What is the Customer Health Score? and How Do I Use It?

    Aren't those large data-driven companies?

Not necessarily. Every business can benefit by understanding the health of its customers as well as a scoring system to get ahead of potential attrition.

We'll go over the definition of a customer health score, the benefits in creating one, as well as the different ways you can assess the health of your customers. We'll then provide an easy template you can modify to suit your business.

Ready? Let's dive in!

•   What's a consumer Health score?
•   What is the significance of a customer's health score vital?
•   Benefits from using a customer's health score
•   How can you use the customer health score for your company

What's a consumer rating of health?

A customer health score is a measurement that determines the chance of a potential customer remaining loyal to you. It's used mostly for retention purposes for companies to determine the likelihood of customer churn.

The criteria typically contain:

• Usage: How often are they using your product or service?
• Engagement: How involved are they in social media and other platforms?
• Revenue: Are they investing more or less than they anticipated?
• Support requests What number of requests have they submitted?

However, they could also encompass anything from customer feedback to the time spent on your website before purchasing. The idea is to combine multiple data points into one unified metric that measures customer health and loyalty - it is easy to grasp and monitor.

Why is a health score so important?

There was a time when firms could routinely conduct face-toface checks with customers. Before the introduction of the Internet, customer loyalty was primarily dependent on price, service as well as proximity. The typical route was to go to the nearest grocery store for toothpaste, regardless of the better choice a town has.

The internet of today has revolutionized everything. Consumers have a wider range of options than ever before and are typically just a few clicks away of switching suppliers.

It's the most important factor to customers who don't need any obstacles in the purchase. This is now harder than ever before for companies to maintain customers within a highly competitive marketplace.

Enter customer health score.

This measure is intended to assess how likely customers are to stick with your business in the long run - before they decide to leave and spend the money and go elsewhere. All without ever needing an in-person checking-in.

The benefits of utilizing the health score of a client

Using a customer health score may provide various benefits.

   Identification of early signs of Churn Risk  

Not paying attention to the signs that indicate customer churn can be costly. If you monitor your customers' health score and analyzing it, you'll be able identify any potential issues quickly and address the issue prior to it's too late.

For example, if your customer suddenly stops logging into your app or product, you can explore and offering extra support.

   Increased retention rate  

Reducing the risk of a departure is one factor, but knowing a customer's health score will aid in improving the retention rate of your customers. When you understand which customers are more likely to stick around and find success with your service or product, you can tailor your message and offerings specifically to these customers.

In particular, sending customized emails that include exclusive deals or discounts to customers can encourage more frequent usage and engagement - two key indicators of customer loyalty.

   Improved customer experience  

If you provide personalized assistance to every user according to their individual needs You'll be able to establish stronger connections with them, increasing the likelihood that they'll stick around for longer.

   Increased CLV  

Additionally, if you concentrate on enhancing engagement with your long-time customers, they might be willing to spread the word about your product or service by becoming ambassadors, as well as natural marketing agents.

   Accurate demand forecasting  

By understanding the condition of your customers, you can accurately predict customer demand. This helps you prepare for the growth that is coming and help you make better resource allocation decisions.

Unpredictable forecasts can derail a growing business by creating unnecessary investments in inventory or stockouts that could cause customers to be irritated.

   Increased ROI  

If you monitor the health of your customers It is easy to determine which customers are most likely to succeed with your service or product and those that require additional help, while also providing them with resources to give them the most value from their investment (ROI).

   Efficient marketing  

Instead of sending out generic messages to every person in your database, you are able to focus on people who are that are likely to remain and make sure that each message is as effective as possible.

How can you use the customers' health scores in your business

Still not sure how to apply a customer health score in your business? This step-by-step tutorial will help you in making your own.

   Define Customer Success  

Are they:

• Are you making regular purchases of your item or service?
• Logging into your app or website frequently?
• Engaging with customer service or support teams?

   Pick your measures  

Qualitative metrics like reviews are beneficial in some contexts however, it is best to focus on quantitative metrics for the most effective health score for customers system so that it can be scaled up.

This may be:

• The number of logins
• Average time between purchases
• Duration spent on the web-based or mobile applications
• Social media engagement
• The use of products
• Online participation
• Support tickets
• Add-ons, upgrades or upgrade options

Measures of customer behavior help you understand how customers interact with your product or service in real-time. This can be more valuable than traditional metrics like survey results on satisfaction of customers, which often take the longest to reach their results and may could be influenced by biases.

   Make an scoring system  

At this point, companies can get ahead of themselves and immediately start to designate a status for each of their clients.

But the visualization of customer health will follow. The first step is to create the numerical method of assigning points to each chosen metric.

For example, a customer who is logged in at least two times a week may be awarded five points. A customer that logs into only one time will receive no points. If you assign a value to every act or behaviour, you can easily calculate a score for each customer.

   Define the data  

The time has come to transform your data from just a jumble of numbers into something that is more relevant.

You can assign colors or labels to any of the scores you've created, such as green for customers who are healthy and yellow for those at risk or those in danger of churning.

Certain companies employ the school grading system, with A+ being a customer that will stay for the rest of their lives, with F being one already halfway out the door. The simple scale of 0-100 can be useful, particularly for companies with a long client list.

   Customer health score examples  

Here is a visualization which you could end up with:

At a glance, you will be able to determine which customers are ranked among your existing customers which ones require attention and the one that is most important to your revenue streams.

Due to the fact that Mollie is such a large purchaser, her sudden drop is quite alarming and requires immediate action. On the other hand, Tom doesn't spend much money anyway, so his recent decline might not require a rush.

   Template for calculating health scores of customers  

Before you head out, here's an easy customer health score template to assist you.

First, you'll have determine how many points you will assign to every outcome range. As an example, in the model below, a user that uses a product less than five hours is eligible for none points for use, while one that spends longer than ten hours will receive 100 points.

Then, an individual's scorecard might look similar to this. By applying weight distribution, you will be able to determine which measure is most important for your customer health score.

In this case, the client is presented with a 60, but when you add more categories (or more precise outcome categories), you can get a more detailed look and customize it for the needs of your company.

Conclusion

Health scores for customers are an effective tool to identify customers at risk of churning. By regularly tracking customer behavior indicators, you'll be able to identify any potential issues promptly and act prior to it's too for too late.

With the right system installed, you'll be able to make sure that your clients remain satisfied - and loyal far into the future.