Customer retention is a key indicator of business success, yet, many businesses struggle to maintain customer loyalty. To navigate these waters more successfully, it’s important to develop an understanding of your customers’ full satisfaction levels with your product.
This is where customer health scores come in. By measuring customers’ experiences over time and evaluating the relevant data points, you can take the necessary steps to retain your most valuable clients and keep them engaged.
In this article, we’ll look at a customer health score, how it is calculated, and how it can be improved to increase customer retention.
What is a customer health score?
The customer health score is a metric used by customer success teams to evaluate the health of their customer relationships to determine churn, growth, and renewal. It is calculated using a combination of factors, including product usage, account upgrades, support tickets opened, customer engagement level, etc.
A high health score indicates that users are satisfied with your product and are more likely to remain loyal to your brand, whereas a low score says otherwise.
Why should you monitor customer health scores?
Customer success managers use customer health scores to track changes in customer satisfaction over time and predict future success. Other reasons why you should monitor customer health scores are:
- Improve customer retention, satisfaction, and loyalty.
- Identify potential churners and proactively address their concerns before it’s too late.
- Find areas of improvement opportunities.
- Implement data-driven strategies to improve customer retention efforts.
- To inform product development and marketing strategies, give better insight into your customer’s behavior.
How to calculate customer health score
There are multiple steps to calculating your customer’s health score. Here’s a step-by-step guide to calculating your customer health score:
1. Define the end goal of the customer health score
The first step to calculating your customer health score is to define your goals and objectives for measuring it. What do you hope to achieve by measuring customer satisfaction? Are you trying to improve customer retention or increase sales?
Your business goal will determine what you wish to achieve. For example, if you want to know why you’re losing customers, then you need to look into the likelihood of churn
2. Choose the user segment to observe
The next step is to segment users to ensure the accuracy of your scoring system. We’ve identified our goal as testing for the likelihood of churn. The next step is to identify the customer segment that’s most susceptible to churn.
In this case, we’re segmenting users whose accounts were created in the past 1 month. You could extend your segment to 2 or 3 months; that depends on what you’re searching for.
Segment these customers based on product usage data and assign a name to each segment.
3. Determine the actions impacting customer health score
Determining the in-app actions that impact customer health scores depends solely on the goal of your score. You need to identify the actions that indicate that users are gaining value with your product. These actions are typically expected from customers who just created a new account, for example, how soon did they complete their onboarding process?
Other actions to consider in this case are:
- The number of sessions in the past 30 days
- number of support tickets created
- 3 party apps integrations
- in-app engagement periods
- how many key features have been activated, including the total time spent on each feature
- number of users invited
Tracking these scores with time allows you to determine their overall engagement and estimate product adoption.
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4. Assign an impact scoring system for each action
Create a table and list all the necessary actions to measure individual customer health. For example, if a customer has 30 sessions in 30 days, that should impact their score positively. Similarly, if a customer refuses to complete their onboarding process, it reflects negatively on their overall score.
If a customer gains much value from your product, it should reflect positively. They’d have a positive score, but otherwise, they’ll have a negative score.
5. Create a scaling system
The last step is to create a scaling system to rate each customer’s health score. For example, you could say:
- Customers who have between 0-40% are likely to churn. Pay close attention to these customers. Create personalized messaging for this segment, and book calls with each user to walk them through your product personally.
- Customers with scores between 41-60% should be closely paid attention to. Help them understand your product, and create a personalized knowledge base to help them resolve issues faster.
- Customers between 61-80% enjoy your product and will likely become power users. Introduce them to more advanced features, teach them during the webinar, and encourage them to use and refer to your product.
How to Improve the Customer Health Score
Calculating your customer health score only gives you information about where your customers stand. The goal, however, is to implement strategies to help improve your customer health score and retain more customers. Here are some ways to do that:
Use interactive walk-throughs to create a better onboarding experience
Your customer’s first impression will determine how they experience your product. In most cases, this happens during the onboarding stage. At the onboarding stage, you need to provide much initial value and sell the benefits of your product to drive product adoption.
Create onboarding tutorials like product tours or interactive walkthroughs to guide users to their “aha” moment faster. Use modals to collect user information and segment users by their job-to-be-done to create personalized onboarding. With this, new users will only see information relevant to them and get the right help to achieve their desired goal with your product.
Segment customers for a more personalized experience
The key to delivering a personalized experience is through segmentation. By segmenting customers, you group them based on their similar characteristics and create a tailored experience based on their preferences.
For instance, you can segment customers based on their customer health score to identify where they stand on the retention scale and the appropriate strategies for winning them back.
Implement strategies to reduce customer churn.
Since the customer health score helps you identify potential customers about to churn, it’s easier to prevent them from leaving. Using tools like Churn360, you can easily identify customers’ churn by monitoring their in-app behavior, product usage data, or purchasing behavior.
Segment these users into a group and re-engage with them with retention emails. It helps if your email is personalized and reminds the user about the unique value of your product. Ask if there’s anything you can do to help, and you can sell a new feature you think might impress them. Most importantly, be genuine. Building a personal relationship with customers will help them stay loyal to your brand.
Continuously improve your product with customer feedback.
Collecting customer feedback can help you understand your customers’ opinions about your product, both positive and negative. It gives you a better understanding of your customers and how you can better design your product to meet their needs.
By collecting customer feedback, it’s easier to identify areas where improvement is needed or new innovations can be made. This way, you improve customer satisfaction and, in turn, your customer health score.
Use customer health scores to make data-driven product decisions
Your customer health score can be valuable for informing data-driven product decisions rather than making assumptions about your customers’ needs. Analyze it to identify gaps in features and reveal areas where your product might be falling short. For example, if customers are avoiding a feature, then it may be time to sunset it.
In addition, your customer health score is also useful for testing and validating product ideas before they go live on your product.
Having a good knowledge of your health score can save your business a great deal of revenue. By keeping track of your health score, you can quickly assess the health relationships.
Want to get started measuring your customer health score? Book a demo with Churn360 to get started today.