What is a Customer Health Score?
Calculate Customer Health Score in 5 Easy Steps
The Customer Health Score is a flexible metric wherein Customer Success Managers measure in various ways. A low health score indicates a need for more attention to the customer to improve the customer’s experience. The Customer Health Score allows companies to form their own goals in response to the metrics that make the most sense to the business.
But is the Customer Health Score significant?
Evaluating the Customer Health Score provides a data-driven, evidence-based approach to preventing churn and identifying growth opportunities. If the score drops sharply, it is a warning sign that a customer must be reached to save the relationship. When the score is high, the customer is a candidate for referrals and upsells, increasing the company’s revenue.
What are the examples of Customer Health Score?
It is vital to understand that CHS is made up of different metrics influencing the overall score. Using this manner of scoring provides freedom for Customer Success Managers to measure the metrics that matter to the company and helps identify the root cause of low health scores. CHS helps CSMs know the exact next steps to get the customers back on track.
How do you Calculate the Customer Health Score?
1. Identify the purpose of the Customer Health Score
Always begin with the goal in mind. You should consider what you want to use the score for, as having a plan will make it easier to identify the right metric to use. For example, you want to prevent churn. Using metrics that indicate churn would be applied to the customer segment later on with that goal in mind.
Keep in mind that you shouldn’t monitor everything at once. It only leads to confusion and unnecessary work. Use only the metrics necessary for the information that you wish to uncover.
2. Choose a customer segment
Which customers are affected by the data you’re trying to measure? It is essential to realize that not all customers have access to the same features. Consider what segment you would apply the scoring to.
3. Identify the base metrics to use
The more metrics you have doesn’t mean the better it is. Too many metrics may result in a less accurate score and misinterpreted data, inflicting more damage than identifying the issues. When collecting and comparing metrics, ensure that the segments chosen are documented to prevent difficulty identifying which one needs help.
The most common metrics used are:
- Feature usage
- Daily, weekly, and monthly usage time
- CSAT score
- Product engagement
- Number of support tickets open
- Number of upsells and renewals completed
4. Assign value and weight to each metric
Now that you have identified which to measure and where the data would come from, you should add value or weight to the metrics according to their importance and relation to the business goals. Most companies use a 100-point scoring system, color codes, percentage scale, etc. There are multiple ways to rank customer health scores, and you are free to use whichever fits the metric being evaluated.
Once weighted, create segments differentiating the healthy from unhealthy by comparing it to what you consider to be an acceptable deviation from the perfect score.
5. Determine the action plan
Using the data collated, prepare the plan to resolve the identified problem. There may be warning signs of possible churn. Hence, you must help the customers solve whatever prevents them from generating value from your product. Patterns will emerge over time, so it is vital that you monitor, reevaluate, and update the data and the strategies being implemented as seen necessary.
To sum it all up,
Measuring the Customer Health Score is essential for the Customer Success Managers’ to identify whether there’s a need to supplement a better onboarding process or offer more to the customer. According to the customer’s current status, the CSM would be able to plan the following steps to ensure that the customers would generate value for the company by maintaining a good relationship for a long time.
