Customer Success has became a critical function for almost all businesses now, and it is not just a result of the emerge of SaaS business
The need for the Customer Success function was mainly a result of many interleaving factors, the rapid increase of services/products and new business models from a side, and the elevated customers’ expectations from the other side.
In other words, from the customer side…
The regular Market->Sell->Service->Support->Maintain approaches could cater to the new customer desires of consolidation, sustainability and reliability
From Product/Service providers side…
Business nurturing and continuity became too sophisticated to handle by the classic functions
The Formula
I had a meeting with two senior Forrester analysts for around one hour, the whole meeting focus was about how to think of a way to measure customers’ health, and we all agreed that such formula should be owned by the customer success function as it is the only global function that can overlook the overall performance of all stakeholders.
I have this model that I developed personally through my years of experience, I believe the model answers this dilemma and transforms the kind of qualitative data, activities and engagements into solid quantitative figures that can be used by executives and subordinates to trace, diagnose and fix issues when needed
I explained it to them and and interesting discussions started, and it has been later featured by Forrester here
I am summarizing it below, with the assumptions made in the Disclaimer section
Disclaimer
– This formula is not intended to measure customer satisfaction by any means, yet it gives a great indication on customer satisfaction and can be taken into account in other applications or approaches that might be more focused on the customer satisfaction part
– This formula is targeted for large to medium B2B engagements, where multiple entities/individuals from the vendor deal with one account
– This formula’s interest is to measure how healthy the customer business is with respect to the vendor’s products and services usage
– This formula cannot be used for accounts of age less than one year
– Data to be gathered in this model are to be gathered on yearly basis
Customer Health Score formula
Measuring the health of any account is a sophisticated task that should take into account multiple and diverse metrics
This formula can assess the performance of mostly all departments that deal with the customer, and how the customer is perceiving their engagements, like:
- Sales
- Marketing
- Support
- Customer Success
- Other Supporting departments
It concludes the health of the account into four main categories as following:
- Stability
- Maturity
- Innovation
- Adoption
Each category has set of sub-categories that are scored as demonstrated below, the output number is normalized to a base of 10 so the overall health of the account is finally measured as a value out of 10, each value range is mapped to the following three statuses:
– Healthy: if the score is more than or equals to 7.5
– Infected: if the score is more than 5 and less than 7.5
– Sick: if the score is equals to or less than 5
The scoring and definition of the four categories and their sub-categories are defined below
1- Stability (5 points)
Stability is concerned mainly on outages rates, integrations health and enhancements delivered to the customer, as per the following:
– Outage (weight is two points)
What is the percentage of severity-1 cases with respect to all support cases count? (Total outage cases)
o %5 and less: 2 out of 2
o >5% <20%: 1 out of 2
o >20%: 0 out of 2
– Integrations (weight is two points)
Are all integrations with our applications working well?
o All working well: 2 out of 2
o Most are working well: 1 out of 2
o Few are working well: 0 out of 2
– Enhancements (weight is one point)
Number products Enhancements delivered per year to the total submitted Enhancements (i.e. if 4 are delivered out of 10, then score is 0.4)
2- Maturity (5 points)
This is to measure generally how the customer is using our products; and what is the level of engagement they have with our people as a whole
– Update-ability (weight is two points)
Are all products are on latest major versions?
o If 75% and more are yes: 2 out of 2
o If 50% to 75% are yes: 1 out of 2
o If less than 50% are yes: 0 out of 2
– Utilization / Shelf-ware (weight is one point)
Any shelf-ware or unused products?
o Yes (0 out of 1)
o No (1 out of 1)
– Participation (weight is one point)
Has the customer participated in any events or special technical forums online?
o Yes (online and events) : 1 out of 1
o Yes (online only or events only): 0.5 out of 1
o No: 0 out of 1
– Reach-ability (weight is one point)
Does the customer know whom to talk to within our organization?
o Yes (1 out of 1)
o No (0 out of 1)
3- Innovation (5 points)
This is to measure the level of advancement in using our products generally, whether new or existing ones. And how this is evaluated with respect to our special reference and exclusive programs we offer
– Earliness (weight is two points)
Does the customer has two or more of our new products?
o Two or more: 2 out of 2
o One only: 1 out of 2
o Zero: 0 out of two
– Development (weight is one point)
Does the customer have in-house applications integrated to our products?
o Yes: 1 out of 1
o No: 0 out of 1
– Referencing (weight is one point)
Is this a reference customer?
o Yes: 1 out of 1
o No: 0 out of 1
– Exclusiveness (weight is one point)
Does the customer participate in any special programs (Beta testing, brain storming…etc)?
o Yes: 1 out of 1
o No: 0 out of 1
4- Adoption (15 points)
This part’s focus is on how successful are we in selling our products/services to our customer (adoption level), the assumption here is that if the account health is good then it should be reflected to the sales figures
However, this part could be taken out of the health calculation if we assumed that only heath is measured on the delivery/usage sides
– Licenses/cloud/subscription sales
Have we achieved all planned new licenses/cloud/subscription sales opportunities in last 4 quarters?
o All Yes (5 out of 5)
o Partially yes, then normalize the sales percentage to 5 (i.e if 80% of sales achieved, then score is 4 out of 5)
– Services sales
Have we achieved all planned services sales opportunities in last 4 quarters? (support, education, professional services..etc)
o All Yes (5 out of 5)
o Partially yes, then normalize the sales percentage to 5 (i.e if 80% of sales achieved, then score is 4 out of 5)
– Vertical sales
Any upsells (licenses/cloud expansion or services expansion)?
o Yes (5 out of 5)
o No (0 out of 5)
Overall health score
As explained above, the total score is divided by 30. Then the final score can be categorized as following:
– Healthy: 7.5 and above
– Infected: between 5 and 7.5
– Sick: 5 and below
This could be color coded and presented to top executives, corrective actions can take place by tracing the scoring losses.
