Customer Health Score in 2020: The Definitive Guide

In order for any SaaS company to grown and be profitable, it is vital that its Customer Success teams have a 360-degree view of the clients’ health. This is necessary in order to increase the renewal rate where buyers make frequent purchases. In addition, it is also important when looking to increase the success of your buyers.

Therefore, deciding on, creating and using a customer success health score has become an important topic for most SaaS businesses.

In this article, we are going to provide you with a definitive guide for establishing the best customer health score system in your company.

What is a customer health score?

The customer health score is a value indicating the probability for a buyer to become a profitable, high-value consumer or to drop off on a long-term basis. Key performance indicators (KPIs) involved in a customer health score incorporate the anticipated churn rate, which identifies customers who will not make repeated purchases. Moreover, another KPI is the renewal rate for customers who continue to make purchases. Yet, when determining the chance of a buyer to become a high-value prospect, factors like cross-selling and up-selling opportunities are also added.

The actual result from a customer health score can be classified with a Likert-type score that ranges between 1 and 100. Another way to show the data for customer health is by using a traffic-light model. In this case, red implies that the client account needs urgent attention, yellow signifies that the account might need to be looked at, while green symbolizes a healthy consumer account.

Why calculate customer health score?

A typical customer for any SaaS business will go through the consumer journey that includes the following steps: acquisition, onboarding, retention, and cross-sell/upsell.

When acquiring a new prospect you need to be able to deliver value during the trial/demo period. This will provide you with the possibility to convert the prospect into an actual customer.

Once you have achieved turning the prospect into a buying consumer, you have to focus on delivering successful events during the onboarding process. This is highly important as the biggest churn occurs in the first 90 days through a consumer journey.

Next, you need to deliver constant value to the client to prevent churn.

Finally, you have to try to make upsells and/or cross-sells by recognizing unmet needs and wants among your consumers. This will help grow your business and create long-term profits.

At each stage of the consumer journey, it is extremely helpful to employ some kind of health score to help you evaluate each customer account’s health. Then you can determine how to evolve and engage with every single account so you can guide it forward in the consumer journey.

How to create a customer health score?

When you have to create a concrete customer health score for your business you can choose to make it extremely complicated or very simple.

It has been found that many firms have a hard time creating their health scores for their company. But why is that?

In most cases, it is solely because the company wants a score that is both reliable and actionable at the same time.

This is not possible.

<p”>Let’s look at an example: If you want to create a customer health score, which is reliable and can predict future revenues and churn, then you should include factors such as how long people have been a consumer, the type of industry, contract size, etc. All of these factors are important in order to make the health score accurate and reliable. Nevertheless, those factors are not especially actionable as it is very difficult (if not impossible) for your Customer Success Managers to change or affect them.</p”>

On the contrary, if you choose to design a health score that is actionable for your Customer Success Managers, you will most likely look at aspects such as when a customer was last contacted, or low consumer usage.

Therefore, prior to producing a customer health score, you and your team have to agree on the purpose of the health score. Do you want the customer health score to be a:

  1. Churn predictor (can also be used as a churn forecasting tool).


2. A guideline for your Customer Success Managers, which they can use as a warning system to help prevent churn.

<p”>The answer to the above question will ultimately determine how you should develop your health score.</p”>

Once you have decided on your strategy, you can choose between two different ways of creating your health score system. You can either manually setup the factors for the customer health score or you can use a data-driven method where you include data modeling or machine learning to help you select the appropriate factors.

Customer health score indicators and metrics

  1. Product Usage

In regards to the various SaaS products and services on the market, it is clear that people will use the products and/or services, which they find helpful and relevant. On the other hand, people will just ignore the products and services, which they do not like.

Therefore, it can be remarkably helpful to measure product usage among your customers. By doing so, your team can be alerted if there are issues with any client accounts that they need to deal with. This can include everything from training, product improvements to informative and instructional resources.

If at some point, your team starts to notice customer product usage is dropping across all users, you presumably want to re-evaluate your consumer engagement strategy. You should also start asking relevant questions about where clients are facing problems so you can learn from it and make improvements.

  1. Customer Sentiment

Understanding and determining your customer sentiment is of high interest when analyzing the overall customer health score. But is it even possible to measure customer sentiment?

We will argue that it is!

While we do understand that it can be hard to quantify something as vague as happiness and/or satisfaction, we still think it is possible.

The measure of customer sentiment might be more of a ‘gut feeling’ metric among your customer success teams. Furthermore, it may also be a metric that is continually updated and changed based on the given feedback.

In fact, customer sentiment metrics can be changed from day to day after each customer touchpoint. You need to look at some important factors such as:

  • How content is your client with your product/service?
  • Do your prospects have any issues with onboarding a new service?
  • Are there any hostile questions about a renewal?

The above-mentioned factors should all be included when measuring customer sentiment. So you see why this metric can change at any given moment just like real human emotions. One of the most used customer sentiment metrics is the Net Promoter Score (NPS®)

  1. Customer Advocacy

Whether or not your customers are talking about and recommending your products and/or services to others is a strong sign of a healthy customer account.

<p”>It doesn’t matter if they are talking to peers or just mentioning your company in casual conversation, the value is the same. If your customers are willing to talk with others about your offerings, it is a clear sign of their satisfaction and happiness with your product or service.</p”>

Advocates are highly important for both your overall marketing and customer success. Consequently, you should make it a goal for your team to work towards turning customers into advocates.

  1. Customer Engagement

The customer engagement metric is used to quantify how often you communicate with a customer account. The personal interaction can be everything from face to face meetings, email correspondences to phone calls.

Normally, you would establish the level of engagement based on the number of days since the last communication with a client.

  1. Customer Relationship

The customer relationship metric focuses on how strong your relationship is with your different customer accounts.

A well-known customer success management strategy is one called going high and wide. This strategy outlines the importance of building the right relationships with the right people. Because having the right connections with the right clients can help you expand your products and services.

4 tips for designing a healthy customer health score

Tip 1: Start with what you know and test assumptions

When you have decided on which indicators and metrics, you want to include in your health score you then have to combine and weight the various elements.

A good tip is to start by analyzing some of your current customer accounts. Look at relevant accounts, which you know are healthy and some, which you know are having issues. This can help you determine some fundamentals aspects for each of the elements you are assessing.

Remember to monitor and adjust your chosen elements over time as a customer health score should develop continuously with your business offerings.

You can also examine your assumptions about customer health using historical data. You might find that some metrics should be adjusted based on their relative impact on the overall health score.

Tip 2: Let it take time

Start with something simple and then you can adjust and improve your health score along the way.

As mentioned above, the various metrics included in your overall health score should not be set in stone. The score have to change according to your product and organization developments.

Tip 3: Different scales determining churn prediction and up-sale opportunity

You should not try to include both churn prediction and up-sale opportunities on the same scale. It will simply complicate things too much.

If you want to evaluate various aspects such as both up-sales options and risk of churn, you need to create different health scores.

Tip 4: Segment accounts for a more accurate health score

Our final tip is to segment your accounts to gain a more accurate health calculation. There are three primary strategies:

  1. Segment by the desired outcome: For example, a CRM could choose to include all accounts that want to double the conversion rate into one segment.
  2. Segment accounts by purchased plan: Different plans should be divided into different segments, such as starters, enterprise, and professional segments.
  3. Segment accounts by lifecycle stage: Depending on where the buyers are in the lifecycle should determine which segment they belong to, such as acquisition, onboarding, retention, and cross-sell/ upsell.

Check your results

When you have decided on which scoring method you want to use, you need to determine some specific benchmarks for an acceptable customer health score.

<p”>During this process, you have to check the outcome from your score, with your customer team. Because they will know, which accounts seem to be struggling and which once that are successful. Hence, they can help verify the overall health score.</p”>

If the output does not align with your expectations, you should simplify the chosen customer health score metrics in order to figure out where the cause of the problem is.

Furthermore, at some point, your customer success team will start to measure the health of a client on a regular basis. This means, that your team will start to understand how the value a client is receiving from your product changes over time. Hence, you have to review the customer health score of consumers that are churning in order to analyze if their score tells the story of their declining success.

Moreover, you should ensure that each account is using the right health score components as they continuously progress in their customer journey. It is not difficult to adjust a health score to each client. However, you might find that some accounts don’t fit 100 % into your segments. But that is okay!

With some careful attention, reflection and a bit of adjustment, you can find a health score model that will be able to calculate the health of your buyers.

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