Have you been blindsided by the churn of a happy customer?
Your customer health score might not be serving you well. A customer health score measures the relationship between you and your customer and is an important indicator for how customers are faring along their journey. Asking Customer Success Managers (CSMs) “Is this customer happy?” Or “Do you think this account is at risk?” are not accurate ways to measure customer engagement.
If you track the perception of whether customers are happy or not, you will be blindsided by the churn of happy customers. This is because the moment customers are not happy, they could leave. Engaged customers, on the other hand, are invested, even when they might be your harshest critics. While a renewal in the bank is the ultimate indicator of customer success, you can’t wait until the end of the license period to know if customers are engaged. The renewal is a lagging indicator.
Instead, leading indicators take the pulse of customers along their journey. The customer health score is a leading indicator, and when done well assesses the current state of accounts, as well as predicts the future direction of your customer: whether they will churn, renew, and expand. In a Forbes article, Jeb Dasteel, Chief Customer Office at Oracle, emphasizes engagement is "an effective leading indicator of loyalty and profitability. Customer engagement is the extent of a customer’s willingness to invest his or her discretionary time with a company for mutual benefit. It is easier to measure, easier to influence, and more strongly correlated with revenue and profits than loyalty measures.”
What’s in a customer health score.
Measuring customer engagement gives insight into account behavior. Ideally the customer health score includes a number of criteria to accurately measure the customer’s relationship with your product and your services. You might include the following touch points:
Onboarding milestones and deliverables
Support tickets logged
Relationship strength, sentiment score, or other subjective input
Participation in Voice of the Customer programs
Net Promoter Score
At a recent PulseLocal event I attended at the Gainsight headquarters in Redwood City, California; the general consensus was, “It’s hard to do math on more than five criteria." One expert indicated it should be “less than twelve.” At my previous company we implemented predictive analytics with a fancy algorithm to take dozens of criteria into consideration. Consider the impact of inputs and whether they help customers create value. At the PulseLocal event, Customer Success leader Lincoln Murphy stressed, “Product usage is the moneybag metric.” Since not all metrics are created equal explore weighting each criterion to improve the accuracy of the score. Your score might be a numerical rating from 1 to 5, traffic signals of red, yellow, green; or a grade of A, B, C, D. It doesn’t matter which you use or where you track your customer health score. Spreadsheets are fine, just start tracking it.
What to do with your customer health score.
Your customer health score helps CSMs and other teams prioritize where to focus their limited time. Dan Steinman, General Manager of Gainsight EMEA shares, "Good and timely account health scores will logically drive accuracy into your renewal forecast. Also, a trusted account health score will help prioritize the activities of your Customer Success and/or Account Management teams. These are expensive resources and prioritizing them and making them more effective has tremendous value to the enterprise."
Let’s say you assign a score of A, B, C, D to each account, which is how we scored customers at my previous company. With a grade assigned to each account, CSMs and other teams easily sort their accounts to know where to focus their efforts.
Most companies focus on very high risk D’s and use tremendous efforts to save them. However, unless they are key accounts, D’s are usually either a poor fit for your product, or a volatile account likely to churn for reasons beyond your control. Before you and your teams send the troops out to rescue very high risk accounts make sure you understand the effort required, as well as the costs and benefits. At the other end of the scale are the low risk A’s. Keep a proactive cadence of reviews to help these accounts reach their desired business outcomes.
Your efforts have the highest impact when you focus on B’s and C's. You don’t want B's to decline to C’s, so stabilize them or ideally uplift them to A's. For C’s, move them to B’s to get out of the high risk zone. Partner with each account and address the issues holding them back, then stay ahead of the curve with proactive actions.
Communicate the score.
The customer health score is not just for CSMs. Before anyone engages with an account, especially sales reps trying to upsell, they should know the account's health score and the reasons behind it. Of course, regular reports to management teams are critical as well.
Rather than keeping score for internal purposes only, consider sharing health scores with customers. Since customers want to be successful with your product, letting them know they are a B or a C is a valuable tool to keep them accountable. Since they purchased your product to thrive, they likely want to improve their score. This opens the opportunity to share what the A’s do differently and then work together to leverage best practices to move them up the scale.
Measure what matters to drive value as the key element of the customer health score and then track customers with proactive relationships rather than reactive ones.