Is your health score making you sick?

customer successgrowthretentioncustomer success operations

13 Dec

“Why are my green customers churning?”

Cried every VP of customer success, ever.

Answer: Your customer health score isn’t measuring what you think it is

Customer Health as a metric is messy and over-rated. Depending on what stage of growth your company is in, often impossible to retrofit to how people use your product or hard to predict with limited data.

Often, in Sales and Customer Success, we place too much emphasis on relationships. For sure, people buy from people. Throughout my career, I’ve been able to predict with almost 97% accuracy (shakes fist at a troublesome German retailer who shall remain nameless) whether or not a customer will grow. There’s not a lot scientific in here, if I know the exec buyer, they have strong usage, and we have a decent relationship, the likelihood is they’re sticking around.

Until 2023, that is.

When it becomes hard to predict what people are going to do, we tend to (I know I do) jump into the data to find the next level of detail, which will have all the answers. We go deeper and deeper, hoping to find something that will show us why something is happening, just waiting for the lightbulb moment.

And that’s kinda the problem with health scores. It’s almost impossible to pick the right metrics to give you the right score. You start with sentiment and maybe utilisation, and before you know it, you have 30 different metrics giving you all sorts of alerts, and you still have no idea where your vulnerabilities are.

So, before I get into the 4 things you should focus on measuring to give you an idea of health, here are some stark warnings from the Old Woman Lamps hologram, who has come back from the future to warn you you’re wasting your time.

There’s no point in having a health metric for the sake of it.
Keep it simple and objective. Do not overthink it. Do not try and rationalise various data points which contradict each other.
If your CRO/CCO/CEO wants one “because”, challenge their why.
Just because something is “the way things are done” in customer success doesn’t make it right or useful.
Spending a huge amount of money on a fancy CS system will not give you a health metric. You still have to pick the data and balance the metrics. It will be a much more expensive waste of time.

So, if you’re looking for a good assessment of your account health and you don’t want to waste weeks running through spreadsheets of data looking for trends, focus here:

1. Customer Roles

Do you know who’s using your software and why? What’s the problem they’re trying to solve? What value do you give them? Do you know the person who pays for your software? Who is your budget holder?

Plot this out, knowing neither is a red for sure. Knowing one, but not the other is amber, and knowing both is green.

If you know the person who pays the bills, great. But unless you know the users, you don’t have a handle on their behaviour or preferences, and you might loose them to another tool which does something better. Know the users but not the budget holder, and you might lose them to a challenger who can cut 25% off your cost.

2. Customer Fit

Be honest. Is your customer an ICP fit? You have one type of customer who is the most valuable type, and a lot of noisy distractions. You can waste a lot of time on noisy distractions; try not to.

This is also a great exercise for challenging CROs and CEOs. If your book of business is a wild mess of random customers who kinda do similar things, your company is going to have a hard time scaling strategically. Your product roadmap is going to be confused, and you probably won’t be innovating around your original problem statement. Go down that road (trust me here), and you’ll start losing your ICP customers.

3. Utilisation and Value

How are your customers using your product? You’re going to need to draw some lines in the sand here, and I would absolutely advise you not to go too deep for this. There is value in drilling down into every facet of your usage data, but not for this task. Keep it simple: are they using what they’re paying for? How are they using it?

Do you know, for sure 100%, that they are getting value from your product? You cannot look at 100% utilisation and infer value. You need to ask your customer about it. This comes back to relationships. ROI data is almost always on the customer side of the fence. Would they share it with you? If not, you don’t know them well enough. If you’re too scared to ask for fear they’ll look at the data and not find value (I’ve been here; it’s rough), then you have bigger problems.

4. Engagement and behaviour change

Straight up, do they respond to your emails? Do they engage with your marketing? Could you get them on the phone if you asked? Do they reach out to you when they need something?

When you’re looking for engagement cues, make sure you’re considering recent changes in their behaviour or utilisation. Coming back to relationships, do you know them well enough to know if there’s a major strategy change on the horizon which risks your relationship?

You are never going to get to a single number, colour or indicator which predicts whether or not your customers will stay, grow or leave. In my experience, these 4 things are the most important leading indicators of long-term customer behaviour.

Here’s my top tip: Do not overthink this; it will not help.

If you need to spend 15 minutes discussing with yourself why a customer is in your ICP, then they’re not. If you need to write a story to explain why their usage pattern is a good thing, it’s bad. If you’re too scared to ask if they find value in using your product because you know they probably don’t, well, they’re probably going to churn.

The good news is that answering these questions will give you a sense of where you need to work. If you’re managing many PLG customers, so you know the users but not the budget holders, then engage your C Suite to go and make friends with execs in your customer accounts to solidify your relationships. If you have adoption problems, work with your product teams to understand where users are dropping out and design engagement strategies to target these specific problems.

You don’t need to spend days on health scores; you need to find your core health indicators. You can use these to focus on your challenge areas, forecast your renewals and segment your customers.

Don’t waste your time in the weeds. If your heart isn’t beating, you’re not worried about whether or not you need a pedicure. Take a pulse of your customer accounts and then focus on what needs to improve.