Wouldn’t it be great to have a crystal ball to tell you when your customers are happy with your business? Or better yet, at risk of leaving? This isn’t a pipedream. Customer health scoring uses the data collected by your business to provide greater insight into your clients and their intentions. Giving you the knowledge and ability to retain more business and sell additional goods or services.
Measuring the health of your customers is becoming much more common. So I’m sharing my learnings to help you pursue similar improvements in your business.
What is customer health scoring?
I define customer health scoring as a collection of quantitative and qualitative metrics that, when combined and scored, help a business predict an outcome and achieve a range of objectives. This could include:
- Reducing churn by providing the business with early warning signals when customers are showing signs of poor health. By addressing this proactively, customers are more likely to be happier at renewal and therefore less likely to churn
- Increasing upselling opportunities by identifying highly engaged and satisfied customers
- Effectively onboarding new customers, ensuring they are achieving expected usage/adoption in the first 90 days
Sound good? Then here are the steps I’d recommend you follow to create your own customer health scoring approach.
Step 1 – Get started with what you’ve got
There’s no need to immediately invest in software – it’s perfectly possible to build your own health scoring tool using Excel. A big part of the process is trial and error. So a spreadsheet is a cost-effective way to provide proof of concept before investing in a platform. You will need someone with good Excel skills and a solid grasp of data, stats and analysis. Plus the ability to work with all areas of the business to run the programme.
Step 2 – Establish the right metrics
It’s important for everyone to be aligned on your health scoring goals to help focus the metrics and discussions. Start by establishing the primary business objective for your health scoring project at leadership level. Then researching best practice and other companies’ approaches for inspiration.
Next, create a working group involving different parts of the business. You’ll need their buy-in later on to make the project a success. They’ll also identify and provide key customer health indicators in their areas. For example, if you want to focus on customer churn, you’ll need to gather data on aspects like:
- Customer engagement
- Product or service usage
- Customer satisfaction
You’ll probably find that this process produces lots of indicators which you’ll need to reduce to avoid over-complicating the process. I’d suggest interrogating each data point to ensure it measures something unique and removing any information that crosses over.
Step 3 – Find the data
At this point you might find that you still have a lot of indicators. But sourcing the data to enable you to measure them will likely help you reduce the number further. Because you’ll only be able to include indicators you have data for.
It’s not unusual for rapid growth companies to hold the data for this kind of project across multiple systems. And this can make it difficult to combine the information you need. I’ve found that during the early proof of concept stage it’s best to only include accessible information. Or data that can easily be made accessible. Sometimes, you’ll find important indicators you’d like to include, but the data doesn’t exist. To address this issue, create a plan to start recording and measuring the information so you can incorporate it later on.
By now, you should have your final list of metrics that will be used to calculate your health scores. There’s no right answer as to how many there should be. As long as you have a focused and relevant set of indicators, you’re on the right track.
Step 4 – Set thresholds and create your dashboard
With your indicators in place and the data to support them, consider getting your methodology approved by your leadership team. This way, everyone’s in agreement before creating your scoreboard.
There are different ways to do this. But I like to set thresholds and assign zero, five and 10 points to each indicator. To explain how this works, let’s explore licence utilisation – a product usage benchmark. It’s an example of a metric that could be used to indicate a customer’s likelihood of churning. Customers could be scored as follows:
- <40% utilisation = zero points
- 40 – 80% utilisation = five points
- >80% utilisation = 10 points
The right thresholds will need to be established by your business and its unique position. A good way to do this would be to explore how historical data correlates with customers who have churned.
This scoring approach also allows you to translate subjective indicators into quantitative data. Providing the stats needed to form an overall health score. A good example is account manager sentiment. You could ask each customer account manager to assess their customers’ renewal intentions. If they would definitely renew, award 10 points. If they might renew, five points. Or if they definitely would not renew, score zero points.
With your various metrics scored and added together by customer, simply take the average to get the customer health score. Or you can weight the metrics if you feel one metric is a stronger indicator than another. Early in a project, I think it’s better to take the average then iterate once more data is available.
The result will be an at-a-glance, traffic light dashboard which makes it easy to identify each customer’s health status.
Step 5 – Take action and support your customers
Establishing the customer health score is really the first part of the process. With your dashboard in place, you’re ready for the real work to begin.
As you might have guessed, customers with a red health score need immediate attention. And the metrics will provide helpful information on what to do next. If the product usage is low, the first step would be to reach out to your customer. This could trigger the provision of training, a catch up call to find out more or something else entirely. The point is that the dashboard provides a flag. A marker that points you to the right information so you can change a red light to amber or green.
Shining a light on customer health helps you support, sell and scale
Deliver your own health scoring project and you’ll create a centralised point for all your customer health information. Instead of searching different systems, your employees will have one place to go.
It will also transform the way you provide client support by empowering your business to be more proactive. Being able to proactively spot and respond to customer issues is a great place to be. If a customer has been trending green for a few weeks and they drop to amber, something’s not quite right. This presents an opportunity to reach out and get your client back into the green.
As your business health scoring becomes more advanced, you’ll be able to engage customers who’ve been green for some time. This will offer a prime opportunity to cross or upsell your products or services. Helping your business to grow through customer retention and increased revenue.
Making the transition to customer success software
In my experience, it’s unsustainable to keep the health scoring process in Excel. Especially when you want the whole customer base to be monitored on an on-going, live basis. It would probably be possible to connect your data and set up health scoring in something like PowerBI. But I’d strongly recommend investing in specially designed customer success software. This automates your health scoring and helps you achieve even more. Because this software already exists, there’s no point trying to re-build this in-house.
With your methodology in place, you’ll already know exactly what you want from a platform. And where the data sits to feed the system. When searching for the right partner, it’s important to make sure they are a good fit for your business. So check:
- Which native system integrations they have
- How much development work it will require at your end to get the system up and running
- What the prerequisites are to make sure it’s a success
- Whether the sales experience indicates a good cultural fit with your business
Benefits Excel can’t bring
Customer success software brings a range of advantages that Excel simply doesn’t offer. Like automated plays which are triggered due to certain customer behaviours. Take customer logins. Feed the system login frequency and it will identify any drop-off. If someone hasn’t logged in for a certain period, the system can automatically send an email to check everything’s alright. You can even include a password reset or link to another form of support.
This kind of digital triage is really helpful for growing businesses. With a finite number of people, asking your employees to do more might not always be possible. But with customer success software the platform can do a lot of the initial work for you.
In the case of login tracking, some customers will log-in after an automated email so no human intervention is required. However, if the system’s initial and follow-up emails aren’t opened, the platform prompts your relevant team member to reach out.
My top tips
If you’re thinking of implementing your own customer health scoring project, here are my top tips to keep in mind:
- Perfect is the enemy of good – there’s no such thing as the perfect set of indicators. Health scoring is a continually evolving process so remember that you’re not committed to your first data set. You’ll only know what will work once you get started, so take an iterative approach based on trial and error.
- Start small – it’s much easier to source and clean a small pool of data then assess your methodology’s effectiveness. You can decide whether to expand as you get more advanced.
- Just because you can measure it doesn’t mean you should – select the most important metrics for your business deliverable. Be tough on the data you feed in. It all needs to stand up to scrutiny and it shouldn’t overlap.
- Every project is bespoke – because every business is different. You’ll need to align your approach to your business and the outcome you want to deliver.
- You don’t need data scientists to do this – find someone with a good head for data and decent Excel skills. Then see what you can develop.
- Seriously consider investing in a customer success platform – it’s well worth the investment. It will centralise your data in an easy-to-use platform. And you can automate plays and intelligently deploy your employees.
Customer health scores are a brilliant way to monitor and respond to a wide range of aspects impacting your customers. With a powerful combination of reactive and proactive support, your software investment will generate an exceptional ROI. Helping you create value, scale more rapidly and ensure your business’ health is as good as your customers’.