How do you know your customers are happy with your product or service and willing to stay around long-term? A customer health score in SaaS is an important metric to help SaaS companies determine this.
This customer health score guide will take you through everything you need to know about calculating this metric to help you make SaaS business decisions that reduce churn and increase customer retention.
What is customer health?
Customer health highlights the relationship that exists between SaaS companies and their customers. This could be positive, where the customer is happy to be associated with your products, or negative, where the customer is at risk of leaving for a competitor due to low satisfaction. Customer health is determined using a metric known as the customer health score, and this will be discussed in detail in this customer health score guide.
What is the customer health score?
How do you know your customers are happy with your product or service and willing to stay around long-term? The customer health score is a great way to determine this. The customer health score is a scoring system used chiefly by customer success teams to determine if users will become long-term paying customers or if they’re at risk of churning due to certain issues.
When a customer has a good health score, this is usually a great sign to go ahead with up-selling or cross-selling strategies, as this is a massive indication that they are in for the long term. While methods for determining a customer health score vary from company to company, it should reliably help customer success teams assess your customers and prevent churn.
Why is the customer health score important for SaaS companies?
Knowing how customers interact with your products and services is essential for customer success, which is a core aspect of this customer health score guide. This way, customer success teams can quickly know if they are targeting the correct demographic or need to improve their efforts in certain areas. Here are a few reasons the customer health score is vital for SaaS companies.
Detect churn early
Knowing your customer health score can help you quickly identify when there’s a risk that customers will stop using your product. A low customer health score could mean a high churn risk; those with this low score can be identified promptly. CSMs can reach out to them and be proactive about solving their issues, thereby increasing retention.
Identify upselling or cross-selling opportunities.
Thanks to customer health scores, you can fuel your customer expansion strategies and use tactics more likely to succeed. In business, happy customers are the best kind of marketers. They don’t need so much nudging to spread the word about your products and services, earning you more customers through referrals. Apart from this, you can easily use the customer health scores to determine the right time to reach out to your customers with upselling or cross-selling opportunities. For example, you can tell when they are ready to upgrade to a slightly more expensive package or purchase product add-ons.
Three types of customer health scores
There are three types of customer health scores. As mentioned earlier, customer health scores don’t have a specific measurement method, but this can be tailored to fit your company’s unique objectives.
Percentage The percentage scale involves rating specific metrics individually for each customer and adding this up to have a final score in percent. The advantage of this type of customer health score calculator is that significant actions have a greater impact on the overall score. So, if you were to measure customer health on metrics such as daily usage, number of visits, response to new features, and request for support, the overall score would be divided by 100 to get the value in percentage.
Color code Colors are attention-grabbing, and customer success managers can easily use this type of customer health score calculator. By using colors, CSMs can determine the customer’s satisfaction with your products or services. You can adopt standard color codes, like those on a traffic light. For example, green indicates positive customer health, yellow indicates a few issues to look out for, and red shows that you need to take immediate action to eliminate the risk of customer churn.
Grade Grades are another universal concept that can be integrated into the customer health score. This involves using the letters A, B, C, D, E, and F to depict different categories of health scores. The advantage of grades in customer health scoring is that they are less restrictive. For example, grade A can indicate excellent customer health, while grade F warns of terrible customer health.
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How to Create Customer Health Scores
To create your customer health score calculator, you must define the metrics to measure how much value you give your customers. Therefore, you need to answer a few key questions, including: How often do you measure your customers’ health scores? This depends on why you want to create customer health scores.
It could also measure the daily use of your products. What should make up your customer health scores? This is similar to “Why are you creating customer health scores?” This is unique for every customer success team and should be determined independently Rate the elements of your customer health score in order of priority to determine if they are all important or should be rated differently. These critical questions are essential to the process of creating customer health scores.
However, having several people bring up ideas to answer these questions can be confusing and frustrating. Therefore, the number of people included in this process should be streamlined to make it more effective and stress-free.
What are Customer Health score metrics?
Customer health score metrics are unique to your organization and valuable enough to influence the success of your relationship with customers. These are numerous, but here are a few key ones to look out for:
Overall product usage For SaaS products, the more the product is used, the higher the chance your customers will like it. Customers often focus on products that provide immense value and deliver stress-free results. These products are also easy to use and don’t usually require an email to the support center. This reflects the overall product usage and can be used by customer success teams to stay alert on products or services that don’t appeal to your customers. Through educational resources, FAQ centers, and training videos. You can encourage customers to engage with features that have less attention when you measure overall product usage. However, if this issue affects many users, you must conduct specific surveys to discover the problems and make fundamental product changes.
Net Promoter Score The net promoter score is a metric used to determine the level of satisfaction and loyalty of your customers. Is your customer happy with your product or service? This can seem like a broad concept, but one way to measure it effectively is by asking. “How likely are you to refer this product to a family or friend on a scale of 1 to 10?”. A customer willing to share their positive experience with your product or service is an excellent sign of a fantastic customer health score. These advocates are a sign that your customer success strategies are working. Therefore, you can use this metric to monitor customer health. Find out how willing they are to talk to others, whether in casual conversation or actively advocating using your product.
Rate of subscription renewals Another critical metric used in measuring customer health scores is the rate at which your customers renew their subscriptions. How willing are they to renew their product or service subscriptions when due? Do they find this process seamless? How long does it take to renew? Again, the rate of renewals is vital for measuring customer success. Other customer health score metrics are:
- Account growth
- Customer engagement
- Product feedback
- Customer ROI
- Request for customer support
- Overall customer relationship
- Level of account growth
Use Customer Health Score to Reduce Churn and Raise Retention
Using customer health scores can reduce churn and increase retention. However, to truly drive customer success, you need to monitor every stage of your customer’s lifecycle. CSMs can understand when to make certain decisions to address potential issues and drive value. Through this, you’ll know when your customers need assistance with a feature, and you can reach out with a solution before it becomes a bigger problem. This is how you can reduce churn.
Reducing churn means drastically reducing the chances of customers abandoning your products due to dissatisfaction and unaddressed issues. This will increase retention as customers value support teams that show that they are essential to the brand’s success. It’s crucial to build healthy relationships with customers to ensure that you monitor their customer health scores. A few ways to do this include:
- Present upselling and cross-selling offers at the right time
- After closing a support ticket, it is important to follow up.
- Reach out regularly for feedback
- Provide information on the latest features
- Automation makes this process more straightforward.
Churn360 has an automated feature that seamlessly keeps track of your customer health scores.
Customer Health Score Formula
There’s no one-size-fits-all approach when it comes to customer health scores. Therefore, we recommend using top customer success tools like Churn360. To create a unique formula that incorporates the uniqueness of your SaaS. This will help you create a customer health score formula specific to each customer stage, from onboarding to keeping them as lifelong customers.
How Do You Measure Customer Health?
There are five important steps to help you measure customer health.
Establish your goal: What is your specific goal for measuring customer health scores? For example, is this for a particular program to detect churn rates or periodic checkups? Knowing what you’re looking for in your customer health scores will give you a good idea of the metrics you need for accurate results.
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Pick your customer health score metrics. Now that you have definite goals for measuring customer health scores. The next step is to pick the metrics that will alert you to your customers’ specific actions. Include or select a few metrics that have not yet been discussed in our list.
Select your scoring system. You need a scoring system that alerts you to churn risks or other issues you should address. For example, if your customer submits negative feedback after interacting with your support team.The result is a deduction from their overall score. If they use your products daily, you should consider adding their daily product usage to their overall score. A low score will let you know that you could lose them to a competitor. While a high score indicates that they could be advocates for your products.
Analyze your data Remember that this doesn’t have to be set in stone. As you continue to monitor your customers’ health and input critical metrics to measure their level of satisfaction. You can analyze and segment this data so you’re aware of new metrics to input when needed. Then, adjust this to fit your overall company goal.
Visualize the scores Apart from presenting customer health scores numerically, you can use percentages, color codes, or grade scales to visualize them. So your customer success team can easily understand and monitor them.
Measuring customer health scores can be a long and overwhelming process, but that’s where an automation tool comes in. With a handy tool like Churn360 that helps you keep track of key metrics for measuring customer health scores. You can improve your product based on customer feedback, improve referrals from loyal customers.
Increase your revenue by correctly identifying upselling and cross-selling opportunities, and reduce churn. Churn360 incorporates the uniqueness of every customer, so you’ll stay updated on every stage of their product lifecycle. This is the ultimate customer health score formla.