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  3. June CS Discussion: Identifying Actionable Growth Metrics

Article June CS Discussion: Identifying Actionable Growth Metrics

Jenna Kluger Jun 23, 2021

Over the past year, the biggest theme we’ve observed at Quala is the increasing responsibility of customer success teams to show revenue impact. As businesses navigate a historic time of change, it’s up to CS reps and leaders to troubleshoot issues, problem-solve solutions, and ensure high-touch experiences.

“Customer success is no longer just a management term bandied around in meetings, it is increasingly being recognized by organizations globally as a way to assist clients to achieve desired business outcomes and manage post-buy relationships,” writes a recent report for KPMG Australia.

“Customer success drives growth through single-minded focus on the customer.”

How can teams build a through-line from their everyday activities to revenue performance? This was the question that inspired our most recent Quala Community Hour discussion topic: health scores.

Framing the Discussion

Behind the scenes, Quala runs a community of hundreds of customer success leaders, at fast-growing companies around the world (join us if you haven’t already). At least once a quarter, we sync for an actionable discussion (check out our previous sessions here).

On June 15, we got together to talk about health scores — a topic that we’ve found to be controversial in our circles. Some companies have found a lot of success tying health scores to revenue. Others perceive this metric to miss the mark on capturing their goals.

So how do you make your health score worth your time?

We sat down with Michael Marcus, co-founder and VP of customer success at Jebbit, an insights platform that works with customers like the NFL, Shiseido, bareMinerals, and more to answer this question.

Key Ideas

We began the conversation with a 30-minute Q&A led by co-founder Sonciary Honnoll. Here were some key points that the two of them hit in their Q&A focused on the why, when and hows of health scores:

Your Health Score is a Teammate

Instead of thinking of your health score as a magic bullet, think about it like a teammate – a valuable tool to spur conversations, communicate risk and drive the right behaviors.

Michael: I think the first place that I stumbled in the early days before we created our health score was I thought a health score needed to be that single source of truth. It had to be right or wrong, period.

And I think the really important learning as we went through the whole process that’ll bring back to anyone who’s creating a health score from scratch is that the health score is like a teammate. It’s not the end point. It’s not the thing that just decides this will churn, or this will renew. It’s the piece that if you operationalize it correctly can be really helpful. It’s not going to be right every single time. And it certainly isn’t for us, but it helps spur conversation that creates great behaviors amongst the team.

Why You Need a Health Score

It’s the shortest path to ensuring that you’re focusing on the right initiatives as you scale your Customer Success organization.

Michael: I think just as you’re laying a foundation, first thing about why do you need this health score, and for us, the reason was very simply, we were putting our time in potentially the wrong places with our customer base. Our customer base grew, we had a team that was growing and we talked all the time about prioritization, where should I put my time?

So actually, the core of it really didn’t stem from predicting churn per se. It evolved to that. But it was how do you focus the team on the highest impact areas? First, how can we proactively flag customers who might be at risk? How can we proactively flag customers where there’s opportunity and let’s use an unemotional number and pair it around qualitative internal sixth sense so to speak.

For us, we really wanted to focus on creating more value for our customers, spending time in the right place, more accurately predicting renewals. And I think if we had that dashboard, ultimately we’re going to improve retention. If the team is better set up to scale, to focus in the right areas, to spend their time in the right places, our retention should go up as a result.

It’s Never Too Early to Start

Earlier the better – start building a health score when you know your customers best.

Michael: Earlier, the better. Right away from the start if I could do it over again, I’d go right from the start. And I think the reason for that, it’s like the same question when someone’s like, “When should I use Salesforce?” You might not need it from the start. I can use my spreadsheets. But if I build the infrastructure when it’s most simple, and when I understand the customer best, you’re going to have a better foundation for a health score.

How to Pick the Right Indicators

Many of us struggle with leading vs lagging indicators and figuring out which are the right metrics to include. Michael shares some tips on how to identify them:

Michael: The way we started out was we just went to a whiteboard. We didn’t over-complicate it, it was nothing fancy. We put up a whiteboard, locked ourselves in a room. It was myself, another member of the customer success team, our data analyst and our VP of product. And the four of us were in there for three or four hours. And all we talked about were, here are customers who renew, why? Here are customers who churned, why?

We looked at the data from the last year in those renewed and churned customers. What are some things that stand out that might’ve led to the renewal, that might’ve led to the churn? And we just wrote every category down. And I think at its peak, we had 100 potential factors ranging from incredibly specific to just broad.

We brought it down to 15 factors and tested it against a group of the 30 or 40 most representative renewals of the past year. We tested each of those factors against it, and identified correlations. For example, we looked at what number of users can accurately predict churn, if any? And that was our starting point.

Incorporate Quantitative and Qualitative Metrics

Positive conversations don’t always translate into renewals and usage metrics don’t always translate into product value. Incorporate checks and balances by combining metrics with spidey sense indicators.

Sonci: For those of us on the call that are in the earlier stages, or maybe we have relationships with customers that are with named accounts, we have close connections with them, you do have to be careful with how you think about their experiences. They might like working with you. They might find your interactions valuable, but that doesn’t mean that they find the product valuable and it doesn’t mean that they’re getting the value that they wanted to get in the time that they wanted to get it in. So asking key questions around, do you have connections with your key champions? Are they getting the perceived value they wanted when they wanted? And we can continue down that road.

Community Questions

After the Q&A, everyone joined small breakout groups to discuss their thoughts in more depth. We concluded the event with a general forum for everyone to share their questions. Here were some of the most interesting topics that we explored:

  • How to create health scores for different customer segments
  • Tying health score to ROI is important
  • Identifying a short list of metrics based on time efficiency and cost
  • Techniques for incorporating industry metrics
  • Creating predictability through data

Further Reading

If you’re interested in exploring the topic of health scores in more depth, we have some reading material for you. This blog post, How to Strategically Score Customer Health to Drive Startup Growth, inspired our vision for the Community Hour.

“At its simplest level, customer health scoring provides you with a systematic, objective view into your customer’s relationship to your business. Your entire business relies on your customer’s success, making this insight incredibly important.”

Don’t Miss Out

If you didn’t have a chance to catch the live event, be sure to check out the recording. It makes for great podcast material, especially if you’re looking for something productive to do when doing other tasks (i.e. cleaning your kitchen or doing dishes).

You can catch the full recording here.

Be sure to share this resource with your team and peers — your LinkedIn network will probably value these insights. If you haven’t already, join our Slack community and sign up to hear about our next event. All are welcome.

Contributors Statement
This work was written by Ritika Puri and Jenna Kluger.