of the highest ROI activities you can engage in.

A good health score system provides a quick and easy avenue for discovering what customers are the most profitable, the most satisfied, and the most in need of additional guidance.

Customer health scores that are tailored to a company’s specific goals and values enable customer success teams to quickly understand where improvements are needed and effectively act to ensure customer satisfaction.

A customer health score can be used to drive specific actions in an account, either automated through software or via customer success agents and sales reps, to improve the overall customer experience.

What Should a Customer’s Health Score Include?

Customer health score chart
Reviewing customer health scores frequently is a good strategy

Health scoring is part data science, part customer success art as the exact elements of an effective customer health scoring system vary depending on the particular business goals and data you have access to.

That being said, a few standard metrics customer success leaders use to calculate customer health scores include:

Product Usage

Product usage rate is a metric that evaluates how frequently individual users interact with your product.

Two things are necessary when estimating your product usage rate to get an accurate score:

  • Make sure your utilization rate isn’t merely a count of how many people have opened your app
  • Normalize against the population usage rate

For example, in a collaboration and productivity app, users should create and complete tasks regularly. If they’re opening the app and not managing tasks, that’s likely a sign you have unhealthy customers.

In this case, “population” is the number of users within each customer account. Thus, when you average customer engagement compared to population, you’re averaging the number of times the average individual user has utilized your products.

Frequency of Visits

Customers won’t log in every day for a variety of reasons, it doesn’t necessarily imply that they’re at high risk of discontinuing service.

It’s crucial to know when your customer success team needs to step in and when they don’t.

For example, many products and services are only needed at certain stages in the customer journey. Some are affected by seasonality.

Likewise, a user who logs in every day may not be using your products most effectively, thus creating a gap in value realized vs potential value that leaves room for dissatisfaction.

How often your consumer’s login is critical to understanding them and it’s a valuable metric to include when assessing their global health score.

So, to get the most out of your strategy to score customer health, make sure you dig into the context of your customers’ use or purchasing cycles.

Customer Relationships

The customer relationship metric measures how well you and your customer account get along. Going high and wide is one customer success management strategy.

Are you forming the appropriate kinds of connections with the right stakeholders? If you don’t, you might be surprised when it’s time to renew your contracts.

Establishing a deep connection with your customer decision-makers to understand their needs, success, and challenges will assist you in developing and expanding your product feature set as well as growing your customer base through a product that more effectively solves customer problems.

Net Promoter Score

The Net Promoter Score (NPS) is a customer satisfaction metric proven effective across a variety of businesses and industries.

It’s based on two simple questions:

  1. On a scale of 1-10, how likely are you to recommend our product to a friend or colleague?
  2. Why did you choose that number?

Responses are then placed in three groups:

  • 1-6 = Your Detractors
  • 7-8 = Passive but satisfied customers
  • 9-10 = Your Promoters

NPS is calculated by subtracting detractors from promoters while ignoring passive but satisfied customers.

For example, Trello may send a survey to 100 users at Google, of which 80 were promoters, 15 were detractors, and 5% were passive.

Thus for that account their NPS is 80% – 15% = 65%

CSM Pulse

The Customer Success Manager (CSM) pulse is a subjective grade your CSMs give each account they manage; it’s a sort of “gut check” on your customer’s happiness.

While you can get as complicated as you like when creating your CSM pulse scale, a simple 1-10 scale will probably suffice to start.

As you iterate your customer health score index, building on top of your simple CSM pulse metric with data like CSM to the number of service tickets an account generates or CSM to customer lifetime value can help you assess customer health and your success team’s assumptions.

How Do You Calculate a Customer Health Score?

Health score calculating
Calculating your health score is easier than ever with the right tools

Define Customer Health

A widespread misunderstanding in customer health tracking is that if a customer uses only a portion of your service or product, they are “unhealthy, but expecting a consumer to use every feature is unrealistic.

Health scores should be calculated using several variables that are good predictors of customer lifetime value.

A few additional examples of the right metrics to track include:

Account loyalty: The percentage of customers who return after creating an account to make a purchase.

Return/Exchange Rate: The frequency with which a customer returns or changes goods.

Interaction with customer service: Customers who have contacted customer service and generated tickets.

Subscribers: Number of monthly, quarterly, or yearly commitments from customers and/or how many users your app has.

Select Metrics

Because there is no one-size-fits-all approach for customer health ratings, you must carefully determine the different metrics that are essential for your company.

For example, Pendo keeps track of the number of visitors, time spent on the app, and the use of essential features.

On the other hand, Asana utilizes an Account Health Score statistic to assess a team’s performance, as well as its geographical area and payment regularity.

Create Your Formula

Customer health score formula
Develop your own customer health score for your customers

Develop a percentage scale to give each component of your global health score a particular weight.

For example, it could make sense to prioritize product measurements at 60% and relationship metrics at 40%. (with further breakdowns in each category). Then devise a Health Score Matrix to determine the relative importance of each parameter.

Some companies find it easier to create a customer health score template or a predictive index scoring template to help track and follow trends.

However you calculate customer health score, it should allow you to effectively allocate company resources towards improving the most important metrics while deprioritizing less important ones.

Automate the Process

When starting, it’s helpful for customer success leaders to take a hands-on approach to developing and implementing customer health scoring systems to thoroughly test and vet a variety of metrics, data consolidation processes, and overall score formulations.

Eventually, as with all business processes, developing systems that automatically feed data from your application analytics, customer support service, and account management teams into your scoring model is crucial for scale.

How Can You Improve Your Customer Health Score?

Measure customer health scores
A focus on customer health scores alone can help you improve them

Naturally, customer health scores are useless if your team doesn’t act on them. So once you’ve developed an effective health scoring system your focus should be on maximizing health scores for each customer segment – growing your business in the process.

A key component of improving customer health score metrics is having your customer success team speak to customers.

They need to hear what your customers have to say about your product, in the customer’s own words, to truly understand what they find essential about it, what drives value for them, and what key issues limit their productivity.

With a tool as seemingly simple as 1 on 1 interviews, your company may find it surprisingly easy to get to the bottom of key causes of customer churn as well as key reasons for customer retention.

Another key component of improving customer health scores is identifying the usage patterns that indicate success.

In-app guidance via effectively placed pop-ups, tooltips, and help desk links allow you to guide struggling users back to the path of success.

Tools to Consider To Improve Your Customer Health Score

There is no better tool out there than Immersa for better understanding how your customers are using your product. It can be a core tool for your rev ops or customer success teams to keep moving.

Product usage data can help you identify issues early on and improve them with your existing customers.

With Immersa you can also dive into product usage data to better understand which customers are your power users and have good potential for your sales team to upsell to the larger team or enterprise offering that you have.

Immersa combines product usage data with other data sources, such as your existing customer success tools, to calculate a Health Score. You can then notify, in real-time, customer success agents and sales reps to take specific actions to improve customer health scores.

Delighted - NPS software

With delighted you have immediate view into NPS or net promoter score. You can integrate it directly into your product and ask people to give feedback from 1 to 10.

There is even a Slack integration that pops up a new review anytime it comes in. This allows you to promote the promoters and reach out to the detractors on how you can make things better.

Gainsight - Customer success software

Gainsight is an all-in-one customer success program. It showcases NPS, health score, and many other items to keep high volume customers from churning. If usage starts to drop or complaints roll in then your team will be notified to make the connections possible to keep them online.

Gainsight has a lot of options for small businesses and enterprise companies and can generally integrate with a lot of your other systems as well.

Involve.ai

If you want a complete view into your customers information and health score than you should definitely take a look at Involve.ai. It is a complete system that helps you understand where your customers are in terms of health and support to drive your customer success and sales teams.

Get notifications or customers who might churn from a poor health score or tie to your automation systems to ask for a referral or testimonial from your extremely satisfied customers.

Involve.ai is a lightweight, but robust solution to help manage your customer health score.

Salesforce

If you already have Salesforce for your CRM, then you might consider adding in the customer health addons they have.

Using Salesforce for Customer Health can be a nice seamless connection to your pipeline and upcoming renewals. You can take a deeper view into notes and other information that you might keep on your customers in the CRM as well.

The good news also is that most of these customer health tools have created integrations for Salesforce and other CRMs, so even if you don’t use Salesforce for customer health you should be able to link what tool you do into the CRM.

Client Success

Another “all in one” customer success platform. Client Success has a health score metric that ties in with your CRM and sales data to help improve your retention and onboarding of customers.

It also provides easy-to-use dashboards that can be shared across every team that might need to see a customer success health score. The sales team, customer success team, and even exec team can all connect to track customer health and make comments to improve retention.

Summary

Customer health score is a critical piece of your growing business. It is much less expensive to keep an existing customer than it is to find a new one, so make sure you are doing all you can to keep them moving with a good health score management system. Customer health score should be actionable – your customer success team should be able to drive specific manual or automated actions that help improve the customer health score. 

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