How To Score the Health of Your Customer Base
Whether you are managing a SaaS customer base of 10 or 1,000 or 10,000, you will need a consistent way to track the health of your customer base. There is software to help you do this at scale, so if you are at or near the many hundreds of customers mark, I hope you have that.
But, a surprising number of companies still do customer health scores manually, having their customer success managers handle the task. And an even more aren’t managing or monitoring customer health at all.
Regardless of which approach you are using—software, manual or none at all—I believe you can’t manage a SaaS customer base of any size without a consistent process for this. A customer health score takes several key metrics or activities and combines them into a single “score” to indicate the customer’s overall health.
Here are some of my suggestions for customer health scores.
Decide on your customer health scoring criteria
What makes for a healthy customer, or an at-risk customer? What behaviors exist in these customers? What events or triggers can you see? Take a look at the activity, actions and usage that indicate customer health. Here are some to consider:
Customer pays (for freemium products)
Customer uses product with X frequency
Customer uses high-value feature(s)
Customer account has X number of users
Customer account includes multiple key stakeholders
Customer account includes executive-level relationships
Customer has desired outcomes met
Customer is using support resources
Customer is active participant in community
Customer has explicitly stated their satisfaction (not a fan of this one, but…)
You can also include some “at risk” flag for scoring as well, for example:
Lost customer stakeholder
Lack of adoption of key high-value features
Business event occurred (such as customer being acquired or an executive team being replaced)
No login in past X days
Don’t overcomplicate customer health scores
Pick no more than 3-5 metrics to determine your customer health score. Anything more than that can be untenable and unscalable to track. Make the result itself super simple—you can actually use a score, from 1-5, but I personally love red (at risk), yellow (unsure or midline), green (healthy) as indicators of health.
This is about a total picture of the customer in just a few metrics, so you need to pick your metrics wisely. Companies can get paralyzed at this step if they overcomplicate the scoring matrix. Which health metrics should they use to score? How should they weight each? Do they each need to be weighted the same? Do all metrics need to be objective or can some be subjective?
Don’t get into an extended debate about the perfect scoring approach—that’s wasted energy for little gain.
Just get started. Pick some key metrics, and then score the customer base. Take a look at the results. Do they seem accurate? Spot check some accounts you are really familiar with. Is the score representative of the customer’s health? If you score the customer base and then look at the results and they seem pretty accurate, then run with it. If they don’t seem right (somehow your most deeply adopted customer who just signed a 3-year renewal ended up with an “at risk” flag, for example), then refine your scoring matrix.
Keep customer scoring simple, above all else, so you can manage and maintain it on an ongoing basis.
Monitor & manage customer health consistently, without fail
Once you have decided on what criteria you will use to score customer health, and have applied that across your customer base, now it’s time to monitor it and act on the outcomes. That means having a regular, scalable way to monitor and adjust health scores as they change (which they will). Customer success software helps tremendously in monitoring health scores.
However you do it, you need to update health status regularly (no less than once per month per customer) and review the health statuses so you can act on the results. Leaders should be reviewing customer health trends, and direct-line managers should be reviewing customer health scores individually with the customer success managers.
Act on the results
Who cares about a bunch of green, yellow and red customer health statuses if you aren’t doing anything about it? Make sure you have a customer success playbook for intervention and correction for your yellow and red customers, and ways to reward and engage your green customers even further. The health statuses are just that—a status.
Yes, it is important to know things like “80% of our customer base is green, 10% is yellow and 10% is red”, but what is more important is to actually do something about it. What’s your plan to move your yellows from green or to red? Because yellow means customers are sort of hanging out in no man’s land—neither successful or unsuccessful, but somewhere on the bubble. What’s your action plan to tackle your red customers and bring them back to health? Your company needs to know how to proactively keep customers in the green, and also how to handle it when a customer isn’t healthy. A customer success/retention playbook can help with this.
Evolve customer scoring and monitoring as needed
There isn’t a set it and forget it approach to customer health scoring. Evolve how you score, and how you monitor health across the customer base as your company grows. What works for 50 customers will need some tweaking for 500 customers. Scoring may also need to change as your product evolves. The health indicators for your 50 early adopters may be different than the customers you acquire once you are more established. Which leads us to the next tip…
Evaluate for accuracy
If you are constantly surprised by green customers churning, your scoring is off. If you have a bunch of red customers who are always getting your time & resources, staying red, and not churning, your scoring is off. Once you create your customer scoring methodology, evaluate it on an ongoing basis to ensure it’s actually giving you the right scores that help you run the business and improve retention.
Use customer health scores to uncover the root issues
Ideally your customer health score isn’t just a score that helps you see who is healthy and who is at risk. That’s important for retention, sure. But your scores can help you improve your business and your product when you look deeper than the surface. Let’s say you are tracking how long it takes a customer to activate a certain feature, as a health metric. And that metric, in general, is longer than you deem acceptable. Now that you are tracking it, you can seek to improve it. Why is the feature taking longer to activate? What’s the barrier to adoption? You can make product or process changes to help shorten that. Use your scores to track health but also use them to uncover areas of opportunity for improvement in your product and your processes.
Know your ONE metric
For every product there is one metric that is the most important. If this metric isn’t there, you are dead in the water in terms of product adoption and customer retention. The one key metric is unique to each product, so you will need to figure out what yours is. It’s the metric that matters more than any others—it’s pass/fail. It could be that a user sends an invoice if you are a financial application (not that they create an invoice, but that they actually send it). It could be receiving end-user traffic if you are a web-publishing application (not that a page or site is created, or that it goes live but that it actually receives traffic).
You will have to figure out what your one metric is, and when you do, everything starts from there—it’s the thing you design for and drive your customer towards, because without it they will never achieve their desired outcome(s). Your entire company should know the ONE metric and monitor for it religiously. It’s a pass/fail metric. Without it, a customer’s health score is zero, no matter how many other elements of health they may have.
Remember why you need customer health scores
For a SaaS company, customer retention is everything. Externally, the entire market value of your company rests on your ability to retain your customers. Internally, churning through customers is a slow downward spiral of exhaustion. It can also indicate something is wrong with your product, onboarding, support resources or market fit.
Customer health scores, implemented correctly, can help you spot your at-risk customers, before it’s too late, so you have time to save them from churn.