How to Develop Customer Health Score Metrics for Your Own Company
While prospecting for new clients is a huge part of running a successful business, it’s also vital that you spend time and energy on your existing clients, too. According to Review 42, 65% of business tends to come from existing customers. Plus, acquiring a new customer can cost up to five times more than retaining your existing customers. That’s why retention should always be a key part of your business plan.
When it comes to keeping the customers you already have, tactics like personalized marketing, loyalty rewards, and ongoing customer service can all help. However, unless you have a way to concretely measure your customers’ “health”, what you are doing can be labelled as “educated” guessing and nothing more. Knowing which customers are happy with your service and which are on the verge of jumping ship takes the guess-work out of it and lets you make decisions with hard data.
In this customer health score guide, we’ll explain the importance of tracking the “health” of your customers and give you some tips on how you can set up a scoring system that tracks your customer relationship metrics.
In our last post, What is the Customer Health Score and Why Does it Matter?, we took an in-depth look into this subject. For the sake of our readers that just found us, here is a brief recap. If you are a loyal, recurring reader, please skip the next two paragraphs to move on to the practical implementation of this method in your business.
What is customer health scoring?
Customer health scoring is essentially a measurement of your customers’ “health” in relation to brand loyalty and customer satisfaction. By measuring customer health, you can get a good idea of which customers are likely to stick with your brand for the foreseeable future, and which customers may need a little extra attention.
Every company measures customer health metrics differently since every company will use different metrics to determine how happy a particular customer is. For instance, one company may find that monthly purchases correlate with good customer health, while another company may find that they can successfully track customer health by tracking customer engagement with email newsletters and social media.
Why customer health scoring matters
There’s no way you can stop a customer from leaving once they’ve already left. By carefully tracking customer relationship metrics using a customer health score, you can anticipate which customers are likely to leave before it happens and make adjustments to your service accordingly. With a good customer health scoring system in place, you can refine your customer retention strategy and put your focus where it really matters. This type of analysis will, in turn, help you to maximize customer lifetime value.
Customer Health Score Guide: How to Score the Health of Your Customers
Because every company’s method of customer health scoring is slightly different, setting up a customer health scoring system isn’t quite as simple as checking customer metrics. Here is a customer health score guide to help you get started.
- Define your version of customer health
Begin by considering what your company’s version of customer health might look like. A good place to start is determining what your most loyal customers all have in common. Do they all tend to make frequent, regular purchases from a customer account? Or, do they all report a high level of satisfaction with your product? Or maybe, your best customers all have strong relationships with the sales team in your company.
In most cases, determining how you want to define a “healthy” customer will involve a mixture of various metrics depending on the type of service or product you provide.
Curious to find out which metrics you should focus on? Intercom offers a great breakdown of how to work out what’s important for your business.
- Determine your scoring system rules
Once you’ve narrowed down which specific metrics you’ll be focusing on, determine how you’ll score customers based on these metrics.
For instance, if you’re looking at purchase frequency, decide which frequencies correspond to an extremely healthy customer, which frequencies correspond to a moderately healthy customer, and so on. Or, if you’re looking at customer engagement, determine exactly how many email click-throughs or social media likes indicate which level of customer health.
- Analyze your scoring system alongside real data
At the beginning of your new customer health scoring system, there is bound to be some trial and error. To improve your customer health scoring system, compare it with real-life customer data to ensure that your system gives you an accurate indication of a customer’s satisfaction and loyalty.
- Create a simple scoring system that your company can use
Once you think your scoring system ‘works,’ make it easy to use. Some companies opt for a 1-5 system to indicate different levels of customer health, with 1 indicating the danger zone and 5 indicating optimal health. Other companies might use a color-coded system.
Decide on a visual scoring method that makes customer health instantly discernable for everyone in the company. If you’re a client of The Birthday Company, you’ll find an effortless way to apply these metrics to your customer list by using the rating column in our client list console. The column is sortable and provides an at-a-glance view of the customers that would require attention. If you’re not already a customer of The Birthday Company, hi, pleased to meet you, we provide greeting card and gift services for businesses. Our service is by far the easiest to incorporate into your client relations system, and the quality of our cards and gifts is unmatched.
Creating a customer health score system that works can take some time while you figure out exactly which metrics your company should be looking at. Follow this customer health score guide to get started on the right foot. With patience and careful metric analysis, you should soon be well on your way to understanding just how healthy your customers really are.