Companies need repeat and new customers who are willing to pay for their product/service offerings. But eventually, consumers jump ship and abandon the brands. It’s inevitable, and there is nothing to be scared of if you’re prepared.
You need to know what customer health score is, why it is important, and how to measure it accurately to predict and tackle customer churn and drive more sales.
What is a Customer Health Score?
Customer health score is a combination of metrics used by customer success teams to determine the likelihood that a customer will renew, grow, or churn. There is no one-size-fits-all approach to calculating this score; each company has its own process. Regardless of the formula used, it should help product and customer success teams reliably assess customers’ likelihood of renewal.
What makes the process hard to predict is human nature – you can expect someone to do something on day X, but they might have changed their minds on day Y.
Another thing to consider is that the scoring system is always biased to some extent – it’s humans who are scoring customers. However, professionals use technology to help them with the decision-making process.
But how much does the overall health score of your customers matter to your short- and long-term goals? Let’s find out.
Why is it Important?
One apparent motive for your customer health score is that it is pivotal for your business to avoid customer churn and sales growth. However, beyond this “eye-opening” revelation, there are many more things that force SaaS companies and ecommerce stores to invest in their customer success managers and overall – in their customer service departments.
Depending on old methods can be quite an excellent way to predict behavior. Still, if you do not incorporate technology into the mix, you risk missing out on many opportunities that you would otherwise have at your disposal.
Let’s see 4 of the biggest arguments that can encourage you to start implementing customer health score as one of the most important metrics for your business.
1. Works on Customer Churn Prevention
A low Customer Health Score can indicate your customers are at risk of leaving you. Monitoring a customer’s health score can help you identify those who need assistance to prevent churn and keep them satisfied with your product.
2. Identifies Patterns
By checking the customer data of healthy and unhealthy consumers, you can distinguish patterns of good and bad practices. As a result, you can adjust your marketing strategies and efforts to better segment customers into groups and target them with different promotions.
3. Boosts Sales
Since customer health scores can help you identify shopper routines easier, you can uplift your sales by heavily targeting your volume buyers and working out the strategies for expanding your customer base. If you lay the foundation properly, your customer success team can step up at the right time to cash in on your efforts.
4. Stimulates Exponential Growth
Many business people underestimate the exponential growth, but it has much more weight than sales, and it essentially allows you to keep closing new clients without sacrificing your current customers. Tracking your customer health scores will only bring more benefits in time, as you will learn how to adapt to sticky situations and capitalize on good momentum.
How to Create a Scoreboard for Customer Health?
Before we start explaining the ways of creating a scoreboard, we need to clarify something – there is not a single formula for all customers. You should be aware of several things:
Your Priorities
It is good to have many elements that you will measure customer health scores, but it is pretty important to give some of them a priority over the others. Not all businesses are the same. Thus, you need to be specific in your needs.
Measurement Frequency
Once you set your preferences, you must define how often you measure the results. Usually, the sooner, the better, as you will have more accurate results, but you can end up having lots of customer data, and it might be overkill.
Evaluation of Results
If you have done everything, then it’s time to think about the evaluation process. Is it manual or automatic, what should the discrimination level be, and how will you put customers in different segments?
Health Score Scales Examples
Health score scales are not purely mathematical, which is why there are different ways to measure them. Do not be limited to a single method when you can choose from many possibilities.
Customer Health Grade Scale
To ascertain the merits and demerits of marketing activities, they need to be accurately measured. Let’s see how this one works.
There are points – from 0 to 100. They are separated into five tiers:
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Very Poor: 0-19 points, poor health score, clients are on the verge of churning. These clients require immediate attention.
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Poor: 20-39 points, poor health score. While not as bad as the other tier, someone should engage these customers more often to move into the next tier.
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Average: 40-59 points, okay health score. These clients aren’t satisfied enough with the products you offer, but are OK to keep using them for the time being. You need to add more value to them.
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Good: 60-79 points, excellent health score. These clients are already satisfied with the products and are willing to keep purchasing from you. Try to convince them to join the next rank and become loyal customers.
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Excellent: 80-100 points, top health score. These are your brand advocates and the ones who purchase the most. You need to keep treating them well to get the maximum possible value.
Color Code Scale
Many companies measure customer health scores with color codes. Why? Because it’s much easier to grade customers, and more importantly – it’s easier to spot the colors. While companies can use whatever colors they want, it’s typically a RAG (Red-Amber-Green) scheme that is being utilized.
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Good: typically, this is when the customer is doing well and there are no signs of them churning, and they are spending reasonable amounts of money on your products.
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OK: if your clients are doing OK, it’s a warning sign. While they are still committed to your services or products, they might soon change their opinion.
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Bad: when things go bad, it’s time to act quickly. Yes, these customers are still on board, but you need to make great efforts to preserve them.
Of course, these are the standard colors, but you can add a few more nuances to segment your customers better, as three scales are rarely enough. A client might be on the verge of quitting your company but still appear in the OK category, which might mislead you.
Percentage Scale
A percentage scale helps the global health scores, giving you a broader image of the customer health score. It pays attention to multiple scores added to the total score.
One good way to utilize it is to give your behavior metrics different weighted scores to make them stand out more when looking at the final picture.
The percentage scale is also very subjective, so ensure you give enough weight to many metrics, as there may be some cornerstone scores that you can underestimate.
How to Measure Customer Health Scores
To achieve your goals, you need to measure customers’ health scores precisely. Otherwise, all your progress will go in vain. But how to do it? Let’s see:
1. Identify Your Buyer’s Persona by Using Segmentations
To create a product your customers will love, you have to understand who they are. That’s where customer segmentation is helpful. You can dissect your customer database into different groups, learn about the needs and wants of each group, and use that knowledge to develop the best solution for each unique persona.
This lets you create a product that meets your customer’s individual needs, leading to increased conversions and customer satisfaction.
You should also find ways to improve user experiences and answer the main problem: Why customers leave your business?
2. Determine Your Desired Outcome
Now that you have a better understanding of what metrics might benefit you, let’s talk about outcomes. Let’s take this example: For a fitness company, the critical health metrics might be “Average time per workout video watched per customer” and “Average number of videos viewed per customer.”
An outcome can be a single metric that contributes to success, such as “average time per workout video watched per customer,” or a group of metrics contributing to an ultimate goal, such as “average number of videos viewed per customer.”
But no matter what, you will be narrowed down to 2 options – to avoid or achieve a result. Remember that metrics can be deceiving, so you should not fully trust a single metric.
One quick example is how long your users are watching your guides – yeah, at some point, you might get a great 75%+ watch time, which is encouraging. But at the same time, they might have issues understanding what’s in the video. Thus, they watch it more times and become aggravated. It’s a thin line, but it might be the difference between a brand ambassador and a churning customer.
3. Measure Customer Health Score Impact
The importance of a Health Score is different for every individual. Some people put more value on the number of existing reviews than on the number of questions asked, while others would rather see the inflation rate on their site’s “Contact Us” page.
That’s why it’s essential to understand which metrics are most valuable to your business and which ones are less important. Once you find which ones are your preferred options, you can then prioritize them.
Health Score Metrics
The customer journey is full of metrics. While the exact metrics you choose to focus on will depend on your company and the stage of your business, there are several metrics most companies utilize in their practice:
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Frequency of product usage: how often are your customers in touch with your product
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Depth of product usage: how many features from their premium plans are your customers using
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‘Contact us’ Page usage: how many times potential leads and current customers are visiting the ‘Contact Us’ page
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The breadth of product usage: how many total users and paying users you have per account
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Open Customer Support Tickets
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Customer Survey Results
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Number of Upsells and Cross Sales
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Number of Subscription Renewals
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Social Media Involvement
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Email Engagement Rate, etc.
How Can I Improve My Metrics?
Customer health scores are the key to increasing brand awareness, customer satisfaction, and loyalty – because when customers are happier, they will be more likely to purchase from you again. But if you don’t take them into account, it doesn’t really matter.
Get More Involved with Your Customers
Find out what they think is causing their product to underperform and create a plan to address the issue. A broken process might be keeping people from using the app as often as they’d like. Just ask your customers about their experience – and try to address their concerns by rolling out new features or giving them a heads-up about things to come.
Identify Customer Patterns and Act Upon Them
What makes the customer health score an option worth your consideration is the amount of data collected. Data that customer success managers can later work on. A general observation, often could find weird patterns that work, like the relationship between “Pricing section views” and “Time spent on the platform.” If possible, try to look for 2 or 3 different metrics that don’t necessarily mean something by themselves, but together, they can be an indicator for your customer score.
Apply Different Strategies (A/B testing)
Do not rely on a single approach to improve your customer health score. Instead, look for various techniques to create connections between 2 or more different metrics. A/B testing is proven to work in real-life situations.
Conclusion
As we reach the end of the article, we would like to share a tip or two with you. First, make sure you track your customer health score metrics and react in time – it’s often the tiny margins that make the big difference.
And finally, don’t get carried away with numbers. Sometimes it’s the simple things that will drive more revenue and reduce churn rate – a warm welcome, taking good care of your customers, resolving issues in a timely manner, and being proactive when it matters the most.