What is Customer Health Score and is it important for your business

Learn about Customer Health Score and how to properly measure it to grow your business.

Customers are the lifeblood of any business. Old or new, these are essential for your business to survive and thrive. Retaining old customers is not enough for any company. They constantly need to expand their customer base and attract new customers to their brand.

Similarly, you should focus on customer loyalty and be able to retain old customers. In either scenario, your customer health score can help you understand and strategize the direction of your business.

Read on to understand the importance of customer health scores, their common metrics, how they are calculated, and how businesses can improve their scores.

What is Customer Health Score?

Your customer health score is an indicator of whether your customer-brand relationship is healthy or at risk.

This score is a way to measure and monitor consumer engagement and satisfaction with an organization. Certain key performance indicators (KPIs) related to customer satisfaction are used to calculate the score.

This score combines data from multiple data points and displays them into a single, simplified metric as a numeric score.

Different companies have different data points and scoring systems for this metric. However, the general goal is to come up with a qualitative measure such as “good,” “at risk,” or “poor.”

A good customer health score means good customer relationships. Customers with this score are more likely to buy again, renew their subscription, and recommend your brand or product to others.

An average score indicates that your relationship with your customers is unstable and you are at risk of churn. A poor result means that your customers are somewhat satisfied with your service, but not very enthusiastic about it. As a result, competitors may pull away from competitors if the company does not take the necessary steps to foster relationships.

By analyzing the scores, companies can study customer behavior and predict behavior. Continuous and thorough monitoring can also prevent possible cancellations and provide better business opportunities through cross-sells and up-sells.

Importance of Customer Health Score

This score helps managers understand whether their teams are investing their efforts in the right places. Businesses, including those offering SaaS products and services, can benefit from customer health scores by:

#1.Identification of valuable customers

Customers with good health scores are power customers. You can find them from this score and ask them to provide your company with valuable feedback and reviews.

#2.About account expansion opportunities

This score helps you create customer expansion strategies. Since you know who is likely to buy your product, you can offer them add-ons and ask them to upgrade their subscription.

#3. Identify customers who are likely to churn in advance

Churn risk is another factor that can be determined by this score. Therefore, you can proactively reach out to at-risk customers and resolve their issues.

#4. Understand the patterns of success and failure

Customer health scores help you determine your customer’s success and failure patterns. Since you know who your customers are healthy and who are unhealthy, you can repeat your success stories and eliminate the friction that caused your failures.

Customer Health Score Metrics

The metrics companies use for customer health scores vary by industry and business. Here are some common metrics that organizations use to examine their scores.

Product use

This is a common metric that most businesses need to know about their customers’ health scores. The more often someone uses your product, the less likely it is to be mass produced.

Customer engagement and satisfaction

This means how often your customers contact your company via email, chat, or phone. You should also consider how satisfied your customers are after each engagement.

Customer ROI

This refers to the ROI achieved by customers using your product or service. Customers with higher ROI are more likely to have better health scores.

customer advocacy

Customers who are willing to share their experience with your company with their colleagues and friends will silently help you with your marketing and PR efforts. They are satisfied with your product and are more likely to continue their relationship with your brand.

Nature of support tickets

Analyzing the subject matter of the support tickets your customers generate each month can help you understand their experience.

Customer pulse or emotion

It is not easy to quantify something as intangible and ambiguous as emotions. However, this is an important metric and can be understood by asking questions such as:

• Are your customers satisfied with your product?
• Will it be easy to onboard without any issues?
• Did your customer renew their subscription in the last year?

If your bill payment is late

This is an important metric because it can significantly determine a customer’s health score. Customers who paid their dues long ago are satisfied with the service, but those who paid for renewals after receiving a warning from the company risk a mass exodus.

Additionally, customers who pay their bills late may perceive your product negatively.

How to calculate customer health score

#1.Please select the measurement target

Find valuable actions toward business goals and determine customer health scores. Each product has its own key metrics.

Maybe you want to track how often your customers log in, how new features are used, or how many support tickets they receive. Whichever you choose, find out what keeps customers or what drives them away.

#2.Distribute scores appropriately

Customers can interact with your product in good or bad ways. When creating an expression, consider positive and negative actions. Positive actions should add to your score and negative actions should subtract.

#3.Assign a different score to each action

Each action should be given a separate weight whose impact on the score can be quantified. By examining the behavior of churned and loyal customers, you can learn about the impact of certain actions. You can score an action according to its impact.

#4.Create a template to calculate health score

Once you’ve built your scoring system, it’s time to collect your data. Initially, experimenting with different combinations of metrics can help you determine which one accurately represents your customers’ perceptions.

Once you find your formula, you can create a template on your spreadsheet. Calculations become faster and easier.

#5.Categorize your customers

Once you have a sizable dataset, you can start categorizing your customers according to their scores. Customers in the top 25% of scores are likely to have a “healthy” score, while the bottom 25% should fall into the “unhealthy” category. By calculating the average score, you can identify at-risk customers.

#6.Visualize customer health scores

Finally, visualize customer health scores so that team members can easily understand the health status of individual customers. Visualizations should be easy to understand for everyone and may include color codes such as red, yellow, or green.

How to improve your customer’s health score

This score allows you to track and manage your relationships with your customers, so you can also take the necessary steps to improve them in specific areas. The following tips will help you improve your customer health score for all your customers.

#1.Create a customer journey map

Businesses should create customer journey maps and use them to manage customer health scores. The map shows the location of customers with different scores and helps you understand the reasons behind bad or at-risk scores.

#2.Plan best practices

You need to provide best practices to your customers, no matter where they are on the journey map. Therefore, you can promote healthy relationships on behalf of your company.

#3. Identify important KPIs

Establish KPIs that connect customer health to business outcomes at each stage of the customer journey.

#4.Develop a personalized model

Develop a customized multidimensional health score model that focuses on the KPIs most relevant to your customer’s health.

#5.Automate best practices and track performance

Get help from your customer success platform by integrating it into your workflow. In addition to automating best practices, you can also track performance KPIs. These tools can also display forecasts and warn you about adverse scenarios.

How to use scores for customer success

This score is not only useful for your customer success department; Organizations can use it in many different ways, and different teams can leverage it.

#1. Find review backers

Customer health scores help identify advocates. You have a group of customers who like your products and are loyal to your brand.

Companies can privately request reviews and ratings on various software review platforms and social media. This increases your credibility and establishes you as a trusted brand.

#2.Contribute to a case study

For B2B and B2C companies, case studies play an important role in attracting new customers. People with good customer health scores can share their experiences and feedback. You can use these as materials for creating real case studies.

#3.Get renewal predictions

People with at-risk scores may not be able to choose product updates. If you know which customer segments won’t stay with your brand, you can prepare in advance. Therefore, companies can avoid false predictions and know what will happen.

#4.Take advantage of upsell opportunities

Companies don’t necessarily need to increase their ROI by increasing their customer base. Upsells can also increase ROI if done to the right customers at the right time. Health scores are a great way to know which customers access your upsell offers.

#5.Facilitate payment collection

This score also shows who is late on their scheduled payments. You can focus on these customers and encourage them to pay.

#6.Learn about customer pain points

Companies can directly ask “at-risk” customers about their complaints and remediate them. We discuss features that we don’t link to or don’t want included in the product so we can work on those features in the next version release.

last word

Customer Health Score reveals how your customers feel about your products and services. Every department in your organization can use the score to improve their workflow.

Now that you know the importance and method of calculating your score, you should start working right away. With the right metrics for your business, you can use this score to increase your customer base and revenue.

You can also read about customer loyalty and retention.