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Customer Health Score is a Customer Success metric that helps detect product engagement fluctuations and highlight customers at risk with the help of traditional and basic product usage KPIs. Think of these calculations as periodic medical checkups. The only difference is that you, the customer success manager, are the doctor that’s looking to “diagnose and treat” at-risk accounts.
You need to consider the following factors while calculating your health score:
Related: Customer Success Strategy: Identifying the Blind Spots
Interestingly, there is no universal method to determine your Customer Health Score. You’ll need to understand your use case/s and decide on the key indicators before getting started with your health score calculation.
Here are some key customer success metrics that are commonly used while calculating health scores in SaaS setups today:
You can (and should) use a weighted health score, which refers to a calculation that includes priorities and takes KPIs that are more integral to your health score into account. The indicators that you choose should be based on your industry, current trends, business goals, and business strategies. In the next part, we’ll calculate some health scores based on a concrete example.
Related: Top 10 Customer Success Tools for the Productive CSM
For our example, let’s stay with the four aforementioned metrics to calculate the Customer Health Score. These metrics are considered to be SaaS essentials today and are being used by more and more customer success managers.
First, let’s establish the health points for each metric:
Now, let’s fit your customer’s metrics into this formula. Let’s assume:
Your raw Customer Health Score in this case is 10+5+5+10/4 = 7.5
As mentioned earlier, Weighted Health Score can help you gain a more detailed picture of what’s going on since the raw calculation is not always accurate. For example, if your product usage rate is more connected to churn (with CSM pulse not really showing any strong connection), you can make the former a “heavier component” in your customer health score formula.
Assign the weights based on your specific use case:
While the raw score is a good way to get started, the weighted metric shows you a more balanced and precise number that can help improve the indicators that are vital to your business growth. The success is in the details.
What about industry benchmarks?
Unfortunately, while SaaS companies with efficient customer success teams score 31% higher on average, the inherited inaccuracy of this metric makes it difficult to set an industry benchmark. For example, the NPS is not a trustworthy metric because only 20% of users actually take CS surveys. What you get is a limited and outdated metric that’s only good as a complimentary measure.
Related: Top 5 Customer Success KPIs to Track in 2022
Health Score doesn’t cover your relationship risks.
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