How do I develop a customer health score?

I finished reading Customer Success this week. One of the more compelling things I learned was the concept of a Customer Health Score.

What is a Customer Health Score?

Customer Health is at the heart of Customer Success. By assigning a score to Customer Health, it can help you predict future customer behavior. When used properly, it can inform and drive appropriate actions for the Customer Success team.

Why do I need a Customer Health Score?

Good Customer Health Scores indicate a high probability of renewal and upsell. A poor score means a lower chance of renewal and upsell. Since retention is of critical important for any SaaS business, monitoring and managing Customer Health is a core activity for Customer Success teams. It must be done well. To put in the words of the book Customer Success- it must also be done relentlessly.

How do I compile a Customer Health Score?

You can run a series of tests to compile a Customer Health Score. Since every company is different, there currently isn't an agreed upon formula. Here are some components to consider for your Customer Health Score:

• Product Adoption. How often do customers use your solution? How many people within each org are using it? Do the executives use it? Nothing will tell you more about your customer's health than whether and how executives use your solution.
• Customer Support. How often do customers call for support? Good, healthy customers will use support resources with some regularity. Too much support calls however, can indicate an unhappy customer.
• Survey Scores. What kind of Customer Satisfaction Score (CSAT) are your customers giving you? What kind of NPS scores are they giving you?
• Marketing engagement. What happens when you send customers a marketing email? Do they unsubscribe or do they open, click thru or download content? Does the email bounce?
• Community involvement. If you have a community forum, are your customers using it? Are they answering questions on it? Do they submit product requests from it?
• Marketing participation. Do your customers participate in Customer Success case studies or videos? Do they speak at your conferences? Healthy customers do these things.
• Contract growth. Healthy customers buy more stuff from you. Plain and simple.
• Self-sufficiency. Healthy customers often don't need your help to use your solution more effectively.
• Invoice history. Happy, healthy customers pay their bills on time.
• Executive relationship. If you have a good relationship with your customers' executives, that is a very good sign of a healthy customer.

How do I use a Customer Health Score?

A Customer Health Score can be used for forecasting and management. It's a daily predictor of future customer behavior:

• Renewal
• Upsell
• Churn

It also provides a more efficient way to manage your Customer Success team. When you have hundreds or thousands of customers and only a handful of people in your Customer Success department, allocating resources at the right time is very important.