How to Create a Customer Health Score

People don’t go to the doctor only when they’re sick. They also go for the occasional checkup to make sure their bodies are functioning properly. Even when everything seems to be going well, you still want to make sure that you’re actually as healthy as you feel. It’s just part of being responsible.

As a B2B SaaS founder, you/your team should be applying this same logic to your brand’s relationship with customers. People might appear to be attached to your brand, but that doesn’t mean the relationship is actually as healthy as it seems. To be sure you’re developing a coherent customer success strategy, you need to actively investigate your customer relationships. The best way to do this is through a metric called a customer health score.

There’s no single way to measure a score. Each business has its own set of benchmarks and priorities, so it develops its methods accordingly. Your job is to devise a metric that provides useful insights for your company. With the right approach, producing a customer health score can help you increase customer retention, meet customer needs, and improve the overall health of your organization.

What Is a Customer Health Score?

This score is a metric that businesses use to understand the strength of their relationships with customers. It is predictive, as it can identify both loyal customers and those who represent a risk of churn. By empowering your customer success managers (CSMs) to monitor and act on these scores, you can improve retention, KPIs, and your company’s bottom line.

Why Is the Customer Health Score Important?

These scores are important tools for strategizing and promoting customer success. Customer relationship management (CRM) is always going to be a complicated process, but it becomes much easier when you base decisions on verifiable data. In a world where in-depth measurements are possible, there’s no sense in having your customer success teams operate by instinct alone. With the right system, you can determine scores and allocate resources accordingly.

One major benefit of tracking customer health is that it helps you identify so-called “power users.” For SaaS companies, these are the customers who most consistently engage with your brand while renewing their subscriptions. A power user likely has a high net promoter score (NPS), meaning they play a significant role in attracting new customers to your company. Once you’ve identified these heavy hitters, you can devote additional resources to cultivating the relationships.

Assigning scores will also help you identify opportunities for account expansion. When account health is high, your sales team can step in and promote an upgrade to a more expensive service. If done correctly, this upselling tactic could become a major component of your marketing playbooks.

Perhaps most obviously, understanding what makes a healthy customer can help you decrease your churn rate. When you see that a customer’s relationship with your brand is weak, you can identify the risk of churn in real-time. By intervening, you can prevent customer churn and build longer-lasting customers.

A final advantage of determining customer health is that it helps you understand long-term patterns within your customer success strategy. No matter how much forecasting you do, you can never be certain ahead of time that a given sales approach will prove effective. When you measure customer health, you can see how new methodologies are working and tweak your tactics accordingly. Eventually, this flexible approach to customer success will help you attract new customers and retain the ones you have.

How to Create Customer Health Scores

Before developing an in-depth scoring system, you need to ensure you have some basic customer-related data on hand. Customer health is a secondary metric, meaning you’ll use existing data to determine it. Luckily, much of the information you’ll need is probably already accessible to your customer success teams. With some research, you should have no problem collecting the relevant data.

Checking Customer Frequency

To get a general sense of their users' overall health, SaaS companies often track the frequency of customer engagement. It’s helpful to know how often customers are actually accessing the services you’re providing. If they’re using your products regularly, it’s reasonable to assume that they’re happy with the brand. If, on the other hand, the frequency of use is starting to wane, there’s a good chance that the user could soon suspend their subscription. With some forecasting, you can assume that infrequent users will soon result in more customer churn.

Checking Customer Depth

Not only do you want to know how often customers use your products, but you also want to know how many specific features they use. This metric is called customer depth and is an essential part of assessing customer health. A customer who logs on quickly and carries out a simple task is less tied to your brand than a customer who uses most of the product’s features throughout the day. Users who take advantage of multiple features represent important customer segments, as they’re less likely to contribute to churn.

Checking Customer Breadth

To determine the relationship between customers and a given SaaS product, you need to see how many of your account holders are actually using the product. Imagine, for example, that you offer six distinct products within a subscription plan. If most of your subscribers are using a particular product, then they clearly have a healthy relationship with it. If, on the other hand, very few of your subscribers are engaging with the product, you can tell that the relationship is weak. From there, your customer success team will have to decide whether to increase promotion, adjust the nature of the product, or discontinue the product altogether.

How Do You Measure Customer Health?

While customer frequency, depth, and breadth can give you a general idea of your overall customer health, you’ll need more specific data points to produce a genuine scoring system. There are multiple ways to determine a customer health score, and your company must develop a system that corresponds to its products and unique customer base. All the same, there’s a certain process that all SaaS companies must go through to develop a workable system. If you follow these steps, you’ll be ready to effectively measure customer health across your business.

Define What to Measure

There are infinite metrics that you could hypothetically use to determine your scores. If you try to use too many variables, however, your scoring system will end up being too unwieldy for everyday use. Ultimately, you’re better off choosing just a few key metrics that will combine to give you a general score.

The metrics you use as variables will depend on the exact nature of your business. For general purposes, however, you can start by accounting for the following measurable statistics:

• Product setup: how many steps a customer has taken toward setting up their product, which shows how far along they are on their customer journey
  
  
• Product usage rate: how often your customers use your product in a meaningful way
  
  
• Net promoter score: how likely your customers are to recommend your products to their friends and colleagues, which often serves as a general benchmark of customer satisfaction
  
  
• CSM Intuition: a subjective measure from customer success managers of how satisfied a customer seems to be with their products

Each company has its own way of measuring these baseline metrics. The process of assessing product setup, for example, will depend on the specific nature of your company’s products. CSM intuition, meanwhile, is a relatively informal metric that you’ll have to obtain directly from customer success managers. Whichever way you calculate these factors, they’ll combine to give you a useful measure of customer health.

Establish the Distribution of Each Individual Health Score

To create a coherent system, you’ll need each individual factor to be calculated uniformly. That means you need some sort of measurement scale that can easily be applied to each individual metric.

If you’re using the factors mentioned above, then you’ll have to develop a system for measuring product setup, product usage rate, net promoter score, and CSM intuition. A standard option is to develop a 1–10 scale for each metric. You can then develop a weighting system that accounts for the importance of each factor.

Determine the Impact of Each Individual Health Score

Once you’ve decided which factors to include in your scoring system, you need to determine how you’ll weigh each factor. A faulty weighting system can skew your results and cause you to make suboptimal changes to your customer success strategy.

Let’s say you rank product setup, product usage rate, net promoter score, and CSM intuition on a 1–10 scale. If you think the net promoter score is your best individual indicator of customer health, you can give it greater weight in your system by doubling how it factors into the total score.

Improve Your Customer Health Score in Simple Ways

A customer health score should be more than just another number. For the metric to actually have an impact, you need to use it as a basis for new customer success tactics. To make the most of your scoring system, keep these tips in mind.

Simple Configuration

While adding variables to your scoring system in an endless quest for an ideal final metric can be tempting, overcomplicating your system will eventually backfire. You can’t measure every possible variable without bogging down the process. If you take a maximalist approach to the process, you’ll spend more time measuring than acting on valuable insights.

A simple configuration with four or five variables will give you an accurate enough picture of your overall customer health. From there, you can focus on adjusting your customer success strategy.

Act on It

The most successful SaaS companies don’t let key pieces of customer data sit around collecting dust. They act on them, drawing on new insights to improve their methods. If your customer engagement isn’t where you’d like it to be, look for ways to boost your products’ appeal. Work to respond faster to customer support tickets. Go above and beyond to meet your customers’ needs. Taking this time to actually act on your data will bring immediate results, helping you meet your objectives and improve the customer experience.

Correct the Course

Monitoring customer health should be a never-ending process. Pay attention to your customers during every stage of their relationship with your company, from onboarding and product adoption to subsequent renewals. Check for increased satisfaction after changes in your approach. Study how switching to automation in the customer service department affects customer behaviour. See how subtle product changes alter customer depth. All of this will help you make informed decisions that grow your customer base and increase customer satisfaction.

Conclusion

Marketing might not be an exact science, but it’s always helpful to have data on your side. Creating a system for determining customer health scores will help you understand how your customers respond to your products. Instead of relying on a general sense that everything is going well, you can produce actual numbers that confirm or disprove your assumptions.

The best thing about this metric is that it’s an actionable piece of data. Once you know how satisfied your customers are with your products, you can make the appropriate changes to boost the scores and improve the overall health of your brand. This deliberate methodology will eventually pay off in the form of a more successful business.