The Customer Health Score and how to use it effectively

Customer Intelligence 8 min read

When you start your business, your first-few-customers customer base is easy to manage and simple to work with. You’re able to work so closely with them, the it’s easy to understand how they feel about your products and services.

As soon as the amount of customers grows, it becomes an almost impossible task to take care of your customers individually and manage them to a satisfactory level. You simply cannot catch every important buying or churning signal.

This is the crucial point at which it’s imperative to automatically start collecting customer health score and make sure you’re taking every opportunity to understand what makes them tick.

In a competitive landscape, in order to retain the current customer base and to create the opportunity in which to build on those hard-won customers, it’s important to create a strategy to monitor your customers’ health score. This will ensure effective and consistent growth and less customer churn.

What is Customer Health Score?

In its simplest sense, customer health scoring is a way of keeping track of, and scoring customers, based on any metrics your business considers important. It’ll also enable you to predict the likely outcomes that will develop with your customers in the future.

Once you’ve collated the information, it’s then possible to improve a long-term relationship into maximising predictive growth. It’s important to understand that each company and business will have different requirements from the health score…

For example, one SaaS company may want to use the information to predict the level of customer churn, while another may be looking at the likelihood of upselling strategies. It’s of course, possible to use the score for a number of different business cases and it’s not necessary to purely think in terms of a one size fits all when developing the process.

The importance of customer health scoring

When customers are satisfied, their most important needs are met and their expectations are potentially exceeded. They become best ambassadors for your business, and the health score certainly helps you identify them, so you can make sure you to give them proper review support for them to start attracting additional prospect customers. Referrals are immensely powerful when it comes to building or destroying your hard-won customer base.

Customer health scoring is also key to providing tailored services to the stakeholders who need it most. Once you’ve set up your system, and have collected most important insights, you’ll be able to address each customer’s issues on a pretty much individual level. This generally helps improving conversions, activations, adoption, retention and growth, while fighting churn.

When your customers are satisfied, their needs are fully met and their expectations are exceeded, they are the definitive marketeers for your business.

Healthy customers and customers at risk

In order to work out a customer health strategy that works for your business, it’s important to first understand what it looks like to have a successful or unsuccessful customer.

What is a successful customer?

A clear indicator of whether your customer is ‘healthy’ is if they’re getting the best value possible from your product or service. Often this reflects them adopting key features for a while.

What is an unsuccessful customer?

Unsuccessful customers can be identified as ‘at risk’ of ending using your products or services. They typically start interacting less and less and any engagement from them starts to disappear.

The easiest method of determining which category your customers belong to, is simply by monitoring your top customers as also the ones that you’ve lost.

Analysing those 360 customer profiles will give you clear subjective view on common traits. It’s a great starting point at which to begin your customer monitoring process.

In order to best use the analysed information, it’s important to begin compiling a list of the specific traits. To begin with, make sure you keep your list fairly short to start with, to ensure that you’re not too overwhelmed with endless data, which can mean making sense of the information much more difficult.

Once you’ve identified the pitfalls, you can begin with starting to define the key metrics for your health score.

5 best customer health score metrics

Once you’ve built up your list of unique customer characteristics, it’s time to look at which customers are healthy or those that are at risk.

Each of your benchmarks will be specific to your own business and the outcomes you want to achieve. Obviously, what is important for one company, will not be as crucial to others.

The way you structure your scoring rules will be individual. It could be that you’re mainly looking at customer life cycles, or maybe the size or location of where your business is largely coming from. Once you’ve looked at what is most important for your business, you can build in different health scores rules.

Let’s take a look below at 5 of some of the best and most common metrics used in those rules.

How much do customers need you?

The more your customers feel connected to your brand, the less likely they are to churn away to your competitors.

It’s really important to look into the types of customers’ behaviour, which will indicate how crucial your offering is to filling in your customers’ needs.

If for example, a customer has invested time, money and energy into integrating their business with your offering, it’s quite obvious it will be far more difficult for them to start that process again with a new company.

The more your customers feel connected to your brand, the less likely they are to churn away to your competitors.

Frequency of use

While there can be many reasons why customers aren’t logging in every day, again depending on the type of business you run, it is generally assumed that visit frequency can be used to define customers at risk.

It’s therefor important to understand moments on which typical usage is expected. For example, it could be your service is only required at specific points in the customer journey (e.g. onboarding), it’s seasonal, or even that they may be away on vacation. A tax reporting app will typically not be consulted every day, but rather at the end of a month of quarter.

Similarly, a high-touch customer who logs in every day may not necessarily be using your product in the most effective way of getting the best value out of it. Imperative to understanding your customers is first and foremost identifying key success events and moments, and determine from there how each customer scores.

Customer relationships

It’s obvious that the success of your products and services go hand in hand with the amount of promotors among your customer base. And having a close relationship with all of your customers will make sure they remain close. And making sure you identify who product champions significantly reduces the risk of losing them.

Making sure you engage in regular conversations with your customers is crucial to building a good business relationship. Keeping the conversations ongoing, will give you the ability to flag any potential metric that may not be part of your current health score rules.

Having a close relationship with all of your customers will make sure they remain close.

Customer satisfaction

It’s key to your business to monitor customer feature adoption and monitor them against outcome of buying vs not buying. As mentioned in previous section, checking whether they log in on a regularly bases, simply isn’t enough, if that reveals to be unimportant to success.

Yet even if that is the case, you also may need to ask yourself — and even better the customer — how satisfied his/her user experience is, using the feature. Net Promote Score (NPS) comes to mind. As you build closer relationships with your customers, you’ll need to ask them for any recurring or other important issues they may be experiencing.

Alternative, if the metrics are currently looking particularly positive for a specific customer, make sure you take other factors into account when weighting in the real picture. For instance, they may be expanding or moving premises, so do make sure that the common-sense element and on the ground knowledge is brought into play when evaluating each customer. This helps creating upsells.

Calculating your health score

The way you calculate a health score is always defined by the business you run.

A good benchmark to create your health score strategy is to class your customers as:

  • Healthy (Green)
  • Nomal (Orange)
  • At Risk (Red)

Once you have defined the rules and benchmarks for healthy and unhealthy customers, it becomes much clearer to see the results in trying additional metrics that may or may not improve health visibility of your customer base.

How your customers reach each stage can be as simple or as complex as fits your own business needs. You can typically build these health rules on computed customer properties, triggered events, timeline entries, and interactions with key social channel, campaigns, web-, blog- and help content.

Yet, even if a customer is at risk, it doesn’t necessarily mean they are moving away towards your competitors, as equally, a green flag doesn’t necessarily indicate a perfectly satisfied customer. Make sure there is always space in your health strategy for real-life input on genuine customer conversations.

Final note

By sharing health and other engagement metrics with the customer tools you currently use — marketing automation platforms, CRMs, support ticketing systems... — you’ll get a 360-degrees holistic view of your customer in context of being healthy, normal or at risk, and unify your various marketing, sales and customer success teams around such shared customer profile. And as customer data and triggers get shared everywhere, you can include them in your general workflows.

This will help you to improve general interactions with most important customers, as to give you the ability to identify key moments, events, properties; and identify what most impacts user engagement and bottom-line business results.

A customer health score is always a work in progress. You may find that what works today isn’t relevant within six months’ time. Be prepared to change and respond to customer and employee feedback throughout the whole process.

If you need any help or would like to speak to one of our expert team regarding health score and other engagement metrics, please get in touch with us and book a free 1-hour session.