46% of Customer Success teams use health scores to forecast churn and renewals (CSM Practice). But health scores are only as good as what you put into them and the actions that they’re able to drive. We recently hosted Kristi Faltorusso, VP of Customer Success at ClientSuccess, and Founder of CS Real Simple, for a session to unpack what makes a high-performing health score. Kristi defines health scores as a metric-based scoring mechanism used to predict customer behaviors. Health scores represent “your organizational DNA. They describe what makes your customers unique in how they behave in ways that support your team’s ability to intervene appropriately.” Here are our top three takeaways from the session:
1. Ground health scores in impactful, timely data sources that describe the entirety of your customer experience.
Customer relationships have many moving parts. Kristi identified seven essential components of customer relationships to reflect in any health score — engagement, usage, sentiment, adoption, billing, relationship, and advocacy.
It’s critical to support each of these metrics with high-quality data that is clean, current, impactful, and well-integrated. “The data is the most important thing. Without actionable data, you won’t have an actionable health score.” However, she cautioned that data is not created equal. Whatever data you’re pulling to reflect each of these components of your customer relationships must be impactful in the context of your business.
Kristi cited important differences between engagement types like receiving an email from your customer vs. an all-afternoon on-site with your customer’s executive team. It’s also important to consider whom you’re engaging with — "of course, you want a regular cadence with your main point of contact. Still, they shouldn’t be your only lifeline into the customer’s organization.” A monthly touchpoint might be fine for some customer relationships, but others may benefit from a tighter direct communication cadence.
To reflect usage, Kristi says, understanding variability in usage trends is probably more important than whether they are logging in every day or once a week. It matters more to understand whether all available licenses are active and, if not, why?
Sentiment, too, is a crucial dimension of customer health. Kristi highlighted organic customer feedback as one of the most impactful sources of sentiment data.
“Survey feedback is great, but it’s very prescriptive. It’s so critical to listen to what your customers are telling you when you’re not asking. We always say that what your customers are saying when you’re not in the room is how they really feel. So if you can capture that organic customer feedback with technology at scale, that is the truest sense of customer sentiment.”
Adoption is another important to health scores. Kristi explained that it’s critical to understand how customers are adopting different modules and feature sets. If their adoption strays from the original plan, “you may not lose customers, but they might down-sell, and you can lose revenue” if they are struggling to realize value from the functionality they identified as necessary earlier on.
“If they aren’t paying, it’s not a mutually beneficial relationship.” Kristi includes billing as a component in her health scores, too. “CFOs love that I include this. At the most fundamental level, payment is a strong indicator of the health of the relationship.”
When evaluating relationship criteria in a health score, the most important question to ask is, does my customer consider us a trusted advisor? “A good CSM will know if you’ve reached that point.” Furthermore, Kristi takes into account the scope of the overall relationship. “Ideally, you want to develop your customer relationships high and wide, and you want multi-threaded relationships.” But no matter the scope, it’s essential to understand the whom, when, and why of your customer engagement patterns.
“Advocacy is the final stage in my customer journey. If we’ve done an excellent job at covering the other 6, we get to this point of advocacy, where that customer is willing to be a reference, speak at events, and becomes our best-performing sales channel.”
2. Health scores should allow you to identify, ideate, and intervene.
When you’re feeding timely, impactful data describing the different components that Kristi described into your health scores, you can use health scores to drive meaningful action for individual accounts and better decisions that positively impact entire customer segments. Kristi spelled out a three-part framework that she uses to scale Customer Success by acting on the insights that her health scores deliver — Identify, Ideate, Intervene.
The Identify step is all about identifying customers whose behaviors indicate some need to provide strategic support. This step is where your health score tells you where you need to start. If you’re using a green-yellow-red mechanism for scoring customer health, you might start with your red accounts. Kristi clarified that it’s important to not over-index on red customers because there’s a possibility that they are too far gone and may not represent enough revenue to justify a substantial rescue effort. “Yellow customers garner a lot of attention because there’s a strong chance I can bring them back to green. Perhaps they’re asking for my help, or I failed to train and properly enable them.”
The Ideate step is about figuring out what you’re going to do to mitigate risks or capitalize on opportunities. “A lot of Customer Success tools have playbooks to guide those actions. But if you don’t have them, it’s not the end of the world. You should look at the data and say, hm, the customer is not using the product. Go find out why they aren’t using the product.”
The Intervene step focused on taking prompt, data-driven actions to drive desired outcomes.
“Customers want you to lean in and help. This step is where proactive motions take stride, and you’re able to use data to jump in and take action. Your customers may not even have had to tell you that something was wrong. This is a moment where you transform the experience for your customers. If you can do that consistently, you will optimize your customer experience so much so that even if your product is often broken and buggy, you might be able to save customers.”
Kristi also mentioned that intervention isn’t limited to saving customers — this framework is equally applicable when you identify customers who are doing great things. “Healthy customers who understand and have realized your value proposition can become your best sales channel.”
The benefits of adopting a framework like Kristi’s, based on timely, impactful data, include increased customer value, retention, advocacy, and net recurring revenue. “Using your health scores to identify risks early and using it as a leading indicator of what’s happening with your customers means you can intervene before things escalate. Even though you may not be able to save everything, this is key. If you can prevent even 2% of churn, that value compounds significantly over time.”
3. Health scores should be as dynamic as your customer relationships.
While each of the components Kristi outlined are critical to a high-performing health score framework to understand and improve any customer relationship, Kristi clarified that health scores are not one-size-fits-all. The weighting of individual components is especially nuanced across different business models. For example, suppose you have thousands of smaller digital customers. In that case, it’s unlikely that relationship will have a heavy weighting since you are unlikely to be spending much time with those customers directly. “If possible, you should create health scores that are unique to different segments.”
Weighting different score components can help you capture key nuances in individual customer relationships that directly affect outcomes. So how do you hone in on weighting that makes sense for your business? Kristi recommended analyzing historical customer behavior for insight into how to score different types of customers. “Historical data will tell you how to score different customer types. Look at historical customer behavior. What do you observe about customers who churned? How do things look different for customers who’ve grown with you and downgraded?” Kristi explained that understanding historical patterns is key to go-forward success in scoring customer health.
And how do you know it’s working? Alignment between health scores and Customer Success Managers’ perspective on customer health is an excellent sign that your health scores are performing as reliable indicators of the future. “If I have an opportunity marked for a 90% likelihood of renewal, and the health score is red, something is wrong. If a green customer churns, something is wrong.”
Another sign that your health scoring works reliably is that cross-functional teams and executive leadership take it seriously. For example, your CFO and the finance team will only put their trust in clean health scores based on impactful data — otherwise, they aren’t helpful in a forecasting context. Your Sales team should look at health scores and understand the impact on pipeline generation. Your Product team will pay attention to what they might need to fix to keep and grow more customers.
Finally, Kristi emphasized that it’s important to iterate on health scores. “Your health score should not have a shelf life of more than 18 months. In my tenure at different organizations, I’ve tweaked health scores five times.” Between changes in your product and customer base, the health score must continue to reflect important nuances in your customer relationships.
Thanks again to Kristi for a great session! Check out the full recording below for more.