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At TSIA, we established an initial framework to create customer health scores. These super set metrics are intended for companies to obtain a reading on their customer’s health relative to their performance using the technology and services they’ve purchased. While each calculation can be considered a snowflake—or individually unique—the important thing is to have a methodology that helps your company align your customer success processes with the outcomes you want your customers to achieve.

Our initial framework included 3 steps to determine your customer health score, which outlined a process to categorize, weigh, and measure subjective and objective elements. We also created a more extensive prescription for our members in the paper titled, “Customer Health Tracking: Past, Present, and Future. In TSIA’s Customer Success member community, the most effective customer health scores are ones that frame it in a predictive way that contain benefits for both themselves as a supplier of technology and services as well as their customers.

3 Reasons You Need a Customer Health Score

I’ll first revisit the primary and future use cases for customer health scores before providing 3 ways to improve usage. TSIA views 3 use cases for health scores:

#1. Predict Customer Churn

This is the earliest and primary use case of health scores dating back to the Salesforce Early Warning System. This is a sore spot in TSIA’s Customer Success Benchmark data. Unfortunately, the majority of Customer Success organizations, cannot deliver against this primary use case.

I am excited about technology improvements that will help. For example, Gainsight announced their new Revenue Optimization platform which is “Powered by a learning framework that continually learns from past outcomes and updates the predictions”. We have also seen great examples of companies that have implemented their own technology to help.

#2. Predict Expansion

It is just as important to know when your customers need more help, and there is nothing wrong with selling them more technology and services during their journey toward accomplishing their desired outcome. Like a good doctor, Customer Success professionals should think about prescribing the next logical step in their customer’s journey with the goal of achieving progress and ultimately some success against a quantifiable and measurable business outcome. In some cases, this would require additional technology and services from either your company, or another third party.

The question is, do you know when it's the right time to do this, and do you have the predictive ability to do so? The data says most of us do not, and we see this less common than the first use case.

#3. Predict Your Customer’s Business Outcomes

While the first two use cases focus on the supplier of technology and services, ultimately this is what we as a broad Customer Success community are chartered to do. Customer Success professionals are the value realization engine that delivers the against the promise of technology and service offers. In order to deliver against these promises, we should start thinking about the customers journey in a more dynamic way.

The next logical step in the customer success continuum will be to use predictive analytics to dynamically engage with your customers along their journey.

In our “2019 State of Customer Success” paper, we spoke about 6 ways to think of scaling your Customer Success organization. One of those ways was to operationalize the journey by aligning success plans and playbooks to that journey. However, the best plans put in place still yield bumps in the road. If we think about this in our everyday lives, we see good examples to steer us in the right direction when we may be headed down the wrong path. After all, good traffic applications can tell you when there is an accident ahead and reroute you to get to your destination in the most efficient way.

The next logical step in the customer success continuum will be to use predictive analytics to dynamically engage with your customers along their journey. Using similar frameworks that we have created with customer health scores may be the key to unlocking this predictive capability. In fairness, after working with and observing 250+ Customer Success organizations in three years, the number of companies I see implementing this third use case is zero, nada, zilch. However, the best Customer Success organizations in the world are starting to think about engagement in a more dynamic way.

3 Ways to Improve How You Use Customer Health Scores

Based on the data, many of you would feel even the first use case is a stretch. Here are three ways to improve how you are using customer health scores today.

#1. Start With “Why”

Every Customer Success leader should be able to effectively communicate the following relative to customer health:

  • Why do you have a health score?
  • Who is using the health score?
  • What are the elements that make up your health score?
  • What does Customer Success and other organizations do with the information derived from the score (i.e. additional playbook triggers)?

More often than you may think, Customer Success leaders struggle with the first question. If you can’t answer why you have a health score, there is improvement to be made. While we are open to more use cases than those mentioned at the beginning of this blog, Customer Success leaders need to start with why. And yes, I am huge Simon Sinek fan.

#2. Improve Your Internal Communication Plan

One of the bigger missteps when first launching customer health scores are the various interpretations from individuals inside of your company. Numeric and color value will be interpreted differently, for example. For the perfectionist inside of your company, a 99 out of 100 would immediately have a negative connotation. Colors in different parts of the world could be interpreted in unintended ways. Where Sales sees an opportunity, Finance may see disaster.

Make sure that you have a few slides in every internal QBR, sales meeting, and other internal forums on the basics of customer health scores.  It is clear we do not spend enough time doing this upfront when first rolling it out, or when a change is made.

#3. Iterate on the Calculation

I will crush my culinary friends with this cliché but here it goes anyway—creating a health score is like cooking spaghetti. If you were like me, you threw it against the wall to see if it would stick. In other words, this is trial and error at its finest.

Ideally, you have moved well beyond trial and error and have some data analytics help that will align back to your core use cases. It is also important to realize that data changes, and trends are happening all around you. The way you calculated when you first launched it, may need to be revisited for several reasons. Revisiting your categories, weights and measures with friendly help from your data analytics resources is highly recommended.

Learn More About Customer Health Scores at TSW

At our upcoming Technology & Services World conference, taking place October 21-23, we’ll be covering this topic and more in detail, sharing additional data and real-world examples. Be sure to register today to take advantage of the valuable insights you can look forward to in our Customer Success track, featuring sessions from some of the industry’s leading Customer Success experts, including:

  • “The Next Level of Customer Success: The New Customer Success Services Portfolio at SAP,” presented by SAP
  • “How Oracle Customer Success Drives Transformation Through a Value and Fee-Based Engagement Model,” presented by Oracle
  • “Balancing the Customer Journey and Renewals,” presented by Changepoint
  • “Transform Your CSMs from Reactive Account Managers to Proactive, Outcome-Focused Customer Advocates,” presented by New Relic

Phil Nanus

About Author Phil Nanus

Phil Nanus, is the former vice president of customer success research for TSIA. In this role, he worked closely with member companies to deliver research and advisory programs focused on helping them optimize their customer success organizations and effectively deliver customer outcomes. Throughout his career, Phil has held various positions related to enterprise software and IT services, including global leadership roles in customer success, support, professional services, managed services, and cloud services. Prior to TSIA, he was the vice president of customer success at Infor, where he led a team of Customer Success Managers (CSMs) focused on driving customer adoption of their technology.

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