Customer health scores are metrics that reduce customer churn and ensure sustained business growth. They can help prevent pitfalls related to poor service or fragile customer bonds.
Rather than always playing catch-up, businesses can use customer health scores to understand and manage expectations and sentiments proactively.
Statistics show that these metrics are used by 42% of marketers globally. So, to help you maximize the benefits of these indicators, we’ll dive deep into the meaning, importance, and metrics of customer health scores. You’ll also learn how to calculate and improve them from this article.
The customer health score is a critical metric that gauges customer satisfaction and engagement with a company. It reflects the likelihood of a client staying with the brand.
The customer health score is calculated based on various factors like product usage, customer feedback, and interaction frequency. Companies identify criteria to assign points based on customer behaviors or actions.
The higher the score, the “healthier” the customers are. “Healthy” customers are satisfied and engaged, making regular purchases and bringing in new clients. “Unhealthy” customers are getting increasingly disconnected and are likely to leave the brand. This negative trend may be due to the failure of the company to meet their evolving needs.
The significance of the customer health score goes beyond merely providing numerical values. It’s a visionary tool that enables brands to navigate customer pain points and nurture lasting relations. Here are the primary benefits of knowing your customers’ health score:
The customer health score is a dynamic metric. It embraces multiple aspects of customers’ experiences with your business. Here are some important metrics to track before starting to calculate your customer health score:
Product/service usage sheds light on the user interaction with your product. This way, it provides a glimpse into varying degrees of adoption. It’s a quantitative indicator tracking:
This metric allows you to gauge the extent to which users are taking benefit from your product. You can also comprehend the spectrum of adoption rates and levels.
Here are the aspects of evaluating product/service usage.
🧾 Invoice history can also provide insights into the customer’s financial health and satisfaction. It involves tracking the timeliness of payments and invoice queries.
💰 All companies should analyze churn, as it directly impacts profitability and is an indicator of potential financial gains through customer retention strategies.
Engagement is tracked through three individual metrics, clearly indicative of customer health.
📟 CLV is a complex metric. To thoroughly understand how to measure, calculate, and improve CLV, check out our dedicated blog post.
This metric shows customers’ perceptions of your product. It offers important insights by tracking quantitative factors like the frequency of bug reporting and product requests. Keeping track of these aspects helps identify potential areas of improvement.
📝 Employing product feedback as a gauge, alongside other metrics, gives a well-rounded view of customer health.
High demand for support might indicate underlying issues with your product or service. Tracking customer support tickets encapsulates the interaction history between a company and its customers. This entails recording essential details like the nature of issues raised.
Support ticket history is a quantitative metric involving:
📈 Analyzing these metrics can uncover recurring issues, offering a roadmap for product/service improvements. It also can provide indispensable information for your product-led growth strategy.
Modern ticketing tools provide a suite of analytics tools, enabling the tracking of key performance indicators. For example, Touchpoint offers a comprehensive dashboard for ticket management. It provides access to the complete support ticket history for every customer.
Understanding and calculating the customer health score can help anticipate customer behaviors. A well-structured approach involves the following steps.
The concept of customer health is different for different businesses. The customer health score evaluation starts with pinpointing a healthy customer’s attributes in your specific scenario. This may entail the time users interact with your product or the range of features they use regularly.
The customer health score accuracy is improved when applied to the relevant customer segments. Segmentation is usually based on several criteria:
📊 Segmenting customer data helps identify the health scores of each group. This allows you to see a more detailed picture of the perceptions of your customer base and tailor your strategies accordingly.
Analyze the full range of possible actions customers can take, such as:
Then, single out the behaviors that significantly impact the customer health score. Ensure you include both positive and negative actions. The positive ones will add points to the health score. On the other hand, negative actions will deduct points.
🏭 Impactful customer actions are different for different industries and businesses. To achieve accurate health scores, pick up the most relevant and indicative behaviors.
Note that customer behaviors don’t influence the health score equally. Once you’ve identified the impactful customer actions, you have to assign a weighted score to each identified action. This process is based on its relevance to customer satisfaction.
Actions central to your service should carry higher scores. For instance, a critical positive action in a digital tutoring platform could be booking a tutor, thus assigning the highest score (e.g., 20). A less important action, such as visiting your site, will carry fewer points (say 3).
Conversely, account deactivation, negative feedback on sessions, or rescheduling might signify dissatisfaction, bringing different numbers of points (let’s 20, 8, and 3, respectively). They will be subtracted when calculating the total customer health score.
Utilizing the assigned impact scores, tally the total action value for each customer. The formula is straightforward:
CHS = (Sum of positive action values) – (Sum of negative action values)
The sum of all positive values is the sum of the products of the scores of all positive actions and the respective times they occurred. The sum of negative values is calculated similarly.
Let’s break it down with our illustrative scenario above. It involves two positive and two negative actions. The formula takes this form:
(Positive action 1 count × Positive action 1 score) + (Positive action 2 count × Positive action 2 score) − (Negative action 1 count × Negative action 1 score) − (Negative action 2 count × Negative action 2 score)
We’ll use score 20 for positive action 1 and score 3 for positive action 2. As for negative actions, the scores for negative action 1 is 8, while for negative action 2 is 3.
In our case, the positive actions 1 and 2 occurred once and seven times, respectively. The negative actions occurred once each. The formula simplifies as follows:
Positive actions (1×20 + 7×3) − Negative actions (1×8 + 1×3)
Thereby:
CHS = 41 − 11 = 30.
Here, the customer health score is 30.
💡 You can subtract points for actions not performed within a designated time frame to enhance accuracy.
Create a scale to categorize customers based on their scores, such as:
Note that these numbers are only exemplary. The maximum score depends on the formula used. So, you’ll need to determine your scale in line with your specific scenario.
Also, this is just one of the possible scales you can employ. We’ll come back to this point in a while.
Automate the process using tools to facilitate collecting the necessary data, such as voice of the customer surveys. Continuously refine the metrics, weights, and action plans based on outcomes and feedback.
Formulate tailored strategies for different health categories. For instance, plan retention initiatives for “At risk” customers while exploring upsell possibilities with “Thriving” customers.
Adhering to this structured approach ensures a well-rounded calculation of customer health scores. Clear visualization of the figures obtained will further increase the usefulness of the findings. This brings us to the next point.
Understanding customer health is instrumental in nurturing relationships and ensuring sustained business growth. Scoring methodologies vary, employing numerical points, letter grades, or color-coding systems.
Here, we discuss the various approaches to translating customer health scores into meaningful, clearly visualized insights. Each of the following examples offers a unique lens through which to view and interpret data.
Make your choice based on the nature of your business and customer interactions.
This visual cue is easy for teams to interpret, offering an immediate insight into customer health status.
Following a grading system like in schools, scores 90 and above receive an A, 80 to 89 receive a B, 70 to 79 a C, 60 to 69 a D, and below 60 an F.
This grading system facilitates easy communication and understanding of customer health within teams. Utilize our fully customizable template to sort your customers’s health alphabetically.
Analogous to traffic light colors, categorize customer health into green (good), yellow (caution), and red (poor).
Suppose a range of scores from 0 to 100, scores 75 and above are categorized as Green, scores 50 to 74 as Yellow, and scores below 50 as Red.
This visual cue is easy for teams to interpret, offering an immediate insight into customer health status. Our template allows you to check which customers require your immediate attention.
The percentage scale template converts the customer health score into a percentage by dividing it by the maximum achievable score. This method provides a quick overview of customer health.
If the maximum score is 100, and a customer has a score of 80, the health percentage is 80%. In this template, instead of calculating a general average, scores are collected from various categories (product and relationships) and subcategories. Each has its own assigned value.
Image source: LinkedIn.com
This allows significant events, such as a product upgrade, to carry more importance than minor actions.
As discussed above, this method ranks and categorizes customers based on their health scores, providing a hierarchical view of customer engagement.
Besides the already illustrated ranking of customers from “At risk” to “Thriving,” you can build a list of customers starting with the highest scores. They are ranked as 1 (Highest), 80 to 89 as 2, 70 to 79 as 3, and so forth.
You might also like this ranking scale from Helloscreen, which indicates the customer’s rank in the leftmost column. Adjacent to it, the column reveals the change in the customer’s health score over a specific period.
Image source: Helloscreen.com
This ranking helps prioritize customer engagement efforts based on the ranking and determine which customers require immediate attention.
Improving the customer health score translates into stronger customer relationships and better products. Here are some best practices to adopt.
Initiating conversations with customers to conduct satisfaction surveys and gather feedback is a must. Utilize various channels like email surveys, one-on-one discussions, in-app surveys, or reviews on third-party platforms. Connect with your customers on every channel they prefer.
Utilize real-time analytics to identify and address issues affecting customer health promptly. Timely, data-based interventions can go a long way in improving engagement.
Delving into usage patterns helps in gauging customer engagement levels. There are various tools that can give quantitative and qualitative insights into the way users interact with your product. For instance, Smartlook offers always-on recording capabilities that facilitate the detailed tracking of every user session.
Image source: Smartlook.com
Eight in ten customers expect to be provided with a self-service option. Enabling customers to solve their issues independently is beneficial for boosting their satisfaction. It also supports improved customer health. Building a knowledge base, creating FAQ pages, setting up forums, and making all these readily accessible is a must.
Seamless customer service is one of the levers for elevating customer health. Equip your customer success team with ongoing training. This will keep them updated on product changes and common customer issues so they can deliver excellent support.
Implement automated outreach to engage customers based on alterations in their health scores. Modern customer engagement solutions enable you to automate your interactions, ensuring timely responses and actions to enhance experiences with your brand.
Conduct regular reviews of customer health scores to identify trends. Also, make sure to keep track of how you compare to industry averages of the relevant customer health metrics. This awareness can encourage continuous strategy improvement.
A full-featured platform like Touchpoint offers holistic views of customer interactions. It facilitates the refinement of every aspect of your customer relationships and support. It empowers users with:
Elevating your customer health score fosters enduring customer relationships. You can achieve that by choosing a customer health score calculation model that best suits your business needs.
Leveraging product analytics in conjuction with a customer service platform will yield the most accurate results. Touchpoint can significantly streamline the process of collecting, organizing, and processing data. It makes customer health calculation and monitoring more accessible by incorporating customer service reporting and analytics.
Iustina is a curious copywriter with an analytical mind and a demonstrated history in the advertising industry. She likes mixing words with data and is passionate about human behavior. When she's not at her work desk, you'll probably find her enjoying refreshing tea flavors, spilling stories on paper, or binge-watching true-crime documentaries.
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