Gaining new customers during periods of rapid growth can be both an attractive and distracting endeavor, however many companies end up overlooking their current loyal paying customers in favor of trying to add new logos.
Discounts and other tantalizing offers to new clients can sometimes leave loyal customers paying more for their commitment, and pushing them to feel unloved and possibly churn. This doesn’t have to be the case. Looking after your repeat customers doesn’t need to be at the expense of profit or growth; on the contrary, it could be a tremendous boost to your expansion.
Remember, existing customers don’t need the full value of the sales funnel, and as such it’s significantly cheaper to retain or upsell to them rather than to finding and converting new prospects. Once this is understood, it's clear that time and attention should be focused on maximum analysis of your current clients -- to keep retention rates up. One great way to do this is to measuring & analyze each account via customer health scores.
Customer Health Score
Putting a value on customer health allows success departments to identify the moments before a customer is churned and allows for time to provide solutions and increase satisfaction. It’s a data-driven approach to assessing the likelihood and imminence of churn, understanding how and when to push new products to existing customers, and who among your customer base is a good candidate for referrals.
It does this by breaking down and recording different metrics of customer interaction, then adding rules to scale them and finding a scale value for ‘health’ for this customer. If a customer falls below a certain health level, you’re likely to lose them. If they go above a certain level, they might be ready for more of your products.
Average-health customers sit comfortably in the middle, but their health will need to be maintained by nurturing principles.
There are a number of metrics that companies use to monitor the overall health of their customers - which we will go into below - and these provide actionable data on how, where, and when to nudge a customer forward.
These health scores predict churn rate, the chance of growth, and consistency in your customers and guide companies towards better practices of customer retention and growth. You can even use the care of existing customers to find new ones through referrals.
Consequently, this can save huge costs in onboarding, prevent losses to churn, and ultimately protect ROI. For them to work, however, the metrics and calculations need to be chosen wisely and will need to match your industry and your product.
Once your metrics have been chosen, your definitions of customer health can be established. With this score, you can also test the value of various loyalty programs or plan how to market a new product to an existing customer. These scores are valuable aids to your marketing and sales strategies.
Customers at the low end of the health score will be the ones at most risk of churn and thus have the lowest health. Happy, engaged, and loyal customers will have a high health score.
With these scores, it makes tailoring their experience a little more obvious. We will also go into some examples of this shortly, but first, let’s take a look at some of the key metrics commonly used to calculate the customer health score.
Customer Health Metrics
There are many approaches to finding customer health scores. If you’re simply looking to reduce churn, this will lead you primarily to using metrics relating to negative experiences your customer might be exposed to. If you’re looking for expansion opportunities, you will want to identify the highest health in your customers before pitching new ideas or in-app purchases.
Either way, it’s useful to have numerous scores based on multiple metrics that can be weighted against one another for a more accurate ‘global’ health score, and more insight as to why things are happening. Here’s a look at five metrics that may come in handy for your scoring system. Of course, as you continue to measure and optimize for your SaaS, you should feel free to add or modify these metrics to best-fit your unique customer base.
- Logins – this is one of the most basic engagement metrics and doesn’t hold much weight on its own. If you are simply measuring login rate, there’s no explanation of why it might change. However, it can be used as part of a sensibly-weighted overall health score, and can sometimes be a good early indicator of some deeper issue that needs to be investigated.
- Upgrades and renewals – This metric monitors a much deeper level of engagement of the customer and is a good indicator of general health. It’s more powerful for indicating a positive experience than a negative one and would be a stronger metric for expansion opportunities than for churn rate since lower engagement doesn’t necessarily mean lower health.
- Bugs – Knowing how many bugs your customers have been exposed to can allow you to infer a level of negative impact on customer health. This can be tied to login rate to find correlations between the two and work towards a solution.
- Engagement with support – this metric gives you information on customer health directly from their own feedback, and in relation to how engaged, they are with the platform and company. It will also give you a measure of how much experience your customer success manager needs to be able to deal with them.
- Length of the relationship – Finally, a simple one. Loyalty can’t be measured more simply than by how long you’ve retained a customer. This implies continued value, and has implications with referrals, expansion, and other actionable opportunities as well as learning more about what you’re doing right.
Most metrics are an investigation into a pain point. It should be used with the idea that if you can find the areas in which the customer is having trouble with your product, you can figure out how to solve it.
As you can see, not many of these metrics work alone, and some have stronger applications in one area of investigation than others, but by combining many of these, it’s possible to develop a holistic understanding of a customer’s current health situation.
Many can be measured from internal record-keeping, but you will need to get direct feedback for some of these. Listen to what your customers have to say and use that information to address their problems.
So, once these customer health metrics have been used to put together a score for your customers, what next? Take a look at some of the example situations in which the customer health score improves the experiences of your customers.
SaaS Customer Health Score Considerations
Taking SaaS as an example, here are some ways a company can leverage its customer health scores for customer success. Addressing churn is one of the most typical implementations of a health score, and most of these examples will be related to finding and reacting to patterns that lead to high churn rates, however, there are other powerful benefits to using customer health scores:
Once your customer has signed that contract and is ready to use your product or service, it's likely your onboarding or implementation team will begin to get the client up and running. Often, the account executive has set some expectation on how long it will take to get "up and running". Here, it's imperative the onboarding and implementation is smooth and overdelivers. Collaboration, communication and visibility across all stakeholders is key. Many SaaS businesses start off on the wrong fit right at the start.
Tip: While your clients are engaged in onboarding and implementation be sure to survey their satisfaction of the onboarding and implementation process; (i) compared to other products and services they have bought; and (ii) compared to the expectations set in the sales process.
Determine the value received first and foremost based on what the client's stated goals. Put another way, what was the client looking to achieve when they originally signed up to work with your company. Then consider how the client has performed against those goals. Have they utilized the SaaS accordingly? Are they increasing users? Leveraging all the unique functionality your SaaS offers?
For Enterprise SaaS, it's likely that your company has a customer success manager "CSM" (or account manager) who is responsible for the day-to-day relationship with the client. Measuring the ongoing engagement can be as simple as considering if the client emails the CSM with questions or updated. Taking this a step further, is the client engaged and regularly present (and attentive) during scheduled review calls? A negative signal could be if the client determines they don't want to continue with quarterly reviews (or whatever cadence you have) it could be a sign they are losing engagement and perhaps less interested in leveraging your SaaS in the future.
Customer Feedback & Surveys
Another great way to determine health score of a customer is to survey them. Surveys are certainly nuanced, as we have found that the most troublesome companies are not the ones with highly negative scores, rather those who are indifferent to your surveys. That being said, the positive feedback is certainly fantastic -- keep those customers engaged. Use the negative feedback from customers to turn around a frustrating situation, they are willing to tell you what you can do to save them, so follow up and pay attention! Finally, the accounts who do not provide any responses (or feedback) could be looking at new tools or de-prioritizing, make sure your CSMs try other methods to engage those clients to get a better sense of where they stand.
Similar to value received, understand how the client has been using the product. Are they utilizing it to the fullest extent? Are they logged in regularly, or sparingly? Are they integrations and data connections still in sync? Ideally, your team will have information and data on how your customers are leveraging your products to ensure they are both using it as intended and hopefully growing their usage as their business grows.
Is the customer constantly emailing into customer support with issues? Moreover, if your company separates CSMs from Support (many do this) is your CSM even aware of the issues facing the client? The good news is that customers who are asking for support are likely to be engaged and using the product enough to invest the time and energy to get issues solved, of course, at the same time they are facing challenges with your product. Ideally, your team can do a fantastic job and solve these issues quickly and further strengthen the customer relationships with your SaaS.
Has the customer sent over any referrals? Or perhaps have any customers engaged on other social platforms? Examples of this could be liking posts on LinkedIn, or re-tweeting content shared on Twitter. Seeing that a customer is pleased enough to referral another prospect to your SaaS is a great indication of overall satisfaction.
Customer Health Score Template
Perhaps the simplest and most familiar method for categorizing your customer health scores would be a three-tier, or traffic light system. This splits scores into three levels of urgency and determines the time to switch from continued nurturing to improving product value and into emergency ‘get well’ plans.
The three-tier system is a template with the customer health scores split into three categories based on severity. Where these boundaries lie is up to your specific means and requirements, but for example, it’s possible to divide upper and lower quartiles with the average health score sitting in the middle 50%.
Each extreme can represent a pressing case, either positive or negative, that should require action. In this example, in the lower quartile, the customer is at high risk of churn, and active intervention is needed. In the upper, the customer is a good candidate for expansion or presenting with referral opportunities.
The center space is occupied by customers who are neither extremely healthy nor unhealthy, but it must be assumed that if neglected their health will deteriorate. This means that there should be an established process of action that needs to be maintained, but no intervention should be necessary.
This is a simple customer health score template for the output of your scoring algorithm but the metrics used, how you input their measured data, and the weightings of their measurements will depend entirely on your specific cases.
Knowing is half the battle, but implementing requires a few tips to guarantee the system’s success. Here are three things worth remembering when running a system based on your health scores.
- First off, keep it simple. The three-tier system isn’t an absolute requirement, but it removes a lot of subjectivity and in-depth training requirements for your customer success team. Make sure the metrics align with the appropriate courses of action. Whichever method you choose to use should be straightforward and easy to work with, so that it can be implemented with a rudimentary understanding between different involved departments.
- Next, be prepared to act. There’s no use in analyzing anything if you don’t have the facility to act upon the results. In designing the template, know what works as a response and what doesn’t, and know exactly how you’re going to initiate and follow through with in that response. Consider running some rehearsals to ensure there are no bottlenecks in the response process.
- Finally, review. Continuous improvement requires continuous adaptation to a steady stream of data. If something doesn’t seem to be working, figure out why and change course. You can review your score calculations on a regular basis to make sure everything is still accurate.
How to Calculate Scores
As mentioned, it’s useful – necessary, even – to have more than one health score in order to cover enough information relating to customer health. For a complete score, consider addressing metrics such as product use, financial health, relationship with the company, and service involvement. With this in mind, break up each metric into measurable quanta.
Taking service health as an example, it’s possible to track (among others):
- Support tickets raised – this should be recorded automatically and easily available
- Response time – this may require some specific tracking software or logging
- Customer satisfaction - this will likely need to be in the form of a survey or questionnaire
With each point, you can then assign a value from internal records and customer feedback, and apply rules to each case.
For example, you can set a rule that your customer satisfaction must average more than 7/10 to score highly, and under 3 to score poorly.
Once you’ve set rules for everything, they still need to be weighed against your other information. Not every piece of information is as powerful as the rest, so part of your calculation process will involve figuring out how significant they are.
This is a judgment call; with some research and plenty of trial and error (hence the importance of the review stage), you’ll be able to figure out how significant this customer review is on the overall health of the customer. You will review and recalibrate your calculations over time based on your experience.
Customer health scores can bring you simple and actionable summaries of the position your existing customers are at in relation to your product. It’s a simple theory, but a little trickier in practice. Ultimately the best system will be tailor-made for your staff, customers, and product.
Using a data-driven approach to put a scale or numerical value on customer interactions with your company involves collecting information across a range of departments and designing rules and calculations to make sense of them. However, the result is an overview of where, when, and how to act to boost retention, increase product value and even push for onboarding more customers.