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A business should routinely check whether its customers are healthy or at risk. If customers are healthy, they are going to stick, make repeat purchases, and contribute to the business revenue. And if they are not, the chances of churn will be higher. And we know most businesses fear churn.
And if customers are not healthy, who knows they might wake up someday and decide to leave, leaving you rattled. You’d surely want to avoid that situation. The key is to know the reasons and actions that may cause the churn.
This is where a customer health score metric comes into the picture.
Tracking this metric can help you –
In this blog, we will explore a customer health score in detail, understand its importance for companies, see some examples, and also look at the tips to increase it.
Before moving further, let’s first get started with the definition.
Customer health score is a powerful metric to measure the risk levels of a customer churn. It is a good indicator of whether a customer is planning to stay or leave. This metric also indicates how robust a relationship the business has with its customers.
The customer health score is a very useful metric for customer service teams and account managers to know whether a customer is at a high or low risk of churn. By tracking this metric, a business can understand ideal candidates for upselling and adjust its sales and marketing efforts accordingly.
The earlier customer success teams measure this score, the more proactive steps they can take to minimize the dangers of churn.
A business should consistently track the customer health score. Doing this can help it identify customers who are likely to go away or stay. When this metric is not measured regularly, a business fails to know how healthily it’s managing customer relationships and ensuring success.
A customer health score is important for various reasons, including –
There is no specific formula to calculate a customer health score. Businesses that look to calculate it often rely on various metrics, specific to the nature of their industry and the unique customer needs. However, there are some key metrics that you need to measure customer health, and these are –
Product/service usage gives a healthy peek into user interaction or engagement with your product or service. It helps you understand the various degrees of adoption by users. This metric can suggest how much users are benefiting from your product. To track this metric, you will need information on –
When evaluating product usage, you can consider various aspects, including –
Engaged customers spend 67% more on average than new ones. This shows why customer engagement level is an excellent indicator of someone’s probability of sticking or leaving. You can track different engagement metrics to understand a customer health score, including –
Retention and churn rates are good indicators of customer health. These metrics provide information on the chances of a customer’s leaving or staying. Both measure different customer data points.
A business’ financial health improves when customers stay for a longer duration and purchase more. Such behavior is often reflected in the overall performance of the business. That’s why financial metrics provide a solid measure of the customer health score.
The calculation will depend on the type of metrics you use and the type of business you operate. The key is to include both positive and negative indicators as it will give a detailed insight into the health of your customer.
Follow these steps to calculate a customer health score specific to your business –
You will need some key indicators to determine the health of a customer. You also need to determine what to measure as it will be unique to your business or product. You can track or measure many things, including –
No matter what you decide to track, it should suggest the chances of your customers to upgrade or disengage. You can then use it as a factor for your customer health score formula.
The score you get will indicate something about your customer’s health. It can indicate positively or negatively. Whatever it does will help you redefine your customer effort and customer success strategy. The information you seek or use can be key to monitoring the relevant behavior metrics and accurately measuring customer health at any specific point in time.
Make a list of all actions you want to consider for calculating the health score of your customer. There will be positive and negative actions – include both in the formula.
While grouping actions, remember two things –
Each customer action will have varying degrees of impact on the health score. For this reason, you must assign a score to each action. This will help determine the impact of each action on a customer’s health. While assigning weight, you may also analyze the actions of happy and risky customers, and adjust your score accordingly.
After that, create a scoring system that will give an overall idea of the health of your customer. In the scoring system, show value-addition actions on the positive side and others on the negative side.
The more customer data you have, the better insights you will gain on the health of your customers. That’s why you need to collect data on consumer behavior and habits to get an accurate picture of customer health. The data you have can help you put customers in different number ranges and set benchmarks.
Now you can use the assigned impact scores and calculate the total health score. Before calculating the score, you also need to tally the total action value for each customer.
Use the below formula –
Customer Health Score (CHS) = Sum of positive action values – Sum of negative action values)
Let’s suppose you have six positive actions and 3 negative actions. Now let us assign the value 5 to a positive action and value 2 to a negative action. ( Note: you can assign any value )
In that case, the CHS would look like that –
CHS = 5×6 – 2×3
CHS = 30 – 6
CHS= 24
Engaged and satisfied customers are always the foundation of growth for any business. This is why improving the health of customer relationships directly impacts the customer health score.
Here are different ways to improve the customer health score –
A business needs to identify the areas of concern that may be causing customer dissatisfaction.
There are two ways to achieve that –
Identifying weak areas can be a good point for enhancing customer satisfaction and happiness.
Some issues may be critical and can impact the health of your customer more. If they are not addressed on time, they might push customers toward churn.
You need to remember two things –
When customers are happy, they are more likely to optimize your product or service’s features fully. You can trust such customers to stick for longer based on the extent of product adoption. That’s why you should always focus on encouraging customers to maximize the value of your offering. You also need to gauge their responses to your messages and communications. That can also be a good signal of their immediate trust in your brand.
Engaged customers tend to be more trustful and less fidgety. The more engaged they are, the better relationships they form with the business. Such customers are also more receptive to price fluctuations in products or services. On the other hand, 66% of consumers will abandon a brand if not engaged through personalized experiences.
Here are some key steps to engage more with customers –
Customers feel happy and valued when a business provides great support to them. Addressing their issues promptly and always guiding them through their problems is key to avoiding churn. You can win customers for life if you focus on building long-term relationships and align your business goals with theirs.
Make sure you –
Is your customer health score low despite all your good efforts to build customer relationships and offering value? Not sure why? Well, you can speak to customers and get a better understanding of the issue troubling customers. You can think of sending out satisfaction surveys, but that won’t help beyond a point.
Talking to customers means –
Do you think your customers’ behavior is changing towards your products or services but not sure how to find out about that? Consider analyzing all the customer data and insights you have gathered. The analysis can suggest why some features are not getting the kind of traction you expected and so on. The more you dig deep into the data, the more you can find some patterns behind the customer’s unhappiness, resulting in a low customer health score.
Interpreting behavioral data and health scores is vital to gaining deep insights about customers. It helps us reach a meaningful conclusion about what customers like and what not. Some businesses are very good at turning the health score data into a decision-making tool.
Here are a few customer health score examples for you –
This scale is very simple to use and most businesses can adopt it for calculating their customer health scores. Whatever maximum value is assigned for a health score, the customer score can be divided by that value to get a percentage. Using this scale, a percentage score for each action can be calculated which eventually can help you exceed customer expectations.
This scoring system may not be as precise as the percentage one, but it nonetheless is easy to use. Its working resembles that of a traffic light where the “red color” and “green color” have different meanings. Here too, the health score is assigned three values in color red, yellow, or green for easy understanding of their satisfaction level with the business.
As the name suggests, this scoring system assigns grades from F to A to a range of health scores. Excellent scores are rated A while poor ones are graded F, and the rating follows a top-down approach with the inferior ratings appearing higher and vice versa. The grading system makes it an easy method to understand the health score quickly.
Engaged customers stay for longer, spend more, and have a higher CLV. Keeping this in mind, your business should focus more on engaging with customers more frequently and effectively.
At REVE, we bring you a wide range of engagement and support tools that you can use and serve your customers better.
You can use our AI-powered chatbot to increase the response rate and automate tasks across sales, marketing, and support.
You can also provide better visual support to customers by using our tools such as video chat software and co-browsing software.
Plus, we have advanced live chat software that you can add to the bot and elevate the level of customer support.
A business that strives for customer happiness enjoys better retention rates and lower churn. When customers are happy, they don’t feel the need to switch to competitors.
At REVE, we understand the significance of keeping customers engaged and serving them the best you possibly can.
That’s why our tools can be a great value addition to your customer engagement strategy. You can sign up and check the features of our products.
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Praveen Singh is a content marketer, blogger, and professional with 15 years of passion for ideas, stats, and insights into customers. An MBA Graduate in marketing and a researcher by disposition, he has a knack for everything related to customer engagement and customer happiness.
As a writer and analyst, he pours the heart out on a blog that is informative, detailed, and often digs deep into the heart of customer psychology. He’s written extensively on a range of topics including, marketing, AI chatbots, omnichannel messaging platforms, and many more.
Mr. Singh also has a passion for subjects that excite new-age customers, be it social media engagement, artificial intelligence, machine learning. He takes great pride in his learning-filled journey of adding value to the industry through consistent research, analysis, and sharing of customer-driven ideas.
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