Customer Health Score: A Complete Guide 2024

Customer health scores

Having a healthy relationship is key if we want it to blossom and bring joy to all parties involved. In life, there aren’t metrics that we can track to see how the relationship is going, but luckily, the situation in business and customer relationships is much different. 

By tracking several KPIs (key performance indicators), you can get an idea of how healthy a customer’s relationship with your company is and also predict less popular customer behaviors and prevent churn.

Ready to learn more about the customer health score, how to measure it, and its benefits for your SaaS business? Let’s dive in!

What is a Customer Health Score?

A customer health score is a metric used to assess the overall health of customer relationships within a company. It provides valuable insight into customer satisfaction and engagement and indicates their likelihood of continuing to use the product or service. Customer health scores are based on various factors like product usage, feedback, support interactions, and engagement levels. 

One of the main benefits of customer health scoring is that it can help you identify at-risk customers who might churn. If you monitor the scores regularly, you can engage with customers proactively to improve their experience by addressing the issues as soon as they arise, or even before.

The ultimate goal of the health score is to improve retention rates and drive more customer loyalty by strengthening customer relationships. 

What Can Customer Managers Do with Customer Health Scores?

The customer success manager is responsible for building relationships with customers. They act as a medium between the company and the customer to improve the customer experience by guiding them smoothly through each phase of the customer journey. 

Now, let’s see what customer success managers can do with customer health scores to improve customer retention and satisfaction:

  • Perform customer segmentation
  • Identifying at-risk customers
    • By monitoring customer health scores, customer managers can effectively communicate with at-risk customers to prevent them from leaving. 
  • Highlighting customer success initiatives 
    • Customer success managers can pinpoint the issues and areas for improvement for the customer success teams and guide them in the right direction.
  • Evaluating the effect of customer success programs
    • Customer health scores are often used to measure the effect of customer success strategies over time. By tracking changes in customer success health scores, customer managers can evaluate the effectiveness of the given strategies and instruct customer success teams on how to modify them when needed.
  • Getting an overall understanding of customer satisfaction
    • Customer health scores serve as a tool for understanding loyalty and satisfaction and determining actions to improve the overall customer experience. 

What Metrics Should Be Included in a Health Score?

The customer health score should include a mix of both quantitative and qualitative metrics that provide insight into the general customer experience and the expectancy of their renewals and/or expansions. Let’s see the key customer health metrics in SaaS:

  1. Product usage metrics
    • Feature adoption measures the extent to which customers have adopted the core features of the product.
    • Product adoption measures the extent to which customers have adopted the product.
    • Frequency of use measures how frequently customers use the product. 
  2. Engagement Metrics
    • Resources Utilization/Engagement measures resource usage, like webinars, training, and educational material.
    • Support Interactions shows the number of resolved inquiries and issues by customer support. 
  3. Customer Feedback
    • Customer Satisfaction (CSAT) measures customer satisfaction with specific experiences and interactions.
    • Net Promoter Score (NPS) measures customer loyalty and satisfaction.
    • Customer Effort Score (CES) measures the level of effort the customers take to achieve their objectives with the product. 
  4. Behavioral Metrics
    • Expansion opportunities indicators of potential upsell/cross-sell opportunities.
    • Renewal opportunities indicators of potential subscription renewals.
  5. Outcome Metrics
    • Value realization is the perception of the customer’s derived value from the product.
    • Goal achievement is the extent to which the customer has achieved desired goals.
  6. Risk Metrics
    • Churn risk is the possibility of churning /not renewing subscriptions.
    • Usage drop-off is a noticeable decrease in product usage over a certain period of time.
  7. Revenue Metrics
    • Customer acquisition cost (CAC) is the cost related to customer acquisition.
    • Customer retention cost (CRC) is the cost related to customer retention. 
    • Lifetime value (LTV) is the expected revenue from a certain customer. 

How to Measure Customer Health: Step-by-Step Instructions

Now that you know what metrics to track, here is a step-by-step guide for measuring customer health.

Be Certain About Your Goals 

Determine what you wish to achieve when measuring customer health, for example, reducing churn, improving customer satisfaction, identifying upsell opportunities, or some other goals.

Identify Core Metrics

Include all the metrics that can help you achieve your goals – engagement, product usage, feedback, and others. 

Gather Data

Collect identified metrics’ data, such as interactions, surveys, product usage.

Calculate the Customer Health Score 

After you have defined core metrics, assign weights to each metric based on its importance. For example, if you wish to assess customer satisfaction, assign a higher weight to NPS, CSAT, and other customer satisfaction metrics.

Akita calculates a customer health score based on the weighted average of the given metrics, allowing you to have a comprehensive view of each customer’s health status. Akita will alert you about any significant trends that may indicate a change in the customer’s health status, and provide recommendations on the actions you should take to prevent churn if the health score goes below a certain level. You can always use a customer health score template where you can input all crucial metrics, weights, calculations, thresholds, action plans, and other relevant data. 

Perform Customer Segmentation

Segment customers based on their health scores and other traits you find crucial at the given moment. This is how you can create a personalized approach for different segments to better answer their needs. 

Monitoring 

Monitor changes in trends in customer health scores to be able to react promptly. 

Act Based on the Insights

Take certain actions based on the values of the metrics, like improving products, targeted outreach, or personalizing offerings.

Reviewing

Review your customer health processes regularly and update them so that they always stay aligned with your customer needs and business objectives. 

Visualize Your Customer Health Score

This is the final step to take so that everyone in your customer success team can stay on the same page and get valuable insights into each customer’s health status. There are various customer health scorecards and examples with percentage scales, color codes, ranking scales, or alphabetical scales that help you get a visual representation of customer health scores and interpret them with ease. 

Importance of Customer Health Scores

By now, you’ve probably picked up a few of the crucial benefits of customer health scoring for your business, but let’s review them one last time:

  • Identification of at-risk customers in the early stages
    • When monitoring health scores regularly, you can identify customers who are at risk of churning early on. 
  • Customer retention improvement 
    • When you understand your customers’ health scores, you can take appropriate actions that help you improve retention rates and customer satisfaction. 
  • Customer experience improvement 
    • Customer health scores help you understand how customers feel about your company and product. Then, you can create tailored customer experiences and improve satisfaction. 
  • Prioritizing resources 
    • Customer health scores help you understand which customers require some extra care and focus. 
  • Data-driven approach

Conclusion

The customer health score is a powerful tool that can help SaaS businesses visualize key data in order to improve customer retention, satisfaction, and revenue growth. 

When measuring core metrics related to customer engagement, product usage, and feedback, you can get valuable insights into the quality of customer relationships and overall customer satisfaction. By leveraging the information provided by customer health scoring, you can build stronger customer relationships that ensure your business’s steady growth and success.

Frequently Asked Questions

How often would I update customer health scores?

They should be updated regularly to rest assured that they show the most current information. Typically, customer health scoring is done on a monthly or quarterly basis.

Can I predict churn with customer health scores?

Although customer health scores can’t predict churn with absolute certainty, they provide insights into customer satisfaction levels and behavior, which can help you identify at-risk customers and take steps to prevent churn.

What are the best practices for implementing customer health scoring?

Defining goals, determining core metrics, assigning weights, establishing thresholds, visualizing data, taking actions, and regularly reviewing and updating.

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