Customer health isn’t just essential to help mitigate retention risk — it’s also essential to help drive meaningful customer expansion opportunities.

  • Healthy customers offer a wealth of opportunities for revenue growth and should be a primary focus in a difficult market.
  • Customer health scores should be used to measure relationship and impact. You can ask a range of questions rooted in these factors to gauge customer health.
  • Having data on where you stand with these two dimensions of customer health can help you improve the health of customers more effectively and ensure you retain them.
  • When looking to expand value for a healthy customer, first consider whether you sell (1) the same impact or a new one, and (2) to the same benefactor or someone new.

It’s not enough for customer success teams to make sure their customers are satisfied. Rather, their top priority should be to drive impact for customers and to ensure that the right stakeholders at the customer understand the impact being made. Impact is the secret to customer retention and expansion, and the way to formalize your focus on impact is through a Customer Health program.

Understanding your customer health is important in any market, though a challenging economy will greatly increase pressure to retain your client base. When it becomes harder to bring in new logos, retaining and growing your existing client base becomes even more critical. In the current market, customer health isn’t just essential to help mitigate risk — it’s also essential to help drive meaningful expansion opportunities.

In this GrowthBit, I’ll share the key dimensions for measuring customer health and how it can help you pursue revenue goals through customer retention and expansion.

Measuring customer health based on two dimensions: Relationship and Impact

Customer health isn’t a one-size-fits-all concept, and scoring it can involve a variety of factors, including measurable and intangible aspects of a customer relationship.

At the end of the day, customer health boils down to two core dimensions: relationship and impact.

Four Dimensions of Customer Health Diagram

First, you should seek to understand how well you’re maintaining a relationship with the customer, in terms of both depth and breadth. Do you have a strong connection with enough of the right types of people at client companies? Here are a few questions to ask yourself to test your client relationships:

  • Do we have a relationship with the key buyer personas our company has defined?
  • For each key buyer persona, would that contact agree with the statement “I make time for you, seek your advice, and you teach me how to think differently about my business?”
  • For each buyer persona, would they be able to articulate the business impact you’re creating for their organization?

Second, find ways to measure the impact of your product or service. Why did your customer purchase? What business impacts were they expecting to see as a return on their investment? Are you delivering on those expectations?

Incorporate ways to measure the value of your product for customers on the collective and individual levels. Evaluate the adoption and utilization the client has of your product and services. How does that utilization translate into business impact for your customer? If you don’t have impact data from your customer, present a hypothesis to them and get their reaction. This is a great way to start a valuable conversation around how they define success for your partnership.

Example Hypothesis: If you believe every time a user uses your product, they save ten minutes or get extra work done, apply their adoption to that assumption, and present the time savings hypothesis.

It can be tempting to oversimplify value to just utilization and adoption… you need to be clear about how the numbers translate into business impact.

How to build a customer health score

Creating the health scoring system for your customer base can be challenging, there are many data points to choose from. Start simple — identify four to six items across both relationship and impact that you will use to give you a sense of customer health.

To understand and measure relationship factors, ask questions like:

  • What trends are we seeing across the users?
  • Are we connected to groups within the customer’s organization that could be good users for us?
  • How are our executive stakeholder relationships?
  • Beyond decision-makers, do we have relationships with people who can influence, who can bless a continued relationship with us or who train and network within the company?
  • How are our survey scores?
  • What kind of feedback does the customer offer in interactions with support, product or marketing teams?

It can be tempting to oversimplify value measurements to just utilization and adoption. While you want to look at those things — particularly because they offer straightforward data points — you need to be clear about how the numbers translate into business impact.

Ask value-focused questions like:

  • Are we having the right conversations with the customer about their utilization and how it creates value and drives ROI?
  • How is the client engaging with training and marketing materials?
  • Are they gaining value outside the platform that you can point to?
  • Do customers validate the success criteria?
  • Do different stakeholders and groups in the organization understand the value of the solution
  • Does the value of your solution outweigh any ease-of-use issues? Do they have integrations in place to further ease of use?
  • If multiple teams engage with the customer, what sentiment is each team seeing from them?

Once you’ve defined your indicators, decide how you want them to translate into an easy-to-see score.

In addition to asking these kinds of questions to craft a customer health score, conduct a historical analysis of your customer base. Consider customers who have left, stayed with you, and grown or expanded with you over the past 18 to 24 months.

  • What are the common themes among those relationships and their use of the solution?
  • What trends do you notice in their engagement?

These patterns can lead to big-picture, lasting indicators of customer health.

Once you’ve defined your indicators, decide how you want them to translate into an easy-to-see score. Here are the steps to create a score:

  1. Identify your health indicators.
  2. Decide if you will weight certain indicators more or give them equal weight.
  3. Define a simple scoring method for each indicator – either 1-3 or Red/Yellow/Green with a number equivalent behind the scenes.
  4. Score each indicator and then average (or use your weighted average) to create a total score.

Here’s the bottom line: healthy customers = opportunities.

In times of economic uncertainty (and times of abundance), it is vital to your business to retain your customer base; to do this a client health score that is simple to understand and gets to the heart of the value your customers are achieving is critical. A healthy customer base also means great potential for revenue growth through expansion.

Set up your customer health scoring to focus on the impact you’re helping your customer realize, and the relationships you have with that customer to be able to articulate that impact. Use your scoring to proactively identify areas where you can do more to achieve an ROI with your customers. This will give you a simple way to evaluate your customers, help your client-facing teams prioritize, and allow your company to be proactive in retaining revenue, and creating fertile ground for revenue growth.

This GrowthBit is featured in LLR’s 2024 Growth Guide, along with other exclusive insights from our portfolio company leaders and Value Creation Team. Download the eBook here.