Getting Started

I am often asked how I built and scaled an award-winning Customer Success team. While there are many chapters to that story, one topic that seems to gather the most interest is how to build an effective customer health score. And for good reason. I think it is fair to say that measuring and tracking customer health is at the foundation of Customer Success itself.

Step 1: Scrub and segment your customer data.

The old saying “garbage in; garbage out” definitely applies when it comes to customer health metrics. If you are not confident in your data, don’t proceed with this exercise until you are. Once your data is in good shape, think about segmenting your customer data by Stage, Size, and/or Location. Each value within these segments should be defined as a drop-down list in your CRM to ensure high-quality results. Sample values for each segment might include:

Stage: Prospect, Trial (establish value), Deployment (grow value), Implemented (adopt & expand), Mulligan (re-implemention), Lost (churned).

Size: Small (< 500 employees), Midsize (< 3,500 employees), Enterprise (3,500+ employees), High (highest potential for revenue growth regardless of size).

Location: AMER-North (Canada and Mexico), AMER-South, AMER-US-East, AMER-US-Midwest, AMER-US-West, APAC, EMEA.

Step 2: Map Customer Journey to Return On Investment

If your product requires a user login, you will want to measure how often your application is being used. If your product requires an Administrator to send an invitation to new users, you will also want to measure the percentage of users who have accepted their invitation. Now work your way down the path of what “master records” a customer needs to create to gain value: perhaps it is the number of inventory items, projects, or requisitions. Next, think about how often those master records are used. Consider using ratios or percentages as this will help normalize your results. Lastly, ensure that your scorecard includes at least one metric used by your sales team to demonstrate ROI. When I was at Jobvite, we first used Referral Hires and later reported Average Time to Hire.

Step 3: Gather product usage data

Product/Engineering teams usually have tools in place to capture customer usage data so they can measure feature adoption, usage patterns, and overall behavior. Ideally they can provide this to you in a spreadsheet with each customer in a row and each feature/function in its own column. Ideally their data matches the requirements you’ve defined in Step 2 above. Either way, you want to collaborate on this project as what you learn from customer health will likely be fed back into the product roadmap.

Step 4: Crunch the numbers to determine Green-Yellow-Red

This step is more art than science with some analytical skills required. Take your usage data now in a spreadsheet and add the customer segmentation values from Step 1 above. Next, apply the AVERAGE function for each feature/function column. This provides a starting point for a new column of data that ultimately receives a 0, 1 or 2 performance rating for that feature/function, where 0 is unacceptable (red), 1 is average (yellow), and 2 is your target adoption goal (green). Each feature/function in your health score spreadsheet will have a column for the nominal usage value as well as a the performance rating. Use nested IF functions in each performance column to do the work for you. Ensure you consider Stage from each customer’s journey as you determine your performance ratings as a customer in “Deployment” should not be graded the same as one in “Implemented.” Once you have all your performance columns completed, create two more columns: Overall Performance and Health Score. Overall Performance is the average of all the individual feature/functions performance columns. Finally, Health Score is where you use the IF function again to determine a final score. Your formula might be as simple as < 1 = red, > 1 = green, and everything else is yellow.

When you have established your health scores by customer, have your CSM team run your playbook for each scenario. Don’t forget to run this process at least once per month, track how overall scores are changing, and understand the overall health of your business.

Thanks for reading and would love to know your thoughts. While I can’t share the internal view we achieved for customer health, you can view the external example of the final product here as it was shared with each customer.

David Lahey

VP of Customer Success & Sales Operations, Fond