Customer Churn Prediction How to Identify and Reduce Churn Using Health Score

Health score
Suprej Venkat May 15, 2023

Wouldn’t it be great if there was a way to accurately predict the likelihood of churn so you could take steps to prevent it? Luckily, for SaaS businesses there is, and that solution is the health score. Health score is a popular way for companies operating under the subscription model (and others) to find out how happy, satisfied and loyal customers are with their product or service and whether they are going to renew their subscription.

Over time, certain characteristics and factors are considered to generate the health score, and a low health score can indicate a high probability of churn. There is no one single factor that you can use to determine churn, but it is rather a combination of different inputs that typically have resulted in churn for your customers.

It’s important to note that you don’t have to analyze and predict churn all by yourself. There are tools available such as Churn360 which can generate a health score for your customers and tell you when certain individuals or segments are at risk. Health scores take into account various sources of data about customers to arrive at an accurate score.

How to Interpret Health Score to Detect Customers that are Likely to Churn

Identifying At-Risk Customers:

The first thing you need to do is define which data points would indicate an at-risk customer that you can feed into your health score. In Churn360, for example, you have the ability to choose which data points best represent the health of your customers and you will be able to use these to generate a personalized health score for your business.

Not only can you define different data points, but you can also assign them different weightages depending on how important they are towards calculating your health score. Different customers may warrant a different definition of health, so you can easily employ customer segments that result in unique health scores for each group.

Understanding the Concept of Health Score and Its Significance in Customer Retention

Why is health score so important for customer retention? Well, the fact is that there are key indicators that can tell you whether a customer is likely to cancel their subscription. For example, frequency of usage or feature adoption are two behavioral traits which can give you a deep level of insight into how likely it is customers are to stop using your product.

Ultimately, healthy customers are more likely to stick with your brand and unhealthy customers are more likely to stray. Health score gives you real-time feedback into the likelihood of customer retention and the avoid ability of churn.

Typically, you would use a scoring system to alert you when a customer falls below a critical threshold, and as we’ve mentioned Churn360 can do this automatically for you.

Developing a Customer Retention Strategy

Leveraging Health Score to Prevent Churn and Improve Customer Satisfaction

There are five steps that your SaaS company can go through when it comes to leveraging health scores to retain more customers.

Step 1: Define the meaning of health

The first step is defining what health score means for your SaaS business. This is most likely a metric to alert you to churn and enable you to take steps before it is too late.

Step 2: Identify your metrics

You’ll then need to choose the metrics that will contribute to your health score, which could be factors like product usage or website visits. Each metric will need to be relevant to your business and its customers.

Step 3: Design a scoring system

Next, apply a scoring system to your different metrics that will enable you to arrive at a final health score for your customers. The range of results should encompass positive, negative and neutral scoring to give your health insight.

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Step 4: Apply customer segmentation to data

Segment your customers into groups so you can apply your health score more effectively. Different types of customers may exhibit different behaviors, making health score somewhat subjective.

Step 5: Visually represent your health score

Choose a method to represent your health score so it can be shared easily with your team and acted upon. You could use a percentage scale, or color code your results.

Wrapping Up

SaaS companies using the power of health score are well on their way to improving customer retention and reducing churn. Health score is so valuable because it gives you a way to predict a negative outcome and take proactive steps to prevent it. By tracking health scores and churning them together, you can build a business model that is growing sustainably and brings in more customers than it loses.

If you’re ready to try implementing your own health score, don’t hesitate to trial Churn360. Once you’ve integrated your various data sources, you can easily define your own predictive data points and use them to represent health scores for different customer segments.

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