Health scores are a single computed value for each customer based on KPIs that are important to your business. Customer Success Managers can leverage health scores to better understand risks in their portfolio and identify customers that need additional guidance in getting the most out of your product or service.
What is a customer health score?
An ideal health score captures the attributes that best reflect a successful customer for your business. It is not a predictor of churn or renewal, but rather a measure of whether a given customer is behaving in the kind of ways that you believe a long-term successful customer should behave. While that is often correlated with renewal, there can be many reasons that an unhealthy customer renews or a healthy customer churns. But by focusing CSMs on driving customers toward known-good behaviors, you will see improvements in renewal and upsell across your business as a result.
CSMs should use health scores to gauge the status of their accounts as well as prioritize and customize customer outreach. They can also be used as one of several ways to measure the performance of the CSM team.
Configuring health scores
Health scores can be configured using a variety of factors, from product adoption and engagement to the perceived quality of the customer relationship.
Common health score factors include:
User activity and feature adoption are objective metrics based on in-app usage, or you may have other custom metrics that capture key indicators about product engagement. Support ticketing trends, billing history, and customer feedback (e.g. NPS or CSAT) also offer quantifiable indicators of perceived value and loyalty. In contrast, a CSM's personal assessment of the customer relationship is more subjective and nuanced.
Despite the wealth of data often available in the system, we recommend that you choose 3-5 KPIs to construct your health score. Having fewer KPIs can result in a low correlation between your health score and long-term customer success. Having more KPIs can result in every account looking the same since every customer will be bad on a few KPIs.
By limiting to just a handful of the most important KPIs, you can get a good measure of which customers are generally behaving in the ways that you want, and you can instead use alerts to notify CSMs of situations where a customer needs attention for specific reasons.
Crawl, walk, run
Freshdesk Customer Success allows health scores to be fine-tuned for the needs of each business.
For example, some CSM teams might prefer to focus on user activity above all else. Other teams may prefer to lean on NPS scores or other non-usage data instead. Others may want to include a combination of both approaches.
Whatever your goal, start with a health score configuration that is simple and easy to understand. Resist the urge to include everything right away. Too many metrics will make it harder for you to validate your initial results in the beginning.
Weighted health scores
In addition to selecting the right factors, you should also consider the relative impact of each metric on the overall health of an account.
For example, you may see a high volume of support tickets when launching a new product or introducing new features.
But this is not necessarily a bad thing.
In fact, it could be perfectly natural that your customers are submitting lots of questions and creating many tickets. In this scenario, you might underweight the number of support tickets as an indicator of poor health.
Here is one example of a health score configuration in Freshdesk Customer Success:
This health score configuration evaluates three different factors:
Number of outstanding support tickets
Level of product usage activity
The CSM's personal assessment
However, product usage is given a bit more weight (40%) compared to the other two metrics (30%), and thus it has a slightly more significant impact on the overall health score calculation for each customer.
Segmenting health scores
Depending on your customer base, you may find that a one-size-fits-all health score is unrealistic.
Metrics and thresholds may differ between your Enterprise and SMB customers. Or, you may want to focus on different KPIs along the customer journey.
When thinking about customer health, you should also consider your customer segments and lifecycle stages.
Creating multiple health scores will let you fine-tune each configuration to evaluate customer health across your entire portfolio better.
In the following example, there are two distinct health score configurations:
1) "Onboarding," and 2) "Default."
Here, customers are given a specific health score configuration while they are in the onboarding phase, and another health score configuration once they have progressed in their lifecycle.
Other examples of health score segmentation:
Account value (current or potential)
Number of users
Product or subscription
and many more
Start with what you know and test assumptions
Once you've decided which factors are important, it's time to configure your health score and weigh the individual components.
Start by looking at accounts that you already know are healthy, as well as some that seem to be struggling. Analyzing your existing customers will help you establish some initial thresholds for each of the factors you are evaluating. Monitor and adjust your thresholds over time — a customer health score should evolve along with your product and business. In other words, don't just set it and forget it.
Another good practice is to test your assumptions about customer health using historical data. You may find that certain metrics don't coincide with poor customer health or that weighting should be adjusted based on its relative impact on the overall score.
Analyzing customer health
Most Customer Success teams tend to bucket the health of their accounts into three categories: 1) green, 2) yellow, and 3) red.
In fact, the term "red account" is synonymous with poor customer health.
Customer health is also represented by a quantifiable score between 0 and 100. This helps CSMs understand the health trend of an account, regardless of its current color band.
Let's look at a potential health score range:
Green: 71 - 100
Yellow: 31 - 70
Red: 0 - 30
If an account is currently at 75 they are considered green. However, if this account was 85 last week, and 95 the week before, it might be time to start addressing this account's steady decline!
Conversely, if an account is currently 65 they are considered yellow. But if this account was 50 last week, and 45 the week before, then it might be a positive sign that the account is now heading in the right direction.l
In other words, a quantitative health score provides additional context for CSMs over time. Depending on the size of your customer portfolio, it can also help rank and prioritize accounts within each green, yellow, and red health band.
Check your results
Finally, you should examine the results of your configuration to see if it's representative of some of your well-understood customers — both healthy and risky accounts.
If the results don't line up with your expectations, simplify your metrics to help you troubleshoot the culprit. Lastly, ensure each account is using the right health score configuration as they progress in their customer journey.
There's no hard science to configuring a health score, and some accounts may not fit perfectly into your mold. But with some careful consideration, and a bit of tweaking, you should be able to come up with a model that does an effective job of capturing the health of your customers.