Customer health scores offer a snapshot of customer engagement, satisfaction, and potential for growth.
By understanding and tracking health scores, companies can identify at-risk customers who need support, recognize accounts ready for expansion, and make data-driven decisions that drive retention.
In this blog, we’ll cover what customer health scores are, the core metrics involved, how to calculate them, and how they can fuel PLG strategies by aligning product improvements with user needs.
What Are Customer Health Scores?
In a PLG framework, a customer health score measures how engaged and satisfied a customer is with your product. This score, usually a composite of several key metrics, indicates a customer’s likelihood of staying, churning, or even expanding their usage. A high health score suggests that the customer sees value in the product and is likely to remain engaged. Conversely, a low score signals potential issues, giving teams the opportunity to intervene.
Tracking customer health scores provides multiple benefits, especially in a PLG environment. First, it helps identify at-risk users, allowing proactive engagement before they churn. Second, it reveals upsell opportunities, as highly engaged customers are often more open to premium features or expanded plans. Lastly, it gives insights into product performance, showing which features or experiences are driving satisfaction, and where product improvements can further enhance retention.
Core Components of Customer Health Scores
The components that make up a customer health score can vary, but there are several essential metrics. Here, we’ll dive into these core components in a detailed, easy-to-read format.
(1) Product Usage and Engagement Metrics
Understanding how often and how deeply customers use your product is foundational for calculating a customer health score. Key product usage metrics include:
- Login Frequency: The more often users log in, the more engaged they tend to be. Frequent logins indicate that the product is an integral part of their workflow or routine.
- Feature Usage: Identifying which features are used frequently can reveal high-value areas of the product. Users who consistently engage with core or premium features are typically more satisfied and invested.
- Session Duration: Longer sessions often suggest that users are finding value in the product. Monitoring average session length can help gauge user engagement.
- Milestone Achievements: If the product has specific milestones (e.g., completing onboarding, using advanced features), tracking these completions shows whether users are progressing and finding increasing value.
(2) Customer Satisfaction Indicators
Customer satisfaction scores give insight into how customers feel about the product experience. Common indicators include:
- Net Promoter Score (NPS): NPS surveys ask users how likely they are to recommend the product, offering insight into overall satisfaction and potential advocacy. A high NPS generally correlates with a high customer health score.
- Customer Satisfaction Score (CSAT): CSAT surveys capture immediate user feedback on specific features or interactions. High CSAT scores indicate satisfaction with particular aspects of the product, while low scores help identify areas needing improvement.
- Support Interactions: Monitoring the frequency and nature of customer support interactions can also reveal satisfaction levels. Frequent support requests may suggest product issues, while low interaction rates typically indicate a smooth experience.
(3) Account Metrics and Financial Indicators
Financial metrics and account-level indicators reflect the value each customer brings and their investment in the product.
- Contract Renewal Rate: High renewal rates signal that customers see value over time, while low rates may indicate potential churn. Monitoring renewal rates allows for proactive engagement.
- Account Expansion or Upsells: Growth within an account, such as upgrading to a premium plan or adding more users, shows that customers are investing more in the product. This is a strong indicator of satisfaction and future revenue potential.
- Monthly or Annual Spend: Tracking the spending amount helps categorize customers by value, giving an idea of who may be more likely to expand or require retention efforts.
Build and Calculate Customer Health Scores
This section is essential because building and calculating a customer health score requires a structured approach to combine all metrics into one actionable number. Follow these steps to establish a consistent and reliable scoring system.
Set Up a Scoring System
Creating a standardized scoring system ensures that all relevant metrics contribute to a clear, easy-to-interpret health score. There are several methods to create scores, including:
- Percentage-Based Scores: Assign each metric a value between 0 and 100 based on the customer’s behavior or engagement level. A higher score reflects a healthier customer relationship.
- Range-Based Scores: Define score ranges (e.g., 1-10 or 1-5) that represent levels of health. For instance, a score of 1-3 might indicate at-risk customers, while 8-10 signals high engagement and satisfaction.
Choosing the right scoring system depends on your team’s preferences and the complexity of your metrics. Consistency across all customer scores will enable easy tracking and comparison.
Weight Each Metric Appropriately
Not all metrics carry the same weight in a customer health score. Determine the most influential metrics based on your product’s value drivers and user behavior. For example:
- High Weight: Product usage metrics, if engagement is central to retention.
- Medium Weight: Financial metrics, as they show account value but may be less predictive of day-to-day engagement.
- Low Weight: Satisfaction indicators, since they are more subjective but still add context.
By weighting metrics based on relevance, you create a balanced score that reflects the customer’s overall health while highlighting key engagement factors.
Calculate and Normalize Scores
Once metrics are weighted and combined, normalize the scores to keep them consistent across all accounts. For example, set a maximum score (like 100) and adjust individual scores proportionally. Normalizing allows for easy comparisons across accounts and ensures that scores remain accurate over time, even as customer data fluctuates.
How to Use Customer Health Scores to Drive Product-Led Growth
Identify At-Risk Accounts and Provide Support
Customer health scores are especially valuable for spotting at-risk accounts. Low scores indicate potential disengagement, giving teams an early opportunity to re-engage users. Use low scores as a signal to reach out proactively, offer support, or introduce them to underused features that could increase their satisfaction.
Interventions could include personalized outreach, onboarding refreshers, or a demonstration of features they may not yet have explored. By addressing these early indicators, your team can reduce churn and retain more users.
Recognize Opportunities for Expansion and Upsells
High health scores often suggest that users are fully engaged and may be open to exploring more advanced features or plans. These accounts represent ideal opportunities for expansion or upsells. When a customer’s health score consistently ranks high, consider suggesting a premium upgrade, additional features, or complementary products.
Effective expansion efforts in a PLG model focus on helping users achieve more value. Tailor recommendations to their usage patterns, highlighting how an upgrade could enhance their existing experience. Using health scores for upsells aligns with user needs and helps ensure expansion efforts are well-received.
Align Product Improvements with Health Scores
Analyzing patterns in health scores can reveal which product areas are performing well and where improvements are needed. For instance, if users who interact with a particular feature consistently have high scores, consider enhancing or promoting that feature more widely. Conversely, if certain features correlate with lower health scores, prioritize updates or consider adjustments to improve the experience.
Health scores provide a feedback loop that helps product teams make data-driven decisions. By aligning product improvements with health score trends, your team can ensure that updates enhance user satisfaction and engagement, ultimately supporting the PLG strategy.
Conclusion
Customer health scores are essential for any Product-Led Growth strategy, helping teams gauge satisfaction, prevent churn, and identify expansion opportunities. By understanding key metrics, building accurate scoring systems, and applying health scores in a targeted way, product teams can align user needs with product improvements and revenue goals. Regular tracking and refinement of these scores ensure that PLG strategies remain focused on user success, driving sustainable growth and retention.
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