What Is Customer Health Score & How to Use It to Measure Customer Retention

In customer service, your customer health score is a lot like the check engine light in your car.

When that light comes on, it could mean one of two things: your car has detected a system malfunction that can be fixed, or your car is on its last leg.

The same is true in the context of customer relationships. Like the check engine light, customer health score measures a customer's relationship with your brand — including how likely they are to "stay on the road" with your business.

In this post, let's break down everything you need to know about the customer health score.

Jump ahead:

• Customer Health Score
• Why is customer health score important?
• How to Calculate Customer Health Score
• Customer Health Score Examples
• Healthy Customers Are Happy Customers

Customer health scores vary by industry and how you calculate them for your company will depend on the customer behavior metrics that you find most valuable.

Below are a few examples you can use to measure customer health:

• Product usage
• Customer feedback
• Marketing engagement
• Website activity
• Customer support cases
• Product upgrades and renewals
• Community participation

Since you can mix and match to your preference, creating a health score is typically a manual process. We'll review this in more detail later on.

When a customer's health score falls below a determined threshold, you have an opportunity to reach out to that customer before they decide to stop doing business with you.

Based on your scoring system, you can identify customers who are at risk of churning and take steps to make them happy and keep them loyal to your business. Your internal teams can use this system to identify behaviors and patterns across your customer base so that you can be proactive when the health of a customer begins to fall.

On the flip side, customer health scores also help you pinpoint your biggest promoters. And that means you can leverage your high scorers to share reviews about your products and services and champion your business to prospective customers.

Convinced but not sure where to start? Let's review the steps you can take to measure customer health at your company.

How to Calculate Customer Health Score

As shown in the image below, there are five key steps to calculate customer health score.

Let's review each step below.

1. Define customer health.

The first step is to establish a goal for your customer health score. Will it alert you to churn? Will you use it to assess the strength of your customer loyalty program? Or, will you leverage it for something else entirely?

You need to determine what your score will represent and how this metric will fit in with your greater customer success strategy. Once you have an understanding of how you'll use this score, you'll have a better idea of what type of behavior metrics you should be monitoring to accurately measure customer health.

2. Select your predictive metrics.

With your goals set, the next step is to select the metrics you'll use to evaluate customer health. These are typically customer behavior metrics that signal when a customer is going to perform a specific action. We listed a few of these metrics — like product usage or marketing engagement — in the section above.

3. Create a scoring system.

The next step is to create a scoring system. For example, if a customer returns to your website five times in a week, that should add points to their overall score. If a customer submits negative feedback, that would reduce points from their score.

The idea is to create a system that provides you with an overall score that summarizes the metrics you chose before. If a customer is using your products and enjoys working with your business, they should have a positive score. If they're unsatisfied and thinking about switching to a competitor, their score should alert you to that risk.

4. Segment your customer data.

After your scoring system is set up, take some time to collect data. Test out different combinations of metrics until you feel confident that your scores accurately represent customer perception.

Once you have a sizeable dataset, you can start categorizing your scores. How you segment this data will likely depend on how you want to visualize it, but most companies will use number ranges to separate each group.

For example, customers who scored in the top 25% may have a "healthy" score, whereas those who scored in the bottom 25% would be in the "unhealthy" category. You can then average the scores in those percentiles to create overall benchmarks for your data.

5. Visualize your customer health score.

The final step is visualizing your score so everyone on your team can easily determine the health of an individual customer or account. There are a few ways you can do this and the method that you choose will likely be guided by how your customer success team operates.

In the section below, we've listed a few examples of how you can display this metric, regardless of the industry you're in.

Customer Health Score Examples

Customer health scores can be represented in a variety of different ways. Here are a few examples.

Percentage Scale

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This is a relatively straightforward system that can be used by most businesses. Rather than totaling an overall average, scores are gathered from different categories all holding an assigned value. That way, you can have major events — like a product upgrade — hold more weight than a smaller action.

Color Code

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Color-coding is simple, but effective. This system is easy for employees to interpret and can help you provide fast responses. Timing is everything in customer service, and those extra seconds might just make the difference between keeping and losing a customer.

Alphabetical Scale

Similar to color-coding, an alphabetical scale assigns a letter to each customer based on their customer health score. The higher their score is, the higher the grade.

Ranking Scale

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Ranking scales organize your CRM by customer health. In the image above, you can see the customer's rank is listed in the far-left column. The column next to it shows how many points the customer's health score has gained or lost in a given time. This is valuable information to have because it can show you who your happiest customers are.

Healthy Customers are Happy Customers

When a customer's health score is high, usually, so is their happiness level. So in the spirit of customer delight, it's a good idea to develop a system where you're regularly monitoring and evaluating customer health.

After all, you don't want to wait too long after the check engine light comes on to diagnose the problem and find a solution.

Editor's note: This post was originally published in June 2020 and has been updated for comprehensiveness.