How To Score the Health of Your Customer Base

Whether you are managing a SaaS customer base of 10 or 1,000 or 10,000, you need a consistent way to track the health of your customer base. There is software to help you do this at scale, so if you are at or near the many hundreds of customers mark, I hope you have that.

But, a surprising number of companies still do customer health scores manually, having their customer success managers handle the task. And an even more surprising number of companies aren’t managing or monitoring customer health at all. Ack, that’s hard for me to wrap my head around considering that when we launched our SaaS product, I instituted health scoring when we hit about 25 customers.

You need to retain and grow customers and you won’t be able to do it without keeping tabs on the state of your customers relationship with your product and your company.

Regardless of which approach you are using—software, manual or none at all—I believe you can’t manage a SaaS customer base of any size without a consistent process for this.  A customer health score simply takes several key metrics or activities and combines them into a single “score” to indicate the customer’s overall health.

Again, I am surprised how many companies aren’t doing this. It’s pretty easy to do, and if you approach it right, it’s  scalable as well. Here are some of my suggestions for customer health scores.

Decide on your customer health scoring criteria

What makes for a healthy customer, or an at-risk customer? What behaviors exist in these customers? What events or triggers can you see? Take a look at the various activity, actions and usage that indicate customer health. Here are some to consider:

• Customer pays (for freemium products)
• Customer uses product with X frequency
• Customer uses X feature(s)
• Customer account has X number of users
• Customer account includes multiple key stakeholders
• Customer account includes executive-level relationships
• Customer has desired outcomes met
• Customer is using support resources
• Customer is active participant in community
• Customer has explicitly stated their satisfaction (not a fan of this one, but…)

You can also include some “at risk” flag for scoring as well, for example:

• Lost customer stakeholder
• Lack of adoption of key features
• Business event occurred (such as customer being acquired or an executive team being replaced)
• No login in past X days

Don’t overcomplicate customer health scores

Pick no more than 3-5 metrics to determine your customer health score. Anything more than that will be untenable and unscalable to track. Make the score itself super simple—you can actually use a score, from 1-5, but I personally love red (at risk), yellow (unsure or midline), green (healthy) as indicators of health.

This is about a total picture of the customer in just a few metrics, so you need to pick your metrics wisely. That’s why companies can get paralyzed at this step. Which health metrics should they use to score? How should they weight each? Do they each need to be weighted the same? Do all metrics need to be objective or can some be subjective?

Don’t get into an extended debate about the perfect scoring approach—that’s wasted energy for little gain.

Just get started. Pick some key metrics, and then score the customer base. Take a look at the results. Do they seem accurate? Spot check some accounts you are really familiar with. Is the score representative of the customer’s health? If you score the customer base and then look at the results and they seem pretty accurate, then run with it. If they don’t seem right (somehow your most deeply adopted customer who just signed a 3-year renewal ended up with an “at risk” flag, for example), then just tweak it.

Keep customer scoring simple, above all else, so you can manage and maintain it on an ongoing basis.

Monitor & manage customer health consistently, without fail

Once you have decided on what you will use to score customer health, and actually applied that across the customer base, now it’s time to monitor it and act on the outcomes. That means having a regular, scalable way to monitor and adjust health scores as they change (which they will). You can use software for this, as I mentioned. That’s always going to be preferred once you hit scale in your customer base (what “scale is” depends on your specific situation—but managing more than 200 customer’s without software is going to be very time consuming and cumbersome). Or you can have your customer success managers to do this.

However you do it, you need to update health status regularly (no less than once per month per customer) and review the health statuses so you can act on the results. Leaders should be reviewing customer health scores in aggregate, and direct-line managers should be reviewing customer health scores individually with the customer success managers, in order to make action plans.

Act on the results

Who cares about a bunch of green, yellow and red customer health statuses if you aren’t doing anything about it? Make sure you have a customer success playbook for intervention and correction for your yellow and red customers, and ways to reward and engage your green customers even further. The health statuses are just that—a status.

Yes, it is important to know things like “80% of our customer base is green, 10% is yellow and 10% is red”, but what is more important is to actually do something about it. What’s your plan to move your yellows from green or to red? Because yellow means customers are sort of hanging out in no man’s land—neither successful or unsuccessful, but somewhere on the bubble. What’s your action plan to tackle your red customers and bring them back to health? Your company needs to know how to proactively keep customers in the green, and also how to handle it when a customer isn’t healthy. A customer success/retention playbook can help with this.

Evolve customer scoring and monitoring as needed

There isn’t a set it and forget it approach to customer health scoring. Don’t assume your first attempt is the only way to do it. Evolve how you score, and how you monitor health across the customer base as your company grows. What works for 50 customers will need some tweaking for 500 customers. The health indicators for your 50 early adopters may be different than the customers you acquire once you are more established. Which leads us to the next tip…

Evaluate for accuracy

If you are constantly surprised by green customers churning, your scoring is off. If you have a bunch of red customers who are always getting your time & resources, staying red, and not churning, your scoring is off. Once you create your customer scoring methodology, evaluate it on an ongoing basis to ensure it’s actually giving you the right scores that help you run the business and improve retention.

Use customer health scores to uncover the root issues

Ideally your customer health score isn’t just a score that helps you see who is healthy and who is at risk. That’s important for retention, sure. But your scores can help you improve your business and your product when you look deeper than the surface. Let’s say you are tracking how long it takes a customer to activate a certain feature, as a health metric. And that metric, in general, is longer than you deem acceptable. Now that you are tracking it, you can seek to improve it. Why is the feature taking longer to activate? What’s the barrier to adoption? You can make product or process changes to help shorten that. Use your scores to track health but also use them to uncover areas of opportunity for improvement in your product and your processes.

Know your ONE metric

For every product there is one metric that is the most important. If this metric isn’t there, you are dead in the water in terms of product adoption and customer retention. The one key metric is unique to each product, so you will need to figure out what yours is. It’s the metric that matters more than any others—it’s pass/fail. It could be that a user sends an invoice if you are a financial application (not that they create an invoice, but that they actually send it). It could be receiving end-user traffic if you are a web-publishing application (not that a page or site is created, or that it goes live but that it actually receives traffic).

You will have to figure out what your one metric is, and when you do, everything starts from there—it’s the thing you design for and drive your customer towards, because without it they will never achieve their desired outcome(s). You, and your entire company, must know your ONE metric and monitor for it religiously. It’s the metric that is pass/fail. Without it, the customer health score is zero, no matter how many other elements of health they may have.

Remember why you need customer health scores

For a SaaS company, customer retention is everything. Externally, the entire market value of your company rests on your ability to retain your customers. Internally, churning through customers is a slow downward spiral of exhaustion. It can also indicate something is wrong with your product, onboarding, support resources or market fit.

Customer health scores, implemented  correctly, can help you spot your at-risk customers, before it’s too late, so you have time to save them from churn.

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