One of the most important parts of being a successful SaaS company is retaining and growing your customer base. A good customer health score is one of the best ways to monitor your customers and identify any factors that could negatively impact the business, and identifying a low customer health score early on in the process is crucial to reducing churn and keeping customers satisfied. But every company has their own unique way of measuring customer health; how are you supposed to know what works best for your team and your business? More importantly, what even constitutes a good customer health score? Let’s dive in. 

 What Is Customer Health Scoring?

Customer health scoring is a critical tool for Account and Customer teams to keep track of the status of their customer accounts and understand how they’re feeling about the product. Monitoring customer health allows these teams to always have an understanding of what their customer is looking to get out of the product versus what they’re actually getting out of the product, which can help them predict the likelihood of a renewal or churn from that customer, as well as allows them to intervene if necessary.

 Every company measures customer health differently and it’s important to adapt your customer health scoring to fit your teams’ needs, but generally, it means to give a customer a score based on how likely they are to reach a valuable target. This could mean renewing their contract, not churning throughout the course of their contract, or being upsold to. This can serve as a warning sign to intervene with a customer to save the relationship or to show you that a customer may be ready to add a seat or to add on an additional feature. 

Core Customer Health Dimensions

All humans are different, and so every team and every customer has different needs (revolutionary, I know). The customer health scoring method at a seed-stage startup is inherently going to look differently than the customer health scoring method at a global, Series D company and that’s because different aspects of a customer’s account have varying levels of importance to teams. But typically speaking, most customer health scoring models contain at least one of these five core dimensions:

1. Financial Signals: These are any indicators purely related to money. When did the customer last renew their contract? When was the last invoice sent, how much was it for, and how long did it take for them to complete it? Has that customer account ever purchased an upsell? If so, what did they purchase and for how much? Obviously, teams are typically tracking much of this information anyways, so utilizing it to better understand your customer’s feelings towards your account can help you predict their financial behavior in the future.

2. Product Signals: These types of metrics are all focused on engagement and activity levels within your product. When was the last time they logged in? How frequently do they use your product per day/week/month/year? Has their activity level increased or decreased over the last quarter? Are there areas of the product they’ve never interacted with before? If so, why not? Tracking product signals can give your Customer Success team a great overview of how your customers are interacting with the product, which provides insight into the value they’re receiving from your product. 

3. Service Signals: Service signals are largely related to the Customer Support team. How many support tickets has a customer account submitted in the past month? How many of those tickets are still unresolved? How many times has a user interacted with your live chat bot to ask a question or report a bug? What is a customer account’s CSAT score, and how does it compare to their CSAT score from four months ago? Service signals can indicate how much a customer account is struggling with your product and what areas may be improved upon with a walkthrough tutorial or an FAQ section. 

4. Relationship Signals: While often overlooked, relationship signals can be one of the most important indicators of customer health and typically relies heavily on the Customer Success team. How often are you communicating with your customer accounts via email or phone call or video call? What’s their general relationship like with you and your team; do you feel that they trust you enough to tell you if they’re struggling with your product? When was the last time that you walked them through a new aspect of your product, and what was their reaction to it? Establishing trust and a solid relationship with your customer accounts is crucial to understanding the health of the account.

5. Human Input: Lastly, an important signal to track is simply human input. What do your CSMs, who are interacting with the accounts, think about the state of the customer’s health? What about your support team, who are the frontline for dealing with any issues that arise with customer accounts? Or your product team- what are they incorporating into their roadmap, and how will that affect the current customers and their experience within your product? Effective communication with your teammates can help give you a better indication of where the product is headed and give you a different perspective about your customer accounts that you may not have had before.

The Importance of Customer Health Scores for SaaS Companies

Monitoring customer health in a streamlined, effective way is crucial to uncovering potential issues early enough to intervene before they lead to a larger issue. If you’re waiting until the customer comes to you let you know that they won’t be renewing their contract, it’s too late. Being able to proactively identify signals that could indicate that the health of a customer account is dipping allows your team to act swiftly to resolve any issues and save the account. 

But, as we said earlier, every single customer account is different and every single product is different. Tracking product signals that solely focus on engagement levels probably isn’t going to be super effective for a software designed to be used once a month. While the specific metrics and goals may change to fit the teams’ needs, the general process for customer health scoring remains largely the same. Let’s take a look.

How to Measure Customer Health

1. Choose an outcome

The basis of your customer health score depends on the outcome your team is targeting. Are you looking to reduce churn? Increase renewals? Increase upsell opportunities? All of the above? Selecting the outcome that matters most to your team is a crucial first step as it will determine which core behavioral signals to look at later. For example, if you’re looking to increase upsell opportunities, you’re probably going to want to track engagement levels in certain areas of your product to see what customers find the most beneficial, as well as relationship signals with the customer account; if you recommended a new feature to purchase, would they trust you enough to move forward with it?

Deciding on this outcome will be different at every company. Maybe one team has noticed that customers are not renewing their subscription after the first year and they want to fix that, so they would choose the likelihood a customer will renew as their outcome. Another team may see a high volume of churn and choose to target the likelihood that a customer will churn. This decision will be heavily dependent on the situation that your business is in and the goals that your team wants to achieve. 

One of the first things that this decision requires is a finger on the pulse of your customers. Without understanding how customers interact with your product, their buying cycles, and the reasons why your team is targeting a particular outcome, you won’t be able to craft an accurate picture of your customers’ health. 

2. Define behavioral signals

Alright, so remember those behavioral signals we told you about earlier? After your team has landed on a specific outcome you’re looking to achieve, it’s time to decide how you want to achieve that outcome and what metrics to track to get there. Selecting the right behavioral signal to track to lead you to a desired outcome is crucial to properly monitoring customer health. Simply, these signals tell you whether a customer account is getting closer or farther away to your desired outcome.

Let’s walk through a quick example. Say that you and your team decided to target increasing upsells for customer accounts as your desired outcome. What can you see that may make a customer more or less likely to buy additional software functionality from you? 

  • Product Signals: Are your users actively engaged in the product? Is it a tool that they need to use every day? How much of the product are they using? What areas are they using? Is their most commonly used functionality similar in nature to the additional functionality you want to sell them?
  • Financial Signals: How much is the customers’ current contract versus the contract of a similarly sized customer? Did your customer recently get a round of funding? Have they been interested in bundled discounts in the past? Are they looking to invest more money in a certain area of their business?
  • Relationship Signals: How is the relationship between the key decision maker on the account and the CSM assigned to that account? How frequently are they communicating? What was the last CSAT score of that key decision maker?

These are just a handful of examples of the types of behavioral signals your team could potentially track in order to reach your desired outcome of increasing upsells. Some of these may be more relevant to your product than others, so it’s important to adapt them to fit your needs, as well as weight certain signals more heavily over others, which is the next step in this process.

3. Weight signals

Not all behavioral signals are created equally. After you’ve selected your desired outcome and identified the appropriate signals to track, it’s time to decide which signals carry the most weight towards the outcome that you are targeting. Maybe the functionality you’re trying to upsell isn’t super relevant to the parts in the product that your customers are typically active in, so it’s more helpful for you to rely on CSAT scores to see who is most generally satisfied with your product, or customers who you have the strongest relationship with so that you’re able to easily set up demos to show how the new functionality works. Or maybe you notice that a customer recently stopped engaging with an area of the product that they were typically very active in, and so you reach out to them to see if they need supporting functionality to help them complete a certain action.

It’s also important to keep in mind that these weights can change based on experimentation as you monitor customer health. Maybe you realize that a financial signal is actually a better indication of poor customer health than you initially believed, so you would adjust the weighting system to accommodate that. Staying flexible with your customer health score as you progress is crucial to gathering the most accurate score possible and improving over time.

4. Create a health scale

The last step in this initial customer health scoring process is to, well, assign them a score! Create a health scale that you can give customer accounts a score on based on the behavioral signals that you’ve selected and the various weights you assign to each signal. One of the most common scales teams will use is just a standard 1-100 scale, which you can easily sort into buckets. So anyone with a score between 0 and 40 is considered “Unhealthy”, or at risk for churn; 41 through 60 would be “Neutral” or likely to renew but not happy enough to upsell; and 61 through 100 would be considered “Healthy”, or likely to renew and could be receptive to upsells.

Using a simple health scale like this allows you to assign customer accounts a customer health score that anyone on your team can easily and immediately understand and can allow your team to proactively identify accounts who may need a little bit more attention before it’s too late. 

4. Track customer health scores

Once every one of your customer accounts is assigned a health score, your work isn’t finished. Health scores can change dramatically and frequently, so it’s important to closely monitor every single customer account to make sure their customer health score is accurate and up to date. That means continually checking on every behavioral signal on a regular basis (every week/month/quarter/year, depending on the signal and your product) to ensure that you have an accurate read of every customer’s health at any given moment.

This is also where that flexibility comes into play. As time goes on, your product may change or your desired outcome may change, and you’ll need to update your customer health scoring model to reflect that. Additionally, if the key decision maker at any given customer account changes, that’s going to affect the customer health score and you’ll need to check in and get a pulse for how they’re different. So continually monitoring and updating your customer health scoring model is the ideal way to ensure that every account is accurately measured and that your method for collecting information is reflective of the outcome you’re trying to reach.

Make Your Customer Health Score a Priority

Every company, team, product, and customer is different, so there really is not one completely accurate way to measure and track customer health score. Adapting your customer health scoring method to fit your teams’ needs means that you’ll be able to accurately understand how your customers are feeling about your product at any given time, and can give your Customer Success team the ability to proactively anticipate the likelihood of churn, renewal, and upsell opportunities and act accordingly.