It’s well known that it’s cheaper to keep a customer than it is to acquire new ones. Customer retention, then, is a big deal for businesses.
In this ongoing customer retention plight, we turn to metrics to track what works and what doesn’t; who is a high churn risk customer and who is satisfied. One particularly valuable metric to create and track is the customer health score. But, unlike most metrics, there’s no one-size-fits-all way to collect and measure it.
So, what exactly is a customer health score, and how do you measure it?
What is a customer health score?
A customer health score is a metric used to help shed light on the relationship strength between your business and a customer. The score is an insight into:
- • Whether a given customer is likely to churn
- • If they’re happy with their service / overall relationship with your brand
- • If their spend with you is likely to grow or change
These health scores are typically useful for SaaS companies and other subscription-based businesses. That is, business models where you have a long-standing relationship with customers and regular transactions with them.
The challenge with measuring a customer health score is that the metrics you need are often scattered. For instance, you have historical data in your CRM. You have sentiment scores from your live chat channel. You have complaints or feedback in emails. Then there’s data from support tickets, product usage monitoring tools, social media reviews, etcetera.
It can be difficult, then, to get the holistic view you need to produce an accurate customer health score. So, why is it worth the effort?
Why is a customer health score useful?
When you have a customer health score for each customer, you have a trackable overview of how happy they are with you. By extension, you have an ever-updated indicator of whether they’re likely to stay.
A low health score alerts account managers and service teams to customers at risk of churn, or of customers losing interest in your offering. With this early warning, representatives can step in and contact the customer. In other words, you get a chance to prevent said churn.
High scores, meanwhile, could act as an indicator of opportunity. They can point to customers ready to upgrade to a higher plan, or customers open to buying more from your range.
And, in the middle, you have customers neither high-risk nor high-opportunity. Here, it might be worth a marketing campaign or a sales offer designed to re-engage and relationship-build.
In short, measuring a customer health score is an important way to get an overview of how well you’re maintaining customer relationships. Strong relationships mean happy customers, repeat business, and ongoing subscriptions.
Metrics to inform customer health score
Perhaps the most important part of measuring your customer health score is choosing the metrics you’ll use behind it. You can mix and match metrics to suit your product, business model, and goals.
Common metric choices to inform your customer health score include:
- • Product usage
How much/often does the customer use your product? How long have they used it for? How many features do they use? This can all point to the strength of your relationship with a customer.
- • Customer feedback
Positive feedback is an indicator that would lead to a stronger customer health score; negative the opposite. Note here that methods used to track customer feedback vary, and that you’ll get different levels of insight based on channels and feedback methods.
- • Customer support cases
Does the customer reach out a lot? Are their experiences scoring high or low on sentiment? How have they rated your service?
- • Product upgrades and renewals
A customer that downloads your upgrades and continues to renew their subscription without prompting will earn a much higher health score than a customer that resists your upgrades.
- • Website activity and participation in your community
I.e. your social media channels, your customer portal, any community spaces you’ve created for troubleshooting and customer-led advice. If the customer is vocal in these spaces, they’re likely to be highly engaged with your brand.
How to calculate your customer health score
With your metrics chosen, you can start to make your scoring system. This is where you assign points to the metrics, with weighting. These points can then be combined to give you an overall health score. You’ll give a heavier weight to the metrics that matter most to your goals, and a lighter weight to those that don’t.
The final steps are to test your new scoring system on past data and define parameters, such as how you’ll display the score.
- 💡 Ways to display your health scores include a percentage scale, a colour code, or ranking scales (be they alphabetical or number based).
How to improve health scores
If you find that your customer health scores are typically lower than you’d like, it likely means there’s something upsetting your customers.
This could be a problem with the product you offer, with the service, the customer journey, the pricing, anything that concerns the customer. How, then, can you work out what’s wrong and fix it to improve your health scores?
The answer is to look at which metric is most often bringing the overall health score down. From there, you can put a strategy in place to address the problem area of the customer experience.
Start tracking your customer health score
For any business, it’s smart to start tracking the customer health score metric. Simply put, a customer health score is a powerful asset when it comes to keeping and upselling to customers.
Without tracking this metric, you lack hard data on both individual and overall retention risks. With it, your actions to nurture customer accounts are proactive, pre-emptive, and timely.
Useful links
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