Robert Statsky

Healthscores are important for you success organization because they help define what good looks like. You set the parameters and can get a sense of what your customer base is doing.

However, they are not perfect and there is not always a direct correlation between healthscore and renewal, expansion or churn.

Too many times you have customers that have a 100% healthscore and are using all features of your platform but their needs have changed and they decide to churn. Or maybe they have outrgrown your product offering, or maybe they just want something different because even though you have delivered on everything they expected they just want something more.

Any number of reasons can be applied to why a customer churns, but in my experience its usually because they are not using your product or service, they are not using it enough, or they are using it and not seeing any ROI.

Most companies too just do not have the data infrastructure or organization to build out a meaningful health score for their customer base.

Before you decide to spend on software or build out a meaningful healthscore, ask yourself:

1. Is my data in a good enough place that I can make an impact with this?
2. Do I have the resources to build this out and make it work?
3. Am I committed to interpreting what it shows me and actioning the results?

If not, get the house in order in some of those ways before you make the plunge of building out another metric for people to not use.

If yes, then move forward and build out that healthscore.

Do an audit of your customer base and find out:

1. Who are my successful customers?
   1. Why are they successful?
2. Who has been with us a while and how are they using the product?
3. Who continues to renew and why?
4. Who is not successful and why?
5. Who just renews because we have a low price product and they forgot it was on auto-pay on the credit card (also important for healthscore because these “zombies” might be adding revenue but you’re providing them no value, and they will eventually wake up or die off)
6. What features are needed to be successful using my product or service?
7. What KPIs do I want my CSMs to track, and what steps do I want my onboarding team to take to set up these customers for success. If you don’t have an onboarding team, or CSMs yet, insert whatever title you have for the people managing your customer base.

You can build out a healthscore on your own, and make it very simple. Red, Yellow, Green. Or even just At Risk, Nuture, Happy. You can just use three levels on your own, and I would even encourage you to do this BEFORE you invest in software.

You can do that without spending anything other than your time, and it could give you a sense if you have a good idea about your customer base before you get involved with the implementation of the software.

Afterwards you just need to identify who you want to use and what you want to build out. There are different customer success softwares out there and I have had experience with Totango, Churn Zero, Catalyst and Plan Hat. I have never used Gainsight because I have not worked for a company that was large enough to need it but I have heard great things about them and their company culture.

Conduct and RFP, these companies would be more than happy to demo you, and then make a decision from there.

The tools can be expensive, but if you feel its going to elevate your program, take it from there.

As always, here is what Chat GPT has to say:

Building a customer health score using a customer success software tool is a strategic process that involves assessing various factors to determine the overall well-being of your customers. Here’s a step-by-step guide on how to build a customer health score for a SaaS company:

1. Define Customer Success Objectives:
   • Clearly define the objectives and goals that contribute to customer success within your SaaS company. These could include factors such as product adoption, usage frequency, customer satisfaction, and retention.
2. Identify Key Metrics:
   • Determine the key metrics that align with your customer success objectives. Examples of metrics include product usage data, customer satisfaction scores, support ticket resolution times, and renewal rates.
3. Weight Each Metric:
   • Assign weights to each metric based on its importance in contributing to overall customer success. Some metrics may have a higher impact on customer health than others. Ensure that the weights reflect their relative significance.
4. Gather Data:
   • Use your customer success software to collect relevant data for each identified metric. This may include data on product usage, customer interactions, survey responses, and any other relevant information available in your system.
5. Normalize Data:
   • Normalize the data to ensure that different metrics with varying scales are comparable. This involves transforming the data into a standardized format, such as a percentage or a scale of 1 to 10.
6. Set Thresholds and Benchmarks:
   • Establish thresholds or benchmarks for each metric to define what constitutes a healthy or at-risk customer. Thresholds can be based on industry standards, historical data, or specific targets aligned with your company’s goals.
7. Define Scoring Bands:
   • Create scoring bands that categorize customers based on their health scores. For example, customers with scores above 80 may be considered “healthy,” those between 60 and 80 as “at-risk,” and those below 60 as “high-risk.”
8. Create a Formula:
   • Develop a formula or algorithm that combines the normalized scores of individual metrics to calculate the overall customer health score. The formula should reflect the weights assigned to each metric and how they contribute to the overall health score.
9. Automate Calculation:
   • Leverage the automation capabilities of your customer success software to calculate health scores automatically. Ensure that the system can regularly update scores based on real-time data and trigger alerts or actions when a customer’s health score changes.
10. Implement Alerts and Notifications:
    • Set up alerts and notifications within the customer success software to notify your team when a customer’s health score crosses a predefined threshold. This enables proactive intervention and engagement with at-risk customers.
11. Review and Refine:
    • Regularly review the effectiveness of your customer health score model. Analyze how well it aligns with actual customer outcomes and make adjustments as needed. Consider feedback from your customer success team and stakeholders.
12. Incorporate Feedback Loops:
    • Integrate feedback loops into the customer health score model. Capture insights from customer interactions, support tickets, and surveys to continuously refine the scoring methodology and improve its accuracy.
13. Integrate with Customer Success Workflows:
    • Integrate the customer health score into your customer success workflows. Use it as a guide for prioritizing customer engagements, identifying opportunities for intervention, and tailoring customer success strategies.
14. Educate Customer Success Team:
    • Ensure that your customer success team understands the customer health score and its significance. Provide training on how to interpret scores, take appropriate actions, and leverage the information to deliver targeted support.
15. Measure Impact:
    • Measure the impact of your customer health score on key customer success outcomes, such as retention rates, upsell opportunities, and overall customer satisfaction. Assess whether the implemented strategies lead to positive customer outcomes.

Building and maintaining an effective customer health score requires ongoing attention and adjustment. Regularly revisit and refine the model to ensure that it accurately reflects the dynamics of your SaaS company’s customer relationships and contributes to successful customer outcomes.