Customer Health Score is an important metric for all businesses. It is a metric that predicts a customer’s likelihood to churn or continue to stay on and grow. This should be designed to provide insight into what is happening in your customer accounts early enough. Hence becoming a golden Leading Metric for managing churn, one that provides an early warning (if measured & tracked well). A customer health scorecard should indicate the well-being of an account, ideally quantitatively, and offer a metric to gauge account health.
There isn’t an industry standard for Customer Health Scorecard (yet) and that can make things a little confusing, and sometimes overwhelming for customer success teams. While working on defining this score, it’s good to isolate 4-7 indicators for calculating the score and avoid making it too complex, at least in the beginning.
Some Customer Success leaders insist that it is important for Customer Success leaders to keep an eye on the relationship with the customer account. This would only be possible through regular touchpoints and interactions. Overall, the CS team should focus on several parameters to take advantage of the CHS.
What are the key ingredients of a Customer Health Score?
Understanding Customer Health Score, Customer Churn, and their relation
Customer Churn: It is used to define a situation when a customer stops buying a product or unsubscribes from a service. Customer success managers have a primary objective to arrest the customer churn. They also need to keep increasing the portfolio. All this must be managed under an already established customer success initiative or one that is in process. It helps to make such a process more efficient and effective. It must be an inherent part of the Customer Success initiative to provide meaningful insights to the CSMs.
Customer Health Scorecard: It is a metric that any business entity should use for its customer success management. This score helps in determining the probability of a customer to churn.
A customer health scorecard should help a customer success manager to move beyond instincts. An informed decision based on real-time data is always more efficient. How the data is collected, how it is segregated, how it is analyzed, which parameters are used, are all important questions. Answers to this will help in defining the process. Actions can then be plugged in based on the Customer Health Scores that the system calculates.
Key benefits of using a Customer Health Score: These will also be understood better when the parameters of a CHS are explained ahead in this article. Most importantly, it acts as an early warning system. If usage is decreasing in terms of time, frequency and spread of the features, the same will get reflected in the this Health Score. The parameters also give long term indications. It helps in identifying the satisfaction levels of the users. It also estimates whether they would be willing to recommend the service to others, thereby helping in business growth.
Basis of a Customer Health Score
The Customer Health Score is meaningful only if it is designed on the aspects that suit your business needs. Key aspects that are measured as a part of it are:
Measuring engagement:
The more a customer uses the product or service, the more the value the customer derives from it. A measure of this engagement is therefore important. The duration of engagement, how smooth and effortless it is will be an important yardstick.
Capturing real-time and relevant data:
This is a complex process needing the right tools and analytics. Excess and unnecessary data is overwhelming. On the flip side taking any decision on data that has low relevance statistically is likely to be counterproductive. The speed and accuracy of the data being captured are also important. Actions need to be taken within a timeframe to yield proper results.
Analysis of data into meaningful insights:
Remember the principle of value over vanity. Segregation of what looks good versus what is useful for decision making is the key here.
Flexibility:
Every business entity should be treated as unique. It should define the weightage and scores for the entire process that is the best fit for them.
The Key Ingredients or Parameters of a Customer Health Score
The parameters defined below need to be a part of CHS. This is immaterial of the name that is given to each parameter by different technical platforms.
Duration Index:
The duration and frequency of engagement of every customer needs to be captured and appropriately measured. How the quality of engagement is defined will decide the score. For example, if an app is being subscribed to, then how much time the app is used needs to be measured. The period being measured could be a single day, or a week, fortnight or month. A statistical average could also be taken on analysis of usage in different periods. The span of usage could vary from every session to session. There could be multiple short span sessions or a few sessions each being of considerable duration. Also, it could be a hybrid of short and long span sessions.
The above example will demonstrate that the task is complex. It will need appropriate data analytics measures and tools .
Retention Index:
This is a measure of the frequency of usage or how many times a user comes back. Taking the same example of an app, the frequency of app usage could be higher on particular days. It could also be higher at a particular time of the day. In a b2b scenario, multiple user access is generally provided for the app subscription. The percentage of users who revisit the app and continue to use it over a long period is now an important yardstick. This will help measure whether most of the users are active or not. In case the number of active users is declining, it is an indicator that dissonance with the app is brewing in the client organization.
The performance of the product or service must be measured for calculating Customer Health Score. This index should incorporate the parameters which best describe the performance for the user. Continue with the same example of an app. If the same is functioning on a desktop or a laptop the speed at which the page loads including all the items on that page are important for users retention.
If the same is being used on a smartphone then the app should be mobile friendly i.e. not only the speed needs to be good but it also needs to have a comfortable user interface given the screen size of the smartphone. Further, the operating system also is different here and the app must be configured to the Android or the iOS which are the most common in the world. Mobile App Stores also could provide a Rating Index which can be picked up directly.
Loyalty Index:
Loyalty, as the term signifies, is a measure of continuity of usage over a longer period. The users who continue using the product for at least one month are usually termed as loyal. The number of features used of the product or service is also important. In other words, loyalty would come when the customer uses it over an extended period. Also, the user is maximizing the value by using multiple features of the product or service. The above is self-explanatory when it applies to the example of the app.
Each parameter that has been explained is moving ahead sequentially. So after loyalty, one needs to ascertain whether the user is recommending the service or product to others as well. A satisfied user is likely to recommend to others. We are all aware of the role of customer reviews in today’s digital world. When applied to the same example of an app the NPS index should track the customer satisfaction levels over a defined reporting period.
Scope of incorporating further parameters:
Considering that every business entity is unique and has unique requirements, beyond the ‘must-have’ parameters so to say, there should be enough room to incorporate specific parameters that complete the customer health score for the customer success manager.
Customer Health Scorecard Should Be Integral To Your Business
It is evident now that Customer Health Score must be an integral part of any Customer Success initiative. Also, it should be relevant to the business. Look at it from another viewpoint. You are shortlisting a customer success management service platform. Choose only those who have a Customer Health Score plugin and offer flexibility to customize your business needs.
A comprehensive CSM platform offering a robust yet flexible Customer Health Score is a very powerful tool. The tool supports CSMs to arrest churn, increase product adoption, grow revenues, and enhance the lifetime value. The platform helps track customer behavior, trends and customer satisfaction to help CSMs take meaningful actions driving business goals.
To learn more about Customer Health Score, industry standards, key parameters, and its importance read our ebook.
Surojit has over 15 years of experience in quality and implementations. He is a promoter of an extremely light and efficient Agile process to fit business needs. In his prior role as product owner, he built a robust product in a very short span of time.
Published February 27, 2020, Updated September 06, 2024
