Building a Customer Health Index

How is your relationship with your customers? Are there areas of concern or pockets of excellence that exist in your relationship? Unfortunately, many companies these days can only answer these questions using their gut feel, rather than objective data. Companies need to take a deeper look into the available data in order to gauge the health of their customers. A customer health index can help you do just that.

What is a Customer Health Index?

An objective measure of your relationship with your customers is often referred to as a customer health index (Or CHI). Just as a doctor has a standard set of tests to run and questions to ask at your annual physical, a customer health index contains data to help you understand if your customer relationships are moving in the right way or if a prescriptive plan for improvement is needed.

What should a health index tell you?

A good customer health index should provide metrics that indicate the relative health of various key aspects of your customer relationships. It’s tempting to put every possible metric into a health index, but this is a bad idea for a couple reasons: first, it makes the index hard to maintain and update, and second it makes it harder to understand. The most useful health indexes are concise and actionable.

We’ve found the aspects listed below to be the most effective at helping you understand and diagnose your customer relationships.

  • Product usage: has the customer’s usage of your product increased, decreased or stayed the same over the past 12 months?
  • Marketing engagement: Is the customer engaging with your marketing efforts? Are they attending webinars, opening emails, engaging in your online community, etc?
  • Technical issues: Has the customer been affected by any critical or severe issues recently? Do they have lots of issues opened for weeks or months at a time that are causing dissatisfaction?
  • Partnership: This is typically a more subjective measure of how engaged the customer is with your sales and/or customer success teams. Do they return your calls? Are they willing to serve as a reference? Are they willing to share their roadmap with you and engage with you on future initiatives? This part of the index is for your customer-facing teams to provide input that just can’t be measured or reported on objectively. It’s a gut feel.

The data to measure these aspects typically comes from your CRM, call tracking system, marketing automation system, and other related systems. But when building an index, start with what aspects of the relationship you want to measure, and then determine where the data reside and how to collect it.

Making your health index actionable

Part of making your customer health index effective is to provide consumers of the data with an easy to understand representation of what areas are in good shape and which need improvement. Rather than using an absolute number or a complicated formula, the most effective health indexes have a “green/yellow/red” visual representation so that consumers of the index can determine a customer’s health at a quick glance.

We set rules around when a specific usage metric (logins, document consumptions or downloads, etc.) for one of our clients recently. Each metric in the customer health index was coded as green, yellow or red:

  • If the given metric was 90% or greater of the the 12-month rolling average, they considered this metric “green.”
  • When the metric was between 60%-90% of the 12-month rolling average, they considered the metric “yellow.” This was a sign to investigate why the metric dropped, and identify any areas of concern.
  • In the event the metric was less than 60% of the 12-month rolling average, it was considered “red.” This triggered alerts to the sales and customer success teams that a remediation plan was needed immediately. Depending on the metric and on the customer involved, these alerts also reached the company’s executive management team.

The view from 20,000 feet

A customer health index give you an “at a glance” point of view on your relationship with a given customer. However, you should also realize it can also help in spotting trends across your entire customer base.

Consider analyzing data in cohorts. Customers in their first year of deployment will use your software differently than those in their third or fourth year. Analyzing customers by the number of registered users (small, medium or large user bases) will also give you more meaningful comparisons. As an example, if all your small customers are only using a small subset of your product’s features, maybe it’s time for a webinar that highlights some of the other features they could take advantage of.

Also consider reviewing customers’ data in aggregate from a historical perspective, not just a point in time. One of our clients uses a 12-month rolling average to review their customers’ data. This allows them to identify periods when the usage data peaks or falls significantly from historical averages, and to understand the best timing for training sessions, webinars, and other forms of customer engagement.

Finally, consider using this data to help your marketing efforts. Customers that are “green” across all aspects may be willing to serve as a reference. They may also be willing to provide a case study for your products or services. Knowing the overall score can also help you more effectively target your marketing outreach.

We welcome your comments on this post. We also invite you to contact us if you’d like to know how we can help you succeed.