Whether you are managing a base of 10 or 10,000 customers, you need a consistent way to track their level of engagement and satisfaction in order to proactively retain and grow those relationships.
I typically do this with a customer health score so that I can track aggregate trends as well as have insights into each individual customer in order to run appropriate customer success plays.
I’m always surprised by the number of companies that don’t have a consistent framework to score customer health.
To retain & grow your customers, you have to keep tabs on the state of your customer’s relationship with your product and with your company.
I believe you can’t manage a customer base of any size without a consistent process for this.
Customer health scoring helps you understand who is engaged and who isn’t and who needs intervention, and who is probably doing just fine on their own.
Getting Started with Customer Health Scoring
A customer health score simply takes several key metrics or activities and combines them into a single “score” to indicate the customer’s overall health.
What makes for a healthy customer or an at-risk customer? What behaviors exist in these customers? What events or triggers can you see?
Take a look at the various activities, actions, and usage that might indicate customer health. Here are some to consider:
- Signs up for a free trial and uses a key feature
- Converts to a paying customer
- Uses the product with a certain level of frequency
- Uses a key feature on an ongoing basis or set of key features
- The customer account has a certain number of users attached to it
- The customer account includes executive-level relationships or users
- The customer has desired outcomes met
- Is using support resources
- Is an active participant in your customer community
- Has explicitly stated their satisfaction
- NPS response or a PMF response.
You can also include some “at-risk” flags for scoring as well, for example:
- Lost a customer stakeholder
- Lack of adoption of key features
- A business event occurred (such as the customer being acquired or an executive team being replaced)
- No login over a certain number of days
You can use analytics to measure key customer behaviors. Read our article about product analytics to learn how that works.
Don’t Overcomplicate Customer Health Scores.
When first starting with customer health scores, the mistake I see being made most often is overcomplicating it, which leads to never getting scoring off the ground.
It drags out over lots of meetings, debates, and discussions, while the valuable ground is lost in understanding the customers.
When first starting out, pick just 3-5 customer metrics to determine your customer health score.
Make the score itself simple, such as four potential scores per question. For example, if you have 3 questions, each with a rating of 0,1,2, or 3, then the highest possible score is a 9, and the lowest is a 0.
A customer health score is about a total picture of the customer in just a few metrics, so you need to pick your metrics wisely. That’s why companies can get paralyzed at this step.
Which health metrics should they use to score? How should they weigh each? Do they each need to be weighted the same? Do all metrics need to be objective or can some be subjective?
Don’t get into an extended debate about the perfect scoring approach—that’s wasted energy for little gain.
Just get started. Pick some key metrics, and then score the entire customer base. Take a look at the results.
Do they seem accurate? Spot check some accounts you are really familiar with. Is the score representative of the customer’s health?
If you score the customer base and then look at the results and they seem pretty accurate, then run with it.
If they don’t seem right (for example, somehow, your most deeply adopted customer who just signed a 3-year renewal ended up with an “at-risk” flag), then make some modifications.
Keep customer scoring simple above all else so you can manage and maintain it on an ongoing basis.
Here are a few customer retention metrics worth considering.
Monitor & Manage Customer Health Consistently
Once you have decided the metrics you will use to score customer health and applied it across the customer base, it’s time to monitor it and act on the outcomes.
That means having a regular, scalable way to monitor health scores as they change (which they will).
Leaders should be reviewing customer health scores in aggregate. In addition to leaders, direct-line managers should be reviewing customer health scores individually with the customer success or support managers to make action plans.
Properly configured customer analytics dashboards are a great way to quickly and easily view customer health scores.
Act on the Results
What good are customer health scores if you aren’t doing anything about it?
Make sure you have a customer success or support playbook for intervention and correction for your low-scoring customers, and ways to reward and engage your high-scoring customers even further.
Yes, it is important to know things like “80% of our customer base scores higher than 6 points, 10% is 3-6 points and 10% is less than 3”, but what is more important is to actually do something about it.
What’s your plan to move your at-risk customers back to healthy?
Your entire company needs to understand the scores, and the customer success plays that proactively keep customers healthy, and also how to handle it when a customer isn’t healthy. A customer success/retention playbook can help with this.
Evolve Customer Scoring and Monitoring as Needed
There isn’t a “set it and forget it” approach to customer health scoring. Don’t assume your first attempt is the only way to do it.
Evolve how you score and how you monitor health across the customer base as your company grows.
What works for 50 customers will need some tweaking for 500 customers. The health indicators for your 50 early adopters may be different than the customers you acquire once you are more established. This leads us to the next tip…
Evaluate for Accuracy
If you are constantly surprised by healthy customers churning, your scoring is off. If you have a bunch of at-risk customers who are always getting your time & resources, staying at-risk, and not churning, your scoring is off.
In other words, don’t just look at churn rate, but see who is churning, and why they’re doing it.
Once you create your customer scoring methodology, evaluate it on an ongoing basis to ensure it’s actually giving you the right scores that help you run the business and improve retention.
Use Customer Health Scores to Uncover the Root Issues
Ideally, your customer health score isn’t just a score that helps you see who is healthy and who is at risk. That’s important for retention, sure. But your scores can help you improve your business and your product when you look deeper than the surface.
Let’s say you are tracking how long it takes a customer to activate a certain feature, as a health metric. And that metric, in general, is longer than you deem acceptable. Now that you are tracking it, you can seek to improve it.
Why is the feature taking longer to activate? What’s the barrier to adoption? You can make product or process changes to help shorten that.
Use your scores to track health but also use them to uncover areas of opportunity for improvement in your product and your processes.
Know Your One Metric
For every product, there is one metric that is the most important. If this metric isn’t there, you are dead in the water in terms of product adoption and customer retention. The one key metric is unique to each product, so you will need to figure out what yours is.
It’s the metric that matters more than any others — it’s pass/fail. It could be that a user sends an invoice if you are a financial application (not that they create an invoice, but that they actually send it).
It could be receiving end-user traffic if you are a web-publishing application (not that a page or site is created or that it goes live but that it actually receives traffic).
Your funnel analytics can give you valuable insights into which metric is most important for your business.
You will have to figure out what your one metric is, and when you do, everything starts from there—it’s the thing you design for and drive your customer towards because without it they will never achieve their desired outcome(s).
You, and your entire company, must know your ONE metric and monitor for it constantly. It’s the metric that is pass/fail. Without it, the customer health score is zero, no matter how many other elements of health they may have.
Remember Why You Need Customer Health Scores
For a SaaS company, customer retention is everything.
Externally, the entire market value of your company rests on your ability to retain your customers.
Internally, churning through customers is a slow downward spiral of exhaustion. It can also indicate something is wrong with your product, onboarding, support resources, or market fit.
Customer health scores, implemented correctly, can help you spot your at-risk customers before it’s too late.