Oct 6, 2017

Read Time 6 min

Customer Health Scoring: The Why & How


There’s nothing more frustrating than not knowing how likely a customer is to renew, why they may have left you, and to not be able to be proactive in addressing their goals, or where they might be falling behind. That’s where customer health scoring comes in.

Last week ChurnZero co-hosted a well-attended webinar with our VP of Product, Abby Hammer and John Mikael Blaisdell founder of the Customer Success Association. The webcast explored the WHY and HOW of customer health scoring.

The topics that were discussed included:

Based on the attendee feedback we found that whether you were new to health scores or a veteran, everyone seemed to find some valuable takeaways from the presentation.

The audience also engaged in some great Q&A with our presenters, that we thought we’d share with you, as a reference on some of the nitty-gritty details of customer health scoring.

Webinar Q&A Recap

Q: Once you determine the metrics, any best practices for when and how often to review the metrics in use?

A [Michael]: The answer to that is going to be variable depending on which company you are and what you market segment is. There’s some that have a more immediacy than others. I think you’re going to learn that over time as you’re always evaluating – “how good are my health scores?” “am I getting surprised?” or “am I missing things?”. Out of that is how you work out what the intervals are for reviewing your health scores.

A [Abby]: Let’s say you haven’t had any triggers to reevaluate your ChurnScore, you haven’t been surprised by anything, that doesn’t necessarily mean it’s all fine and dandy. I would say at least a couple times of year, you should be revisiting to make sure. In particular, if you’re working with a SaaS product you’re going to be adding features all the time and how you expect your customers to use that product is going to be shifting and changing, and the score should also be shifting and changing. So particularly as you have major releases that should be an impetus to go back and review your scores. But certainly, any time that you run into a situation where your health score doesn’t end up lining up with what happens with a customer that is a big red flag that you should take the opportunity to re-review.

Q: For quantitative scores do you look at add-ons? So, if a customer continues to add-on or loose revenue, would you put those as indicators in a ChurnScore or a health score?  

A [Abby]: That’s a very interesting idea. I have a couple of customers, that we’ve set up a calculation that allows them to see what their contract growth or shrink has been over a time period. And then we use that factor in their ChurnScore. So, if their overall contract value is in the positive and growing upwards that’s a good factor, and if it’s shrinking then that’s not a good factor. Certainly, anything that gives indication that your customer is settling in more to using your products and services and investing more with you, those should definitely be things we consider including in our score.

A [Michael]: You also want to look at if you have revenue decline, when they’re scaling back, that’s time to go look at that customer’s business. They may be perfectly happy with you, it’s just that they might be getting hit by budget crunches and you need to factor that in. You don’t automatically want to flag them as code red, when they are just in a down turn that is likely to reverse over time.

Q: Do you trust everyone on your team to take part in determining a health score? In other words, do you think this is a bottoms up endeavor or a top down endeavor?

A [Michael]: Yes, as a matter of fact. You want everyone to weigh in on that. Now, we are all people and are going to take different factors and think they are more important that others and that’s basic reality, that’s going to happen to you. You are going to learn over time, who tends to be right about such things and you may adjust your approach accordingly, if you have someone that is a naysayer or takes anything as a sign of doom and gloom. But you don’t want to apply that broad brush across everyone. These are things you are going to learn over time and gather data on to fine tune. It’s like Abby was saying, it’s not like you are going to do this once and then never revisit it.

A [Abby]: I’d add one thought to that. So, I have seen scenarios where we get into a “too many cooks in the kitchen” situation. And that’s not to say that everyone shouldn’t have the opportunity to give their opinions and to talk about factors they think should be involved. But if you are reaching a space with your team where you are struggling to make decisions, it might be worth it to at least initially narrow the group, get something to start with and then open it up to a wider group to get feedback.

Q: Any tips to minimize the risk for subjectivity in your health scores?

A [Abby}: It is up to the manager of the team a bit to enforce some consistency. So, defining your values, let’s say you are going to have a CSM sentiment rating, and your options are going to be green, yellow, and red. The more specificity you can put around those definitions, the better. So, something like, you cannot call a customer green unless you had a meeting with their executive buyer within the last 2 months, and unless they have at least 2 users that are logging in all the time. Try to put some bounds around it. Now, that can mean that there’s some research that’s involved to be able to update the qualitative measure, but that’s not necessarily such a bad thing. But it’s also comes down to the manager to do some sniff testing. I’ve had a manager that came in and said that a certain person always scores too lightly or that person always scores too heavily. So, you are going to deal with some personalities there, and the manager should be a helpful resources to get everyone on the same level.

A [Michael]: And this too is something for the Customer Success Operations person if you’re fortunate enough to have one.  They should be constantly looking into the feedback from the system, and seeing how accurate it was. Looking at all of our code red customers for the last 6 months, what was the behavior of them, when did they go code red, how accurate was the health scoring and the automatic alerting that comes out of that. This is where the ops people or the data analysts live and breathe this stuff, and you really need people like that.

Q: Where do you stand on making NPS a component of the health score? Do you think it’s important, or just one of many?

A [Michael]: Well, a lot of companies will put in NPS as part of the performance metric for the customer success team. But they will use it in different ways. There’s no real consistency about it, other than, yes, it’s a factor. How much of a factor, can vary rather highly. As I mentioned before, I’m not a fan of it, because, I want to know did they actually refer someone. That’s the important metric to me. Not whether they say they will or not. And then again, WHO, is giving this NPS data. Is it a casual user, or is it your decision maker? There’s a world of difference between those two people’s opinions.

A [Abby]: I agree with the type of user portion of that. Seems like I’m a bit more of a fan of NPS. I think it’s a great way to get a pulse. I think one of the key thing you need to do with NPS is – if you are going to use it you are going to need to implement NPS correctly. Meaning you don’t do a NPS one off that you send to everyone in January, then you are still using that same number in November. That’s no longer a valid representation of how someone feels. So, you need to be continually serving the question and making sure you’re keeping that metric up to date, so that it is a valid look at how they feel. I do strongly agree with you on the side of the type of user matters. How your decision maker, what they are putting in a NPS is very different than someone that logs in once a week. So, when you are looking at NPS you might want to consider filtering down to just look at those that are going to influence the renewal decision.

This was just a recap of some of the Q&A portion of the webinar. In case you missed the full webcast, or would like to review it again, you can do so on-demand by signing up to view the recording.

Please stay tuned for more presentations in our customer success webinar series.

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