What is a customer health score & how do you calculate it?

A customer health score helps your customer success team better understand the engagement of your customers and how to better serve them.

What is a Customer Health Score?

A customer health score is a metric looking at how healthy a customer is with your company. If the score is low, a customer success team knows to pay more attention to the customer to improve their overall satisfaction.

Customer health scores are flexible metrics, meaning that they can be measured in different ways across multiple industries or organizations. This allows companies to create their own goals based on the metrics that make the most sense to their business. Before we dive into calculations, let’s explore some of the benefits monitoring customer health can have.

Why Customer Health Is Important

By collecting and monitoring different metrics, businesses can create a customer health score that provides a data-driven approach to preventing churn and identifying upsell opportunities. For example, if a new client’s health score is dropping sharply you can potentially salvage the relationship by proactively reaching out before they submit a complaint.

Alternatively, customers with a high health score may be good candidates for referrals, testimonials, and upsells. Ultimately, happy clients use products longer and tend to refer the product to others. Tracking your customer health score helps improve retention rates, reduce churn, and increase revenue by identifying unique opportunities based on customer data.

Health scores are made up of different metrics that provide context and help signal what direction a customer is headed. The example below shows both feature adoption and user activity being reported for a single client.

Each metric influences the overall score. Scoring in this manner helps customer success managers easily identify the root cause of a low health score and know what steps need to be taken to get the customer back on track.

How to Calculate Your Customer Health Score

Since all businesses are different, there is no single formula that can uncover the health of all customers. We’ll first have to identify the right metrics to track inside your business to calculate client health.

Determine How You’ll Use Your Customer Health Score

It's important to start with a goal in mind, especially before you attempt to collect and interpret large amounts of customer data. When building your first health score, consider what you want to use that score for. Having a goal in mind will make it easier to segment your customer base and identify the metrics you want to collect later on.

For example, if your main goal is to prevent churn you’ll be able to narrow your focus on a particular subset of metrics that indicate churn and apply that to your customer segment. Trying to monitor everything at once can often lead to confusion, especially when working many different silos of data.

Choose a Customer Segment for Your Score

With a goal in mind, consider what segment of your customer base you want to apply this score to. This is important because not all customers will have access to the same features that drive each metric you’ll be measuring.

Segmentation also helps you assign the appropriate remediation for that customer. A problem with feature usage could indicate the customer will churn. How you help that customer will vary depending on where they are in their customer journey.

For example, you’ll have different follow-up actions for a brand new trial conversion than you would a long-term enterprise client. Segmentation helps you see the differences between your customers and apply the best possible actions to fix the relationship.

Identify Your Base Metrics

To build an accurate scoring system, you’ll need to identify the metrics you’ll use. More metrics do not necessarily equal a more accurate score. For example, software-as-a-service companies may want to look at feature adoption rates and time spent on the platform to identify customers who may be churning or need a higher plan to help them scale.

When collecting and comparing metrics, be sure to note what segment your customer is a part of. For example, businesses should separate the metrics in a seven-day trial from data collected from full-paying clients. Think about where your customer is in the customer journey and create segments based on different products and goals.

Some common metrics you can collect include the following:

• Feature usage

• Daily, weekly, and monthly usage time

• CSAT scores

• Product engagement

• Number of support tickets open

• Number of upsells and renewals completed

Assign Value and Weight to Each Metric

With your data sets selected, add a value or weight to your metrics based on what is most important to your business goals. For example, IT service providers may weigh system uptime more heavily than average download speed.

Most systems use a 0 to 100 scoring system to keep things simple. Numerical values can be translated into percentages and even simple color codes to provide at-a-glance health scoring for your teams.

Once metrics are weighted, create segments to differentiate healthy from unhealthy. For instance, IT services may have different segments for each client depending on their service-level agreement. Certain levels of downtime or speed might be acceptable based on the client contract.

Ask yourself, what is an acceptable deviation from that metric? Many organizations use multiple health scores to monitor different segments of their customer base to predict behavior with the highest degree of accuracy.

There are different ways to rank your customers' health scores, some examples are color codes, a grade scale, or a percentage scale. In general, color codes are great to get a quick overview of the status of your customers, but they’re also a bit blunt. For some metrics, a grade scale or even a percentage scale would be a better fit. It's up to what best suits your needs and the metric you want to start tracking.

Determine Your Action Plan

When a customer health score reaches a certain threshold determine what actions your team will take. Use data to help refine your action plan over time. For instance, if this is the third time this week a new customer has gotten frustrated during an integration, consider making it a part of onboarding or doing that step for them.

Patterns will emerge over time making it important to continuously update your remediation steps as you learn more about your customers.

Playbooks provide a reliable and repeatable process your team can use to improve customer health scores when problem arise. Rather than improvising, playbooks give both new and seasoned team members exact actions steps based on the client and their health score.

How to Improve Your Customer’s Health Score

Improving your customer health score is key to long-term customer success. As your product evolves and more customer data becomes available, its imporant to use this new data to more accurately anticipate your customer’s needs and predict their behavior.

Below are three simple steps you can take to stay on top of your customer health score.

Create Action Plans

Have a plan when customer health scores reach a certain threshold. Designing a playbook or leveraging automation helps create consistency in your customer success strategy and makes your efforts more predictable. Low health scores might indicate an account manager needs to reach out to fix an issue.

A higher score measuring feature adoption could indicate the customer is getting value from the product. An automated email could send them a discount code to the next tier of your service. As you can imagine, there are plenty of actions you can pair with a health score to reduce churn and increase customer value.

Refine Your Goals and Metrics

Sometimes improving your health score requires digging through your customer data. Look at each metric you measure and carefully evaluate its importance and weight.

If you have many data points for one score, consider creating different health scores around each goal. For example, feature adoption could be a separate health score, while client satisfaction could have its own.

It’s necessary to review your scoring methods for effectiveness and update them over time. As your goals change, your health scoring will naturally need to be updated as well.

Review Your Customer Journey

Your customer success journey tracks how a client interacts with your business throughout the entire life cycle of the product. If your health scores need improvement, it could point to a problem within the customer journey.

For example, if you see a low score in feature adoption during the trial phase of your product, it could point to onboarding issues or a lack of documentation. Examine the customer journey of that segment carefully to find and fix pain points. Alternatively, you can use customer feedback to identify issues more quickly.

How Planhat can help

Planhat connects all the customer data, gets actionable insights, and drives actions to manage renewals, reduce churn, and boost expansion.

Planhat also provides a unified view of your customers all in one place, identifies risks and opportunities, creates clear, repeatable processes through the customer life cycle, and offers multi-channel communication as well as customized inboxes for teams.

With Planhat Portals, it is possible to share success plans, playbooks, dashboards, goals, documents, and align on business goals with your clients in a branded Customer Portal.

Altogether, Planhat is a complete customer success platform that lets you track the key performance indicators that matter the most for the future growth of your business. You can download our report to learn What's next for Customer Success? or get a Planhat demo!