As a business owner, you’ve likely dealt with customer churn. But what if you could stop it before it happens? With a customer health score, you can evaluate the health of each of your customer relationships and take proactive measures to keep them engaged.
Learn how to calculate a customer health score and what impact it can have on your business.
What is a customer health score?
A customer health score is a metric that gauges the happiness of an individual customer or the health of your business’s relationship with them. It accounts for a range of possible indicators, both positive and negative—including frequency of purchases, length of relationship, reviews, and returns—which help you assess whether a customer is satisfied or at risk of churning.
For example, if you see a customer submit negative feedback and contact customer support, you can pinpoint when the complaints started and use their feedback to inform your approach to winning them back.
You can use customer service software such as Custify or ChurnZero to track customer behavior and assign customer health scores based on that behavior. You can also create automations to reengage customers whose scores fall below a set threshold.
How to measure customer health scores
- Identify indicators
- Determine each indicator’s impact
- Set your ceiling
- Calculate a customer’s score
- Visualize the results
- Take action
A customer health score can help you avoid churn and identify healthy customers who are good candidates for upselling. To determine where each customer falls, you need to evaluate how they interact with your brand. Each business measures this metric in different ways. Here’s how to measure customer health scores:
1. Identify indicators
To measure customer health scores, identify your indicators, or the significant events that can influence whether customers continue or stop purchasing. Some indicators include returns, interaction frequency, and repeat purchases.
Every business decides what factors matter most. For example, if you own an ecommerce apparel shop, you might monitor purchase frequency and how often customers interact with your brand on social media. In contrast, SaaS companies may prioritize customer engagement, referrals, and product usage.
2. Determine each indicator’s impact
Some indicators will matter more than others to your company. Therefore, when you calculate customer health scores, you’ll quantify or weigh each positive and negative indicator according to its importance.
To do this, you can use a ranking scale ranging from one to 10, with 10 being the factors that your business most prioritizes and one being the least important. For example, let’s say you run an online jewelry shop and decide on four key indicators: purchases per year, referrals, returns, and customer satisfaction survey answers. You may weight purchases as a 10, referrals as a five, returns as a three, and positive survey answers as a three.
3. Set your ceiling
To calculate your ceiling, find a high-value customer who can serve as the standard to which you compare all other customers. You’ll use the customer health score formula to find the top limit of your brand’s customer health score. The formula multiplies the frequency of each indicator by the weight of that indicator, then deducts points for negative outcomes.
For example, say your model customer made six purchases, referred two new customers, answered six satisfaction surveys positively, and returned one item. You would measure their score as follows:
(6 purchases x 10 impact weight) + (2 referrals x 5 impact weight) + (6 positive survey responses x 3 impact weight) - (1 return x 3) = 85.
This makes your customer health score ceiling 85.
4. Calculate a customer’s health score
To calculate a customer’s score, you’ll use the same customer health score formula. If you want to use percentages to analyze customer health score metrics you can then divide the number by your ceiling to get a score out of 100.
Say a customer made four purchases, referred one new customer, answered three satisfaction surveys positively, and returned one item, you’d have:
(4 purchases x 10 impact weight) + (3 referrals x 5 impact weight) + (3 positive survey responses x 3 impact weight) - (1 return x 3 impact weight) = 61.
You can use 61 as the customer health score or divide by 85 and get 72 out of 100.
5. Visualize the results
Once you assign customer health scores to your entire customer base, decide how to visualize and present the results. There are three common ways to do this:
Traffic light
This color-coded data visualization uses red, yellow, and green. Red symbolizes a poor customer score. It is the lowest health category, meaning there’s a possibility of churn. Yellow is a middle score, indicating customers may need attention. Green is a healthy score, representative of customer success, signaling the potential for account growth through upselling.
Letter grade
This A to F scale can mimic school grading systems (e.g., A = 90 to 100, B = 89 to 80, C = 79 to 70, D = 69 to 60, and F = 59 and below), or you can amend it to distribute scores more evenly. For example, A = 81 to 100, B = 61 to 80, C = 41 to 60, D = 21 to 40, and F = 1 to 20. In this case, everything over 61 counts as a good health score.
Percentage scale
The most granular is a percentage scale, which measures customer health from 0 to 100. If you have a ceiling of 75 and calculate a customer health score of 61, this would yield a percentage score of 72%. In this customer health scale, you can choose a specific number—for instance, 75%—and decide that customers with a score above 75% are happy customers who don’t require attention, whereas customers below 50% have low account health. (The exact number will vary depending on your company.)
You can use these data visualization approaches to easily categorize customers with high scores and low scores, and from there you can tailor your marketing to target each group.
6. Take action
Next, you can develop a strategy to re-engage customers with low health scores and boost the health of customers with moderate-to-good scores.
Each customer category has different needs, so improving a customer health score depends on the individual and the behavior that led to the low score. However, there are a few things that can improve scores and, as a result, customer satisfaction:
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Speak to customers. One of the best ways to provide a better experience is to speak directly to your customers. If you have a customer on the brink of churning, you can ask where you can improve. Similarly, you can talk to a satisfied customer to learn what you’re doing well and how you can replicate it across your wider customer base.
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Automate. Using software, such as customer relationship management (CRM) tools, can help your company reach and re-engage more customers whose scores fall under a certain number. This can help your efforts go further.
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Analyze customer data and watch for patterns. If you roll out a new product and your health scores begin to decrease, it’s possible your customers require more information before a sale, or that your new product doesn’t resonate with your audience. Tracking customer health scores can help you catch these negative usage patterns early, so you can address them before you end up with unhappy customers.
Customer health score FAQ
What is customer health scoring?
Customer health scoring is a methodology customer success teams use to understand customer satisfaction and qualify a customer’s likelihood of churn or upgrading. It can include multiple indicators of satisfaction or dissatisfaction including product usage, purchase frequency, positive and negative customer feedback, and referrals, resulting in a total customer health score.
How do you calculate a customer health score?
To score customer health, you’ll need to:
1. Identify indicators of customer satisfaction and dissatisfaction.
2. Feed the information into a health score formula, which weighs different indicators by relative importance.
3. Determine where each customer falls on your scale.
What is a good customer health score?
Each company has a different customer health scoring system, so there is no specific benchmark for a good customer health score. Unlike Net Promoter Scores, which produces a one to 10 number measuring customer loyalty by asking how likely a customer is to recommend your company to somebody else, a customer health score is relative—you are measuring against your own set standard, not anyone else’s.