Launching Your First Customer Health Scores: Keeping It Simple

As organizations grow their customer base, it becomes more critical to have a methodology on how you measure your customers’ health daily. Customer health is not a sure-fire way to forecast if a customer is going to churn or grow, but it provides great leading indicators of quantitative and qualitative attributes to help mitigate risk and advance opportunities in accounts far before a renewal date approaches (fewer fires means happier customers). Consider it your mechanism to go from reactive to proactive in driving customer mitigation plans early in the customer journey. 

For example, many organizations use NPS as an indicator of customer health. Unfortunately, NPS is typically done as a point-in-time survey and usually doesn’t reach the right audience. Another downside: NPS scores collect minimal data on a customer and are a lagging indicator of success. 

So, where do you start to gather those great leading indicators of health?

Where to Find Leading Indicators of Customer Health Scores

Not sure where to look to find leading indicators of your customer health? We’ve broken it down into a few easy steps. 

1. Segment your customer base

Start by segmenting your customer base. You can segment by size, vertical, or whichever measurement you use to bucket your accounts. Gather your team to conduct data deep dives to discover what you want to measure. These will be much more useful if you analyze by segment. 

2. Do some homework 

If you look over the past two to three years of won vs. lost deals, what are the consistent trends?

For example: 

At one organization, we had a clear indicator that customers with event-based C.SAT scores over 4.7 (out of 5) were 50% more likely to renew than a 4.6 or below (these were surveys sent after each touchpoint – kickoff, install completion, EBR, support cases, workshops).

At that same organization, we discovered that customers who reach 80% product utilization by Month 6 of their subscriptions renewed and grew faster than anyone else (even if they never reach 100%). This includes those customers who got to 100% utilized by subscription end, but at a slower pace. 

Our conclusion: Time to value was a stronger indicator of success, rather than hitting 100% adoption at the end of 12 months.

  1. Define the top 3-5 measurements you will use

The measurements you choose to use do not all require data or automation. To get started, sometimes it is pure force by the customer success managers (CSMs) to gather the proper data and input them into a health score monthly or quarterly. You’ve got to start somewhere! 

A few things to keep in mind:

  • Qualitative data is just as important as quantitative data. 
    • Have you conducted an exec business review in the last 6 months with your sponsor? If not, take 20% off the top. For key accounts, consider reviews once every 4 months and once every 8 months for SMBs. You decide based on data and experience. 
  • Give your CSMs or Account Managers the ability to lower the score based on their pulse but with clear reasoning (i.e., company was acquired, drop the score by 20% right away).
  • Don’t be generic in your measurements. Many teams measure customers against getting to 100% utilized/adopted by month 12. This measurement is risky. If a customer does not use your product for 11 months and suddenly uses it fully in month 12, the risk of churn is likely very high, but your health score looks strong. Have a monthly target/index a customer should hit based on their segment and adjust scores as you progress. 
  1. Weight your scores

As you measure your data, remember that not all measurements are created equally. For example, having an regular sponsor business review and time to first value should be weighed greater than NPS results. 

As you look across the 3-5 measurements you picked, which is the highest indicator of health risk or success? Make sure that has the highest weight. 

Customer Health Score Considerations

These are just some simple steps to get started. There is a lot more that can be said about health scores, but this should give you a start. 

Some extra helpful hints:

  • Utilize a CS tool to input data and health scores once you know what you want to measure and how. 
  • Make sure there is clear ownership of health scores and know who needs to keep them updated. 
  • Review your health scores vs your churn/growth customers annually. They should be trending together. If not, something is likely off and you need to make changes.  
  • Trend your health scores over time. Are you just measuring for measurement’s sake, or have you trended to see if your teams are improving customer relationships as soon as they see a dip in their healthscore? A health score without clear mitigation plans for each account is nothing more than exposing risk but not having a remedy. An easy format for mitigation plans: Next 5 steps, owners, due dates (reviewed weekly with manager). 
  • Ensure sure the entire organization is aligned on health scores, how they work, and what the purpose is. Otherwise, they will only be adopted by one team rather than the entire organization including product, engineering, sales, etc. 

Share Health Scores With Customers

Lastly, share your health scores with your customers! Clearly tell a customer how you measure their health, show them on a regular basis where they stand, and even how you benchmark their health vs. other relevant companies. Customers will appreciate it and it may foster health score competition across your customer sponsors.

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