Designing Customer Health Scores

Customer Health ScoreHealth scoring is a hot topic in Customer Success, thanks to the explosion of customer data available to Software-as-a-Service (SaaS) businesses. Savvy Customer Success Managers (CSM) leverage this data to proactively monitor customer health and spot accounts that are at-risk.

What is a customer health score?

An ideal health score captures the attributes that best reflect a successful customer.

It's a useful metric for understanding a customer's overall health, as well as the health trends for a segment of accounts or the business as a whole.

Health scores help CSMs gauge the status of their accounts and prioritize customer outreach. They can also be used as one of several ways to measure the performance of the Customer Success team.

Configuring Health Scores

Health scores can be configured using a variety of metrics, from quantitative data about product engagement to subjective information measuring the quality of customer relationships.

Some commonly used factors include:

  • Activity level
  • Feature adoption
  • Support history
  • Billing history
  • Customer feedback
  • Relationship strength, sentiment score, or other subjective input

Activity level and feature adoption are objective metrics based on in-app usage, and customer feedback like Net Promoter Score (NPS) or Customer Satisfaction Score (CSAT) also offer quantifiable indicators of perceived value and loyalty.

In contrast, a CSM's personal assessment of the customer relationship is more subjective and nuanced.

Health scores should include metrics that align with the characteristics of engaged product users and satisfied stakeholders. In addition, CSMs should identify Key Performance Indicators (KPIs) that are uniquely relevant to their business.

Metrics like "Storage Consumed," "Campaigns Launched," or "Contacts Created" are all examples of potential KPIs. Of course, these will vary depending on your product or industry, but when included, they can significantly elevate the accuracy of a customer health score.

Given the variety of SaaS products and usage models, it's essential for a health scoring tool to provide a great deal of flexibility in terms of potential configurations.

"An ideal health score captures the attributes that best reflect a successful customer."

Some Customer Success management solutions, including Natero, allow health scores to be fine-tuned for the needs of each business.

For example, certain CSM teams prefer to focus on the activity level of their customers or emphasize certain feature usage above all else. Other organizations may place less value on user activity and rely more heavily on NPS scores or other non-usage data.

As you think about potential metrics, resist the urge to include everything right away. Too many metrics can create a lot of noise that will make it harder for you to validate your initial results. Instead, start with a few metrics and add new data points over time to refine the accuracy of your health score model.

Not All Metrics Are Equally Important

In addition to selecting the right factors, CSMs should also consider the relative impact of each metric on the overall health of an account.

For example, you may see a high-volume of support tickets when a product is new and needs time to mature. In fact, it could be perfectly natural (and welcomed) that your customers are submitting lots of questions and creating many tickets.

In this scenario, you might underweight support tickets or increase the threshold for the total number of tickets that will indicate poor health.

Here is one example of a health score configuration in Natero:

Customer Health Score Example

This health score configuration is evaluating three different metrics: 1) number of outstanding support tickets, 2) level of product usage activity, and 3) the CSM's personal assessment of the account.

However, product usage is given a bit more weight (40%) compared to the other two metrics (30%), and thus it has a slightly bigger impact on the overall health score calculation for each customer.

Segmenting Health Scores

Depending on your customer base, you may find that a one-size-fits-all approach to health scoring is unrealistic.

Metrics and thresholds may differ between your Enterprise and SMB customers. Or, you may want to focus on different KPIs along the customer journey.

When thinking about customer health, you should also consider your customer segments and lifecycle stages.

Creating multiple health scores will let you fine tune each configuration to better evaluate customer health across your entire portfolio.

In the following example, there are two distinct health score configurations: "Onboarding" and "Default."

Multiple Health Scores

Here, customers are evaluated using a specific health score configuration while they are in the onboarding phase, and another health score configuration once they are no longer in onboarding. Other examples of health score segmentation can include account value, size, maturity, location, etc.

Start With What You Know and Test Assumptions

Once you've decided which factors are important, it's time to configure your health score and weight the individual components.

Start by looking at accounts that you already know are healthy, as well as some that seem to be struggling. Analyzing your existing customers will help you establish some initial thresholds for each of the components you are evaluating.

Monitor and adjust your thresholds over time — a customer health score should evolve along with your product and business.

In other words, don't just set it and forget it.

Another good practice is to test your assumptions about customer health using historical data. You may find that certain metrics don't coincide with poor customer health or that a weighting should be adjusted based on its relative impact on the overall score (or lack thereof).

Analyzing Customer Health

Most Customer Success teams tend to bucket the health of their accounts into three categories: green, yellow, and red.

In fact, the term "red account" is synonymous with poor customer health.

While color coding is great, customer health should also be represented by a quantifiable score. This helps CSMs understand how an account's health is trending regardless of its current color band.

Let's look at a potential health score range:

  • Green: 100 - 71
  • Yellow: 70 - 41
  • Red: 40 - 0

In this case, if an account is currently at 75 they are considered green. However, if this account was 85 last week, and 95 the week before, it might be time to start addressing this account's steady decline.

Conversely, if an account is currently at 65 they are considered yellow. But if this account was 50 last week, and 45 the week before, then it might be a positive sign that the account is now heading in the right direction.

In other words, a quantitative health score provides additional context for CSMs over time. Depending on the size of your customer portfolio, it can also help rank and prioritize accounts within each green, yellow, and red health band.

Check Your Results

Finally, you should examine the results of your configuration to see if it's representative of some of your well-understood customers — both healthy and at-risk accounts.

If the results don't line up with your expectations, scale your metrics back to simplify your troubleshooting process. Lastly, ensure each account is using the right health score configuration as they progress in their customer journey.

There's no hard science to configuring a health score, and some accounts may not fit perfectly into your mold. But with some careful consideration, and a bit of tweaking, you should be able to come up with a model that does an effective job of capturing the health of your customers.

How important are health scores in your organization?

We asked over 100 customer success professionals to rate the metrics that mattered most to their teams – including health score. See the results in our Customer Success Performance Metrics Survey report.

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