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Customer Health Checks: Measurement Matters

Your customer success team is responsible for nurturing relationships with your customers at each and every stage in their customer journey experience. By understanding product and service needs, analyzing usage statistics, and proactively resolving problems, you’re much more likely to keep customers happy, earn more of their business in the future, and benefit from their recommendations to colleagues and friends. To measure customer satisfaction and help ensure you’re consistently meeting expectations, we recommend the development of a customer health check scoring system.

 

What is a Customer Health Check Score?

Customer “health” measures the status of a specific customer’s relationship with your company (e.g. how engaged they are with your product or service and how likely they are to renew or discontinue their partnership with you). Health scores are typically created through a system that qualitatively and quantitatively evaluates and weighs different aspects of the customer journey, while also identifying when a relationship may be at risk. If you’re able to track the right metrics and apply learnings swiftly and effectively, a health score can be an invaluable tool.

Tracking health check scores helps you gain critical insights, which can tell you a lot about customers and how you can optimize your relationship with them. Oftentimes, B2B companies need to measure churn, the rate of renewal, or the probability of an upsell. Some companies even have unique scoring models for different segments of customers based on the lifecycle stage, company size, and industry. Customers will complain. A complaint highlights a problem with the product or service and by learning about these issues straight from your customer, it provides you with an opportunity for improvement. When feedback is processed quickly, customers frequently go on to make additional purchases and become brand advocates. It is six times as costly to acquire new customers as it is to keep current customers and existing customers are 60-70 percent more likely to purchase additional products or services. By implementing health scores throughout your customer base, you can ensure your efforts are focused on churn reduction and revenue expansion. 

In addition to valuable constructive feedback for yourself, health checks provide tremendous benefits to the customer. Unhealthy customers are an indication that your relationship with that customer needs improvement. As companies devote more attention and resources to listening, understanding, and resolving customer concerns, customers will get the support they need to have a good experience. Health checks teach customers how to get the most out of your product.  When your company provides that added support, you have more interactions with the customer which helps you get to know them better and therefore strengthens the relationship.

The value of health scoring has intensified as more B2B companies provide subscription-based services since customer relationships rely on continuous value delivery. Other B2B companies may use transactional sales methods which encourage customers to make a larger investment at the start of the relationship. However, once you get the sale, the work doesn’t stop there. It also requires companies to monitor customer adoption, revenue retention, and the possibility for expansion. B2B sales always come down to how well the product or service addresses a customer’s challenges and if they enjoy working with you. Health checks help you maintain constant focus on the customer and proactively alert you to any warning signs.

Measuring Customer Health

Health scoring is often conducted by the customer success team. Though, to leverage all existing customer data and make informed decisions, customer success needs to engage sales, marketing, product development, finance, and other internal teams in the scoring development and analysis process. So how do you get started?

 

1. Define Customer Health

To conduct B2B customer health checks, first determine what outcomes you wish to measure, and include both good and bad scenarios, enabling you to plan for the best and prepare for the worst. Health checks can evaluate multiple outcomes, assuming the correct metrics are in place. Tracking irrelevant or incorrect metrics will waste time and can have a negative impact on your business because you won’t have an accurate reading of the score, so it’s important you get this step right.

2. Look for the Signs

Next, you’ll need to establish predictive signals and the customer behaviors that relate to the outcome you’re tracking. Customer health scoring involves making some assumptions about customer behavior based on existing data. Be sure to consider signals at every stage in a typical customer lifecycle, which includes the initial sale, onboarding, adoption, retention, and expansion. Your monitoring should also reflect financial, product, service, relationship and market inputs to provide a comprehensive view of the customer. For instance, signals in these categories could include:

  • Total revenue added or days since last renewal (financial)
  • Frequency of usage, depth of usage, or activation time (product)
  • Type of support tickets, service level agreements, or training completion rates (service)
  • Communication frequency, responsiveness, or quality of issue resolution (relationship)
  • Market trends or competitor product/service updates (market)

3. Track the Right Metrics

Identify the key performance indicators (KPIs) and associated data points that you’ll need to collect to accurately assess customer health. For example, to evaluate customer churn rates, you may look at customer satisfaction (CSAT) survey results, Net Promoter Scores (NPS), and product usage stats. A lack of product adoption or narrow product use can indicate that customers may be at risk of churn. Each KPI offers unique insights that provide an overall assessment of that metric. We break down three important metrics used in evaluating common areas of B2B customer health:

  • Customer Churn: Customer engagement such as email marketing click-through rates, active days measuring usage time and date stamps, and cost to retain the customer which would evaluate the total cost associated with customer success efforts.
  • Lead Generation: Review the number of leads generated from recent marketing and business development efforts and how many of these leads became customers. As customers advance and become more loyal, you can measure cross-selling and upselling, demand per unit, and engagement with company/product content.
  • Revenue Churn: Customer demand such as revenue at the start and end of contract and service utilization rates that measure the amount of your product or service consumed by the customer.

4. Develop A Scoring System

Now you’re ready to assign a weight to each metric and institute a scale that will determine healthy, at-risk, or stagnant customer relationships. Many companies use a “stoplight” coloring system (red, orange, yellow, and green) to indicate customer status, while others use a numeric scale. Outlining specific parameters for each status level is important, and you’ll need to make sure everyone in your company understands the terms and sentiments behind each of these customer health segments.

Now that you’ve created a customized health scoring system that provides vital stats on your customer base, you can predict engagement opportunities over your customer’s lifetime. Calculating a customer’s health score is the first step to improving the customer experience. The next step is to develop a plan for what you’re going to do with those scores. Businesses need to immediately act on scores to improve the experience and increase loyalty rates.

ServiceSource has over 20 years of experience tailoring premium B2B sales and customer success programs for companies around the world. Download our step-by-step guide on how to create a customer success plan today to get started on the path to increased customer retention and revenue.

Author

Steven Hastert