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29 June 2020

6 Essential Steps to Building a Predictive Customer Health Score Program

by Jackie Mullen Reading time: 4 mins

Customer success leaders are continuously looking to determine what action to take next with which customer. This question is especially critical when it comes to predicting and mitigating churn risk. Customer health score programs are integral to any customer success strategy, because they enable customer success teams to easily identify and address potential customer and revenue churn. 

Here are 6 essential steps we recommend you follow to launch a new customer health score program or optimize your existing program.

How to create a customer health score

1. Define account health

You need to establish what account health means for your organization before you can chart a course to your desired state. Define what a healthy customer and an unhealthy customer look like, and establish an understanding of the key habits of each.

Many companies define a healthy customer as one who successfully adopts and leverages their solutions to achieve their business goals. You can define what product adoption means at your organization by identifying several indicators, such as: 

  • Whether the product is installed
  • Percentage of licenses activated
  • How frequently the product is used
  • How frequently the customer leverages your support and services 

2. Identify the health measures

A health score consists of several measures, and the combination of these measures roll up into an overall customer health score.

We recommend you start small and introduce a limited number of health measures in the first iteration of your program. Five health measures is a great number to start with when introducing a new customer health score program to your organization.

Common health measures include the following: 

  • Net promoter score
  • Days since last touch by Customer Success Manager (CSM)
  • Number of product enhancement requests
  • Speed of invoice payment
  • Comparison of current monthly recurring revenue (MRR) to the MRR of 3 and 6 months ago
  • Product utilization
  • Number of escalated support cases
  • Number of active opportunities
  • CSM sentiment

Consider including a subjective health measure such as CSM sentiment in your first customer health score iteration. A CSM-controlled measure can be critically important when you introduce your inaugural health score program and are trying to optimize the right measures and weightings.

3. Establish the health categories

The simplest way to score a customer is to classify the overall score and each measure as a colour, such as green (good), yellow (fair) or red (poor). A colour-coded health score provides a digestible, early visual warning that a customer is at risk of churning

Many organizations use both a colour and a numerical value to score their customers. This combination allows organizations to take both a global and more granular and nuanced approach in classifying risk and designing risk mitigation workflows.

4. Determine the weighting of the measures

Your next step is to think about the weighting of each health score measure. You may decide to weight the measures equally (e.g. 5 measures, each weighted at 20%). 

Alternatively, you may decide one measure is a more important indicator of account health and weight it heavier than the other measures (e.g., 5 measures, 1 measure weighted at 50%, and the remaining 4 measures weighted at 12.5%).

5. Operationalize your customer health score program

Once you have decided on your customer health measures and weighting, you can turn your attention to operationalizing your program.

Many organizations have manual health score programs. In these organizations, CSMs update and track the measures in a customer relationship management (CRM) software, or in a spreadsheet. 

We recommend you operationalize your customer health scores in a customer success platform. This will enable you to: 

  • Automate the calculation of your customer health scores 
  • Centralize customer data, including the customer health score, in a single platform 
  • Trigger a standardized workflow, such as a risk mitigation workflow, when a health score crosses a predefined threshold

The last bullet is important. A customer health score program is successful when it is integrated with your customer success processes. A health score should initiate workflows that help customers achieve their value-based outcomes defined in the sales process.

6. Evaluate the efficacy of your health score program

It’s important to revisit your health measures and weightings at regular intervals to evaluate if the measures accurately predict account risk. After launching the program, you may realize that one health measure isn’t a predictive indicator and needs to be replaced, or that the weightings of your measures need to be adjusted. 

You can continue to iterate on and improve your customer health score program as you accumulate more data and develop a better understanding of your customers.

Start mitigating churn risk today.

Are you ready to adopt a data-driven and predictive approach to supporting your customers and preventing customer churn? Start by listing what questions you wish you could answer about what your customers are doing right now.

Jackie Mullen

Jackie is a Customer Success Strategy Solution Lead at Valuize. Prior to joining Valuize, Jackie was the Customer Success Leader for Avaya’s cloud business unit and established a 92% retention rate, increased the number of referenceable accounts by 50% and NPS by 33 points.