What’s a Customer Health Score and How to Improve It? Image

What’s a Customer Health Score and How to Improve It?

What’s a Learning Management System?

Customer success teams across nearly every industry know the importance of tracking metrics to measure success. The best metrics to track depend on the industry and the specific objectives of each business. One metric that almost every business can benefit from tracking is customer health score.

The reason customer health score is so universally beneficial is that it is not a standardized metric. Instead, customer health score is a subjective consideration of the overall “health” of a customer account that is tailored to the specific needs of the individual business. Some of the elements that a business’s customer success team might factor into its customer health score formula include:

  • The amount of time the customer has been in relationship with the business.
  • The frequency with which the customer reports issues to the business’s customer support team.
  • The number of times your sales team has successfully upsold to the customer.
  • The frequency with which the customer uses the product or service.
  • Feedback from the customer, including the way the customer engages with the brand community, such as on social media.

What’s a Customer Health Score?

Customer health score measures the quality of a business’s relationship with a customer and can represent many things, such as how much of a churn risk a customer is. A customer who is very happy with the business and is not likely to churn would have a very high customer health score, whereas a customer who is very unhappy with the business and is considered likely to churn would have a very low customer health score. B2B companies, especially SaaS companies, often can’t afford a high churn rate, so customer health score is a very useful metric for identifying churn risks while the problem can still be corrected.

However, customer health scores may be measured very differently at one business than at another business. Each organization’s system of scoring customer health is therefore subjective and based on factors that the business has specifically selected.

Customer Health Score vs. Net Promoter Score

Customer health score and net promoter score have similar purposes, but they are very different metrics. First of all, the customer health score measures the overall strength of a business’s relationship with customers, while the net promoter score measures the likelihood of customers recommending the business to others. Second of all, the customer health score is a subjective amalgamation of various metrics a business has chosen to represent customer health, whereas the net promoter score is a numeric score that customers provide in response to a survey question.

How to Calculate Customer Health Score

Calculating customer health score isn’t quite as straightforward as memorizing a customer health score formula and plugging in some customer health metrics. This is because every business measures customer health score differently. Nevertheless, we’ll break down how to calculate customer health score. Here are four easy steps you can use to build your business’s customer health scoring system:

  • Consider your business’s goals. First, you need to determine why you’re measuring customer health score at all. This will depend on your business’s unique situation and objectives. For example, if your current goal is growth, you might factor upsell frequency health into your customer health score.
  • Identify which customers you’re measuring. It can often be helpful to segment customer health scores according to factors like pricing tier. This can help you arrive at the most accurate customer health score for each individual case.
  • Define a healthy customer. Think about which actions customers take that indicate customer health according to your business’s definition. For example, is customer health at your organization influenced by frequency of product usage or number of support tickets submitted?
  • Weight each factor and calculate your score. Finally, assign an impact score to each action you’re measuring according to how significantly it influences customer health. Then, you can calculate a final customer health score by multiplying the number of times a customer completed each action by the action’s impact score and adding all the scores together.

You can use these steps to understand how to measure customer health score. It’s up to every business to precisely define customer health for itself, not rely on pre-established customer health metrics.

How to Improve Customer Health Score

It’s very important to understand how to measure customer health score. However, there isn’t much point in measuring it if you don’t have any idea how to improve customer health score. If you calculate low customer health scores, the next step is to take action to boost those scores and enable healthier customer relationships. Here are a few steps you can take to improve customer health scores at your organization:

Understand Your Customers

Customers want different things from different businesses. For example, a SaaS customer health score should likely not be considering the same factors as a retail customer health score. One of the best ways you can improve your health score at your organization is simply to understand your customers better. If you don’t know why customers aren’t having successful outcomes, don’t be afraid to ask them. Communicate with your customers and find out as much as you can about their needs and preferences. You will be able to use all this information to improve their experience and their relationship with your business. Customer-centric business strategies often lead naturally to higher customer health scores.

Empower Your Teams With Technology

Customer success teams have their work cut out for them keeping all your business’s customer relationships afloat. Sometimes, despite your team’s best efforts, you simply don’t have enough resources available to achieve the customer health score boost you’re looking for. Many businesses that find themselves in this situation turn to technology as a solution. Augmenting your customer support efforts with automation can be a great way to help your customer success team accomplish more. Using a learning management system (LMS) like Gainsight Customer Education, you can automate many aspects of customer support and education and keep your customer success team members free so they can devote their time only to the most meaningful tasks.

Obsess Over Measurement

If you want to improve your customer health score, you need to be willing to address what’s not working. The process of identifying problems with your customer relationships and working to resolve them promptly and effectively will most likely be at the heart of your efforts to bring up your customer health scores. The only way you can drive this iterative process forward is by constantly measuring. Customer success teams that are relentlessly curious about customer outcomes and what factors are influencing them are typically more likely to succeed at improving customer health scores.

It’s important to be constantly listening and looking out for customer feedback so you always have a pipeline of information that can inform your customer health strategy. Another great way to collect data about customer behavior is to use software with analytics features. Gainsight Customer Education includes tracking and reporting tools that you can use to analyze the way customers interact with your support content.

Get started today! Learn more about Gainsight Customer Education and schedule a demo here!