Creating a Customer Health Score in Five Steps

I recently was diagnosed with shingles, a viral infection that causes a painful rash. It’s caused when the virus that causes chicken pox reactivates. I had early symptoms like headaches, sensitivity to light and a pain in my left eye for several days before a rash appeared, but I didn’t have enough insight to know what was going on. My physician used my symptoms, medical records and history of having chicken pox to determine that I had shingles. My doctor used the combination of information to determine the best course of treatment for me and explained what to look for in the future.

Just as my doctor synthesizes information, a customer health scorecard combines information about a client account, allowing the customer success team to detect issues as they occur and to set priorities for strengthening customer relationships. 

The creation of a customer health score requires a combination of metrics that can include quantitative dates as well as subjective data from customer success managers on the quality of the client relationship at the account level. The parameters used to calculate the health score should span the customer lifecycle to ensure steady engagement with customers.

When selecting metrics and determining the calculation method for the score, include the following foundational elements for consideration and prioritization:

• Conduct a data inventory to understand what data sources exist, where the is data pulled from and how often the data is refreshed.
• Understand how the business will take action based on the data. There’s no sense in measuring something if you are not going to take action as a result of the insight.
• Establish role-based data views to enable the business to take action.
• Understand the budget, resources and timing that will be necessary to implement a health scorecard.

Once the foundational elements have been prioritized, use the following five steps to create the customer health scorecard:

1. Weight metrics. Not all metrics carry the same weight in every organization. Look at the existing post-sale journey and identify any correlations of metrics to lifecycle stages. For example, if onboarding is a critical step for customers, determine whether there is a correlation between satisfaction scores or renewal rates and a positive onboarding experience vs. accounts that have indicated issues. If a post-sale customer journey map and metrics are not yet in place, try to find correlations between non-financial and financial metrics (e.g. revenue, churn, growth) that can help determine the thresholds or weights for each metric or set of metrics.
2. Select calculation method. Choose a model that can be used to assign a numerical value to the selected metrics. Give each metric a score using a 0-to-100-point scale, weight metrics by their importance to the financial correlation (from 0 percent to 100 percent) or group data points to form a single score. Consider using color coding for easy-to-view assessments to provide a quick view of an account’s health and areas where corrective action is needed.
3. Consider scoring variations. Organizations may require multiple health score profiles based on the segmentation of accounts with different levels of relationships (e.g. high-touch accounts vs. low-touch accounts). Additional variations may include geography, product, platforms or services levels. Segment and score customer accounts in a way that is meaningful to the business and predicts business outcomes for each segment.
4. Validate scoring model. Apply historical data to the scorecard from accounts that were retained or churned to ensure that the scoring method correlates to the chosen metrics and calculation method. 
5. Monitor and refine. After developing and implementing the first scoring methodology, periodically retest it against customer results and refine the model as needed to improve its accuracy.

A customer health scorecard isn’t a magical crystal ball but it’s a vital tool for the customer success team and broader organization with indicators to understand whether or not the customer is satisfied. It’s critical to constantly monitor the health scorecard to ensure that necessary nurture activities are put in place to build a loyal customer base and protect upcoming renewing accounts. The insight provided by the customer health score can help anticipate issues and allow necessary steps to be taken to resolve issues within an account.