Part 3: What is a Customer Health Score and How Should CSMs Use It?
Customer success, like many other departments, thrives on data and metrics. How else can a team know if it is trending in the right direction and achieving its goals? Customer success teams work directly with customers – the most valuable asset for any SaaS organization – ensuring ongoing service and customer satisfaction is paramount.
We’ve already deep-dived into the Customer Effort Score and Customer Satisfaction Score with tips and tricks on measuring, using, and improving these critical customer success metrics.
In this article, we’ll look at Customer Health Score and what this critical metric means, calculate it, and use it.
What is a Customer Health Score
A Customer Health Score is one of the most useful, transparent metrics CSMs have in their toolbox. This metric measures precisely what it sounds like: how ‘healthy’ is the relationship between a customer and vendor? The ‘healthier’ a customer, the less likely they are to churn and the more likely they will grow or expand their services with a vendor. ‘Unhealthy’ customers are more likely to churn, and those in ‘middle-health’ are likely to stay consistent in their services.
How to calculate a Customer Health Score
So what goes into a customer health score? This metric can be as unique as your customers themselves and, as such, should be developed by your team to capture whatever data your team deems critical.
To get to this final number, your team should first gather a list of criteria or outcomes that you want to measure with the Customer Health Score. This could include product usage, issue tickets, engagement of the customer team, and more. Next, you need to be able to measure each one of these metrics individually. Then, it’s time to aggregate or combine these metrics into a single, easy-to-understand score: your Customer Health Score.
Once you have a scale in place for gathering and calculating a Customer Health Score, you need to be able to decipher it. Is a higher health score better? Where are the lines between good, medium, and bad? All stakeholders – including department leaders and executives – should be able to see a Customer Health Score and immediately understand what it means.
How to use a Customer Health Score
There are plenty of uses for a Customer Health Score, as you can imagine. In addition to the example mentioned above of understanding the likelihood of customer churn, expansion, or growth, a Customer Health Score can also be used:
- To proactively identify areas of concern or risk within certain customer accounts and develop strategies for resolution.
- As an executive metric, either on a per-customer basis or aggregated across a book of business, to gauge the overall health of a customer group.
- To predict customer decisions when it comes time for renewal or expansion conversations and develop presentations accordingly.
- To ensure your CSMs focus their time and effort strategically, with the correct accounts, and on the right topics.
You can learn more about the Customer Health Score and other critical customer success metrics with these additional resources from ClientSuccess: