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March 26, 2020

Steps to Determining Your Customer Health Score

When you have a health score methodology, you’re able to align customer success processes with the outcomes you’re hoping to achieve.

Once you’ve set up a system and collected the necessary data, you receive the insights you need to address the unique problems your customers’ experience. In return, you enjoy accelerated acquisition, greater retention, and more success overall. Here are the three basic steps involved in customer scoring.

1. Select an outcome

Before you even start thinking about customer health scores, you need to know why you need them. This is why it is important to start by selecting an outcome you want to achieve. SmartKarrott’s customer success platform helps companies to achieve outcomes such as retention, adoption and upsell. 

If you keep losing customers, reducing customer churn will be a major concern. When identifying measurements and categorizing them, you will need to focus on what will be most effective in helping to identify churn. 

You obviously don’t need to limit yourself to a single outcome but you may want to start with one and then eventually transition to a more complex system. 

Without having accurate, up-to-date customer data, you won’t be able to assign health scores that reflect reality. 

2. Nail down signals and assign weight

Essentially, a predictive signal is any behavior related to the outcome you’ve selected. For example, if you decide to predict the likelihood of churn, you need to look at the lack of product usage, narrow product usage etc. The closer the correlation between signals and outcomes, the more accurate customer health scores will be.

You need to assign more weight to certain signals than others or the health score won’t be accurate. For example, if clients are using only certain features and yet they express that they’re very happy with a product, the breadth of product usage may not be enough to predict churn.

Using a score of 0-100 makes it easy to distinguish between different customers. For instance, some customers may be labeled unhealthy, others neutral and others healthy. Different groups of customers are commonly assigned different colors such as red, yellow or green. This immediately communicates a meaningful message and determines what actions need to be taken to improve health. 

The more specificity with which you categorize your customers according to their health scores, the better the results. More pointed strategies for each bucket increases the likelihood of customers feeling that their needs are being met.

3. Measure and make adjustments

It's important that you don't just measure customer health once, but make sure you consistently calculate it over time. You also need to have a workflow in place with remediation activities to improve health scores. It’s no use having early indicators to predict churn if you don’t do what you can to prevent it. 

The whole purpose of health scoring is to plan how to respond to customers in a mutually beneficial way. For example, healthy customers may be interested in upgrading to premium subscriptions, whereas unhealthy ones may respond to offers of discounts. 

The success of your system depends on how willing you are to make adjustments, as things never go entirely as expected. As your company grows, so does the range of needs of your customers. Updating your system on a regular basis ensures its continued success. 

The success of a company is directly related to customer success – which, in turn, is dependent on your capacity to meet customer needs. Developing a customer health scoring system enhances that capacity and gives you the insights you need to serve them as well as you can. 

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