Customer health scores are a great way to measure how a customer is doing, and more importantly, indicate if they are at risk. But customer health metrics by themselves are completely useless: they can help measure & predict customer retention, but they can’t improve it alone. The key to using customer health scores to improve retention is to pair it with an action (even customers who have amazing health metrics can benefit from the proper outreach).

In this blog post, we will go over how to define a customer health score and what actions you should take based on the value.

What is a customer health score?

Customer health score is a quantitative value that reflects how well a customer is doing with your product. It is a type of customer health metric, and also a value that, if done properly, reflects all customer health metrics. All customer health score calculations have to be personalized to your company, which is why you should start by analyzing your best customers to see what helped make them your best customers. Do they all have similar high usage? Are they all experiencing a low amount of bugs? 

Here are a few resources that dive deeper into how to define a customer health score:

• Custify - The Full Guide to Customer Health Scores
• Hubspot - What Is Customer Health Score & How to Use It to Measure Customer Retention
• Gartner - Track Your Customer Health Score to Improve Retention
• UserPilot - What Is The Customer Health Score And How To Calculate It For SaaS Products

How should I group customer health scores?

Before determining what actions go with which customer health score, you’ll need to group the values. Why? Well, if your score can range from 1 to 100, you’re not going to want to have to define 100 actions for each value. In fact, if you did this approach, you would probably find that a lot of actions would repeat, and that they would repeat over a range of values - so might as well begin by grouping them.

If you’re going from zero to one, then you’ll want to start with three basic groupings: doing well, take notice, requires attention.

• Doing well is going to be your top 25% of customers. They are the ones who aren’t going to require immediate action and are the ones that you are confident will renew at their current ARR.
• Take notice is going to be your middle 50% of customers. You’re not confident that they are going to renew, but they also aren’t angry with you and the product. But they could easily have their customer health score drop, which is why you’ll want to monitor and take some sort of action soon to improve their score.
• Requires attention is going to be your bottom 25%. You need to do something, and you need to something now, otherwise you will lose them.

If you’re ready for a more complex grouping system, then you’ll want to explore a percentage scale, alphabetical scale, or ranking scale.

What action should I take for each customer health score?

Let’s assume you’re doing the basic groupings of doing well, take notice, requires attention.

Requires attention

Customers in this category are likely realizing minimal, if any, value from your product. Your goal here is to unblock them and guide them to value, ASAP. Here are some actions you will want to take:

• Dive deeper into the customer health score and see where they are dipping, and more importantly, how long this downward trend has been going
• Get on a call with whoever was the champion during the buying process and try to get inside information on what might be going wrong
• Offer to hold trainings to help them realize value and directly tackle some of the reasons why they are dissatisfied with your product

Take notice

Customers in this category are realizing some value, but not enough that they are definitely going to renew. These customers likely have some goodwill so it’ll be somewhat easier to get them to the next group, but don’t make the mistake of hitting them with just general suggestions. Here are some actions you will want to take:

• Determine what customers in the doing well group are doing, and then cross check that with a take notice customer to see what the take notice customer is missing out on (make sure it aligns with their initial reason for buying the product)
• Send an email to users with suggestions on what else they could be doing with the product, complete with support articles and videos to make it easy for them to do so
• During a business review, make sure to highlight the other things the account should be doing in order to get the full value and achieve their business objective
• Work with your champion to help drive further adoption and usage

Doing well

Customers in this category are sure to renew, so that means you don’t have to do anything right? Wrong! While they are likely going to renew at the current contract value, these are the customers you should be trying to get to expand (cross-sell or upsell). All of which is a great way to increase NRR and drive more revenue for your company. Here are some actions you will want to take:

• Share a benchmarking report to show what other value other companies are getting from the product (think of this from the perspective of here are other business objectives we can help you achieve)
• Use your business review (well ahead of renewal time) to share what additional product lines and upgrades the company can benefit from and more importantly, what potential ROI impact it will have for them
• Do a demo for your champion and power users or invite them to a webinar to show them what they are missing out on

What’s an implied requirement about each action…

Personalization. All of these actions require you to have a good understanding of what the account is, or is not, doing, as well as what they care about in terms of value and business objectives. While a pray and spray approach can help a bit, as a CSM you should be building relationships and trust with each account, and that can only be achieved through personalization.

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