What is a Customer Health Score? What is it and how can I use it?

    Doesn't this seem like something that should be done by large data-driven companies?

Not necessarily. Each business could benefit from understanding how customers are feeling and utilizing a scoring system to get ahead of the possibility of losing customers.

Below, we'll examine the concept of a health score, the advantages of developing one, and various ways to measure customer health. Then, we'll present the template to modify it to suit your business.

Ready? We're ready to dive right in!

•   What's a consumer rating of health?
•   Why is customer health score vital?
•   Benefits of using a customer health score
•   How can you use the customers' health scores for your company

What is a client rating of health?

A customer health score is a measure of the chance of a potential customer continuing to do business with your company. It's used mostly for retention purposes that allows companies to anticipate and prevent customer churn.

The criteria typically include:

• Use: How often do they use your service or product?
• Engagement: How involved are they on social media as well as other platforms?
• Revenue: Are they spending more or less than expected?
• Support requests: How many requests have they been submitted?

They can also contain everything from feedback from customers to the time spent on your site before making a purchase. The idea is to combine various data elements into one common metric for measuring loyalty and health of the customer - which is easy to understand and keep track of.

Why is a health score vital?

There was a time when companies could regularly do face-to-face check-ins with their customers. Before the internet arrived, customer loyalty was primarily based on service, price, and proximity. The typical route was to go to the nearest supermarket for toothpaste, regardless of the more extensive options available in a city over.

Nowadays, the internet has changed all that. Consumers have a wider range of options than they ever had before, and are usually just a few clicks of switching suppliers.

It's the top priority for consumers that don't want any obstacles in their purchases. Today, it is more difficult than ever for business to keep customers loyal within a highly competitive marketplace.

Enter customer health score.

This measure is intended to understand how likely a customer is likely to stay with your company in the long run - before they decide to leave and spend your money to another. All without ever needing to make a personal checking-in.

Advantages of using an individual health score for customers

Using a customer health score can offer you various advantages.

   Early identification of potential Churn Risk  

Turning a blind eye to the warning signs of customer abandonment can result in costly. By regularly tracking your customer health score, you'll be able to identify any potential issues quickly and address the issue before it's too far too late.

In the case of a customer has suddenly stopped accessing your application or product, it is possible to look into and offer extra support.

   Increased retention rate  

Saving customers from the brink of a departure is one aspect, but having a health score could assist in increasing the retention rate of your customers. When you understand which customers will be more likely to stay for a long time and be satisfied with your product or service, you can tailor your message and offerings for those clients.

Sending out customized emails that include exclusive deals or discounts to customers can increase their frequency of use and engagement - two key indicators of customer loyalty.

   Improved customer experience  

If you provide personalized assistance to every user according to the individual requirements of each user You'll be able to build stronger relationships with them, which will increase the likelihood that they'll stick with you for more time.

   CLV Increased  

Plus, if you focus on increasing engagement with existing customers, they could be willing to propagate the message about your product or service by becoming ambassadors, as well as natural marketing agents.

   Forecasting of demand with accuracy  

When you understand the state of your clients You can predict accurately consumer demand. This can help you plan for future growth as well as make more educated resource allocation decisions.

Unpredictable forecasts can slow a business's growth by making unnecessary inventory investments, or stockouts that could cause customers to be irritated.

   Improved ROI  

If you monitor customer health scores, you can quickly identify those customers who are likely to benefit from your product or service and which customers require more help, while also offering them resources that offer them the highest return for the investments (ROI).

   Efficient marketing  

Instead of sending general messages to everyone in your database, you are able to focus on people who are who are most likely to stay making sure each communication is as effective as possible.

How to use customer health score for your company

Still not sure which way to implement a health score in your business? This step-by-step tutorial will help you in making your own.

   Define Success of the Customer  

Are they:

• Are you making regular purchases of your product or service?
• Are you logging into your application or web site frequently?
• Interacting with customer service or support staff?

   Choose your measurements  

Review-based qualitative measures are valuable in certain contexts, but you should concentrate on the quantitative aspects of the most effective health score for customers system so that it can be expanded.

This can comprise:

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

Measures of customer behavior aid in understanding how your customers interact with your product or service at any given moment. This can be more valuable than traditional metrics like surveys on customer satisfaction that can take a long time to get results and could be influenced by different biases.

   Develop a scoring system  

Often, at this point, organizations can get ahead of themselves and instantly designate a status for each of their customers.

But the visualization of customer health is the next step. In the beginning, you must create the numerical method of assigning points to each chosen metric.

For example, a customer who is logged at least twice per week may be awarded five points. A customer who logs in only once would get none. If you assign a value to every activity or behavior it is easy to calculate scores for every customer.

   Interpret the information  

Now comes the time to transition the information from being a collection of numbers into something that is more important.

The color code allows you to assign colors or labels to each score you've created, such as green for people who are healthy and yellow for those at risk as well as red for customers at risk of becoming churned.

Certain companies employ the school-based grading system where A+ is a customer that will stay for a lifetime, and F being one already halfway away. A simple 0-100 scale also is a good choice, particularly in companies that have a large list of customers.

   Customer health score examples  

Here's a diagram that you may end up with:

From a glance, you can see how each customer ranks among the current customers, which ones require attention and which is the most important to your revenue streams.

Because Mollie is such a huge consumer, her recent decrease is very worrying and requires immediate action. However, Tom doesn't spend much on his own, and consequently, his current decline might not require a rush.

   Template for calculating health scores of customers  

Before you leave, check out this a simple customer health score template to help.

The first step is to assign points to each range of outcomes. For instance, in our model below, a user who uses the product for less than 5 hours will earn zero points when using the product in comparison to one who uses the product for more than ten hours will earn 100 points.

Then, an individual's scorecard may look something similar to this. Through the use of weight distribution it is possible to rank which metric is the most crucial for your customer health score.

In this instance, the customer is given 60. However, when you add more types (or more precise outcome categories) You can have the more specific look you want and adapt it to the needs of your company.

Conclusion

Health scores for customers are a valuable tool for identifying those who are at risk of becoming churned. When you regularly monitor customer behavior indicators, you'll be able to detect any problems promptly and act before it's too to late.

When you put the right strategy installed, you'll be able to make sure that your clients remain satisfied - and loyal for a long time to come.