Create Your First Customer Health Score

Why do I need a Health Score?

The main reason you need a health score is to be able to understand your customer’s trajectory towards achieving their outcomes.

Before building a health score it is very important to have clearly identified the milestones that will make your customer successful with your product. And even before this, identify what the customer is looking to achieve with your product.

Everything always tracks back to customer outcomes. You will have happy, engaged customers as long as they are seeing value from your product.

A health score will help your Customer Success team focus on what is important. If implemented correctly, it will help them identify risk early enough to take action at the right time.

How do I build a Health Score?

The first step to build a health score is to decide which variables you are going to be tracking. What should you measure? The answer to this question is different for every business and for every product — The health score that works for company A will not necessarily work for company B.

That being said, how do you know which are the variables that you should include and measure? Here's how to do it:

  1. Measure variables that dictate your customer’s engagement with your product. What is the frequency of use expected? Is it daily? Weekly? Monthly? Define that frequency and set that as your first variable.
  2. Measure the number of active licenses from the total available. If a customer bought 100 seats and only 50 are active, what does this tell you? Red alert.
  3. Are there any implementation settings that dictate how successful your customer is? Any API integration? Is there something that needs to be completed or else the customer won’t be able to accomplish what they desire? Include this as well.
  4. Every product sells at least 3 things that are common needs for all of their customers. Include these separately so you can track how many of those features your customer is using.
  5. Do you have information on customer sentiment? NPS surveys? You might also want to include this in your scorecard.

Once you have nailed down the criteria, the next step is to prioritize, score and try it out!

How to score?

The basic principles of scoring are identifying what your customers value most.

So let’s say I’m the CSM of ChurnZero.

I am going to use ChurnZero’s product as an example because I am such a huge fan and plus, I’m a power user of this software.

So, it would be really easy for me to build what a Health Score of my company would look like from ChurnZero’s CSM perspective.

So, for me. What I value most about ChurnZero is that it gives me the ability to feel the pulse of my customers.

A tool that allows me to pump all of the data of my tech-stack in one single place: I have Hubspot, Intercomm, Chargebee, and my product data pumped into it.

The three most important features I value most about ChurnZero are the ability to create journeys, alerts, plays for automation, and building health scores (yes, the topic of this article).

The main goal of getting ChurnZero is to increase the health of my customers. I will be able to do this if I’m able to follow up on time on those customers that are stuck on their onboarding journeys and follow up timely on red accounts.

Taking this into account, a North Star metric for ChurnZero must be % of Healthy customers over time.

At the end of the day, this is what any company looks for in a CS tool like ChurnZero. Because they’re looking to improve the health of their customers. Another end outcome would be seeing customers increase in value, which is the result of timely following up on adoption (tracking their usage).

So it’s also safe to say, that another North Star Metric would be account value. If the value of my customers increases over time, ChurnZero would be making my business successful and I would continue to renew my subscription.

So, if I were a CSM at ChurnZero, this is how I think my health score should look like:

  • Daily usage. CSMs need to use this tool every day.
  • Advanced settings enabled: Integrations. To their CRM, to their product, to their billing software, to their support tool. The more integrations they have the more they get out of it.
  • Features used: They have at least 1 journey set up, created at least 1 alert, build at least 1 health score and at least 1 play.
  • Revenue growth per account (accounts spending more over time).
  • NPS score and feedback from the customer (all positive).

Deciding how to score is a trial and error method. You will not necessarily get it 100% right the first time, but it is important to start with something and continue iterating once you start seeing which customers fall in each bucket.

Health Scores need to be changed over time, as you continue to understand what makes your customers successful. It is important to include enough variables to measure customer behavior, but not too many to make it complex for your CSMs to follow up.

Health Scores in action

Once we were able to define which variables matter most, this is how a Health Score’s settings look like:

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The next step is going to be deciding how each one of these variables will go from 0 to the max value.

For example, this is how I broke down the frequency of use and its associated point value.

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For ChurnZero, daily usage of their product is expected. If CSMs at a company stop logging in or do not use the tool frequently, they will not be able to achieve their ultimate outcome: improving customer health, increasing the revenue of their customers. Maybe for other companies, a weekly usage is desired. Each company should decide what their expected usage is.

This same exercise applies to all of your variables. Defining how you are going to score each of them will dictate what your scoring looks like in the end.As a CSM, what I could learn about this customer is that I would need to do a deep dive analysis and understand why this customer is struggling to create alerts, health scores, and plays. They mentioned it’s what they cared most about, but they are not yet using these features. Bad sign!

Now, let’s take a look with real numbers as an example.

A ChurnZero customer is meeting the following criteria:

  • The usage is daily
  • They completed all the integrations to their account: Hubspot, Intercomm, Chargebee.
  • They have created one journey, but have not yet created alerts, built a health score or a play.
  • They are responding to emails sent, communicating to our Support Chat and engagement is high.
  • You have 10 licenses (average NPS score 10)

If you tracked this behavior, I would score it overall like this:

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This customer would look like this in my Health Dashboard

(ChurnScore = 100 - Health Score)

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As a CSM, what I could learn about this customer is that I would need to do a deep dive analysis and understand why this customer is struggling to create alerts, health scores, and plays. They mentioned it’s what they cared most about, but they are not yet using these features. Why is that? Well, you would need to find out!

Now imagine a customer that isn’t logging in weekly and is no longer following up on their outstanding tasks or reaching out to support chat or replying to your emails. This is describing a risky customer and immediate action should be taken. Their health score probably would be 10 out of 100, RED, ALERT! A different type of engagement should be taking place. Overall this approach is looking individually into each account.The most important reason we build health scores is to understand why our customers are RED and look for strategies to bring them to Green levels. Healthy customers buy more from your service, which means more revenue for your company. Revenue growth is the end goal of all businesses looking to implement a CS tool.

Zoom out, and this is what it would look for a CSM with a Healthy set of accounts. Imagine I have 100 customers. 75% are in Green status, 17% in Yellow, and 8% in Red.

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Health is measured both in accounts and revenue. Both important measures. And they are not necessarily the same breakdown.

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The most important reason we build health scores is to understand why our customers are RED and look for strategies to bring them to Green levels. Healthy customers buy more from your service, which means more revenue for your company. Revenue growth is the end goal of all businesses looking to implement a CS tool.

If you’re interested in learning more about the learnings after implementing the first health score, you can also reach out and connect with Erika via Linkedin here.