Customer Health Scoring: The New Framework For Retaining SaaS Customers

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Customer experience backed with value is the fuel that keeps SaaS businesses up and running even in the era where competition is neck-to-neck. With technology evolving by leaps and bounds, businesses succeed by incorporating cutting-edge technology to enhance customer experience and security.

However, specific ways to enhance customer experience couldn’t guarantee success since the market is flooded with endless competitors in every niche. And brands have to think out of the box to prevent customer churn.

Customer health scoring is an approach that analyzes data to predict which customers are at risk of churning. It uses machine learning, computer systems, and other algorithms to analyze customer behavior and patterns to predict if customers are likely to cancel their subscriptions.

Let’s dig deeper into this and understand why SaaS businesses must put their best foot forward in adopting customer health scoring to improve customer retention.

What is Customer Scoring? Why Does it Matter for SaaS Businesses?

Customer Health Score is a term SaaS businesses use to ascertain how likely a customer is to stay with the product. Using pattern analysis and machine learning, businesses can analyze customer behavior and patterns, indicating when customers are likely to cancel their subscriptions. This information can, in turn, help in making decisions on how to retain them.

Data collected from your customers (and potential customers) helps you create policies to segment customers into groups by their predicted likelihood of churning. This way, you can prioritize resources and allocate budgets for people who are more likely to churn and acquire those who aren’t.

In a nutshell, you can’t afford to ignore customer health scoring because SaaS businesses typically rely on the revenue they get from their customers, who are usually very sensitive and can switch to your competitors with little hesitation. As a result, customer health scores are more crucial than ever before.

Now, the question is, which factors go into analyzing customer health scoring? Several factors contribute to portraying which customers are at a higher risk of leaving, are unhappy, or are most valuable to your business. Let’s figure it out.

1. Churn Rate

Churn rate is a business metric that measures how many customers leave your business or cancel their subscriptions. The higher the churn rate, the more your business loses money.

For example, if a business has 1000 customers and 10% leave after one month, 100 customers have left. The number of new customers does not affect your churn rate (as long as they are replaced by others who stay for the same amount of time).

There are many reasons why people cancel their subscriptions with you, including:

  • Getting tired of paying for something they don’t use anymore
  • Not getting enough value from what you’re offering
  • Being unhappy with the quality of your product or service

SaaS businesses can minimize their churn rates by:

  • Directly reaching out to customers for feedback on their experience with your product or service
  • Offering discounts or other lucrative offers to retain them
  • Making changes to product/service as per the feedback received from customers
  • Enhancing customer support (the better your customer support is, the more likely they are to stay)

2. Measuring Customer Engagement

Customer engagement measures how often customers log in, use the service/product and interact with the support team. It can also be measured by tracking how many features are used.

There are a few different ways to measure customer engagement:

  • Customer Engagement Score: This percentage shows how often customers use your product or service. It’s based on how much time they spend using it and what they do while they’re using it.
  • The Customer Satisfaction Score: It’s an overall rating of your client’s satisfaction with your product or service. They’ll rate their experience as either very satisfied, somewhat satisfied, neither satisfied nor dissatisfied, somewhat dissatisfied, or very dissatisfied.
  • Net Promoter Score (NPS): This measures whether or not clients would recommend your product or service to others. They’ll answer a question about their experience on a scale from 0-10 (with ten being the best), then answer one more question about whether or not they would recommend it to someone else.

In Conclusion

SaaS businesses can’t overlook the importance of customer health scoring; hence, they must emphasize the same. The aforementioned aspects depict the importance and elements of measuring customer health scores to understand that customers still love their products/services and are likely to recommend them to their acquaintances.

Apart from this, businesses can also learn more about their satisfied customers, the ones that could switch, and where they need to focus on minimizing churn rates.

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