Measuring and Defining Customer Health Scores

Customer Health Scores are vital signals for churn

A Customer Health Score (CHS) is a metric that gauges the health of your relationship with your customers. It's like the "check engine" light for customer satisfaction, signaling whether a customer is likely to stick around or churn. It's crucial for account managers and customer service teams to identify customers at risk of churning and to understand how high that risk is. CHS is vital for reducing churn, increasing sales, and building a higher reputation.

Breaking down Customer Health Scores into steps

Figuring out Customer Health Scores (CHS) for your organization is like setting the GPS for your customer success journey. It's not just about picking metrics; it's about aligning those metrics with your business goals and customer expectations. Let's break it down:
Step 1: Establish Objectives - What do you want to achieve?
Figuring out Customer Health Scores (CHS) for your organization is like setting the GPS for your customer success journey. It's not just about picking metrics; it's about aligning those metrics with your business goals and customer expectations. Let's break it down:
Step 2: Identify Key Metrics - How will you achieve what you want to achieve?
Based on your objective and team input, list potential metrics that could be part of the CHS. These could range from product usage metrics like 'features used' to customer interaction metrics like 'response time to support queries.' You can also include metrics like the ratio between daily usage and tickets raised, daily time spent on the product, social posts or support for the product in their network, open disapproval or dissatisfaction with a feature, and many more indicators that positively or negatively impact a customer’s health.
Step 3: Align with Customer Journey - How will you bake in the metrics?
Map out the customer journey and identify touchpoints where each metric comes into play. This ensures that your CHS is not just a number but a narrative that tells the story of the customer's interaction with your brand.
Step 4: Document and Share - How to add structure to it?
Create a comprehensive document outlining the CHS model, how it's calculated, and how it should be used. Share this with the entire organization to ensure uniform understanding and application.

How to Define Customer Health Score in Your Organization

Defining CHS starts with establishing a goal for what the score will represent. Will it alert you to churn or assess the strength of your customer loyalty program? Once you've determined the purpose, you can select the metrics that are most valuable to your organization, such as product usage, customer feedback, and marketing engagement.

Determining What You Want to Measure

Ambiguity regarding customer health scores can lead to vulnerability as a customer success team, causing you to lose out on maintaining customer relations and not being able to leverage said relations to identify upsell opportunities or even churn signals. And when it comes to understanding what you need to measure, the sheer volume of available data can be overwhelming, leading to analysis paralysis and unclear action steps.
How It Helps?
Focusing on key performance indicators that genuinely impact customer health helps streamline efforts and make data-driven decisions. This targeted approach serves the purpose of making the CHS actionable and directly correlated with customer satisfaction and business outcomes. Identify key indicators unique to your product, like how often a customer uses an important feature or logs into their account. These factors will go into your CHS formula. The metrics should be aligned with actions that make a customer likely to upgrade or churn.

Giving Weightage to The Things You Want to Measure

Without a clear understanding of metric importance, teams may waste time on low-impact activities, missing out on crucial customer engagement opportunities.
How It Helps?
Assigning weights to different metrics helps prioritize actions that have a more significant impact on customer health. This ensures that the CHS accurately reflects the customer's status, allowing for more targeted and effective interventions. For example, frequent product usage might have a higher weight than a single customer support ticket.

Assigning Scores to These Metrics and Calculating the Score

Assigning weightage to scenarios and activities is a smart way to translate qualitative customer interactions into quantitative data. However, this can often be a complex and ambiguous task because there are a lot of grey areas that persist when it comes to customer actions.
How It Helps?
A structured scoring system simplifies this by providing a standardized way to measure customer interactions and feedback. This makes the CHS both comprehensive and easy to interpret, enabling quicker and more informed decision-making. For instance, returning to your website multiple times a week could add points, while negative feedback could reduce points. The total action values are then added together to get the final CHS.

Using the Score to Determine if the Customer is in Good Health or Not

Once you have the CHS, you can categorize customers into "healthy" and "unhealthy" based on predetermined thresholds. This helps in proactively reaching out to customers at risk of churning.

The importance of determining the customer score is that by not determining it, you’re following more of a traditional reactive approach to customer management which means that identifying at-risk customers happens too late, making retention efforts less effective.
How It Helps?
Once you have the CHS, you can categorize customers into "healthy" and "unhealthy" based on predetermined thresholds. This helps in proactively reaching out to customers at risk of churning.

Color Coding to Segment and Easily Identify Customer Scores

If you’re a startup or a small business, having a handful of customers is easier to manage. But with larger organizations where you might have thousands of customers, quickly identifying which customers need immediate attention can be like finding a needle in a haystack.
How It Helps?
Color-coding the CHS offers a quick visual cue, enabling customer success teams to allocate their time and resources more effectively. This visual system serves the purpose of immediate risk or opportunity identification, making daily operations more efficient. Use red, yellow, or green labels to indicate a customer's health at a glance.

Using the Score to Design Reachouts and Planning Strategies

One-size-fits-all outreach strategies often miss the mark, failing to address the unique needs and pain points of individual customers.
How It Helps?
A nuanced understanding of the CHS allows for the design of personalized, effective engagement strategies. This tailored approach serves the purpose of making each customer interaction more impactful, thereby increasing the likelihood of positive outcomes. A low CHS can be a trigger for immediate action, like personalized reachouts or special offers. On the other hand, a high CHS could be an opportunity for upselling or asking for referrals.
Example 1: High Product Usage, Low Support Tickets - The "Power User"
CHS: High
Action: Consider upselling premium features or larger storage options.
A customer that uses your design software daily and has never raised a support ticket. She's a prime candidate for upselling to a premium plan that includes advanced features and more storage.
Example 2: Low Product Usage, High Support Tickets - The "Struggler"
CHS: Low
Action: Initiate a customer success intervention.
A customer, who is a small business owner, signed up for your e-commerce platform but struggles with setting up an online store and has multiple open support tickets. A customer success manager should reach out to offer personalized assistance.
Example 3: High Product Usage, High Marketing Engagement - The "Brand Advocate"
CHS: High
Action: Potential brand advocate.
An avid runner, not only uses your fitness app daily but also engages with all your social media posts. She could be approached to become a brand ambassador or provide a testimonial.
Example 4: Low Product Usage, Low Marketing Engagement - The "Ghost User"
CHS: Very Low
Action: High risk of churn.
A customer subscribed to your streaming service but barely watches any content and ignores all marketing emails. He's likely to cancel his subscription soon. A targeted re-engagement campaign is crucial here.
Example 5: Moderate Product Usage, Moderate Support Tickets - The "On-the-Fence User"
CHS: Medium
Action: Monitor and engage to improve health.
A project manager uses your software but has raised a few support tickets for minor issues. She's neither fully satisfied nor dissatisfied. A customer survey followed by a tailored solution could tip her into becoming a loyal customer.

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