You've probably had to deal with customer attrition as a business owner. What if, however, you could prevent it before it occurs? You may assess the state of each of your customer connections and take proactive steps to maintain their engagement by using a customer health score.

By analyzing customer behaviors, purchase patterns, and interaction history, businesses can proactively address concerns, improve customer relationships, and ultimately increase sales. This guide will walk you through the concept of a Customer Health Score, how to calculate it, and strategies for using it to grow your e-commerce business.

What is a customer health score?

An indicator of a client's satisfaction or the state of your company's connection with them is called a customer health score.  It takes into consideration a variety of potential signs, both positive and negative, such as the frequency of purchases, relationship duration, reviews, and returns, which aid in determining if a client is content or likely to leave.

A Customer Health Score (CHS) is a numerical value or classification that determines how engaged and satisfied a customer is with a brand. It predicts whether a customer is likely to continue purchasing, upgrade services, or churn (stop doing business with the company).

How to measure customer health scores

You may identify healthy customers who are strong candidates for upselling and prevent customer attrition by using a customer health score.  You must assess each customer's interactions with your brand in order to ascertain where they fall.  Every company uses a different method to measure this parameter.  How to calculate customer health scores is as follows:

1. Determine the indicators

Determine your indicators, or the important occurrences that can affect whether consumers continue or cease making purchases, in order to calculate customer health scores. Returns, the frequency of interactions, and repeat business are a few indicators.

Each business determines the most important criteria. If you run an online clothing store, for instance, you may track how frequently clients make purchases and engage with your brand on social media. SaaS businesses, on the other hand, might place more emphasis on client interaction, recommendations, and product use.

2. Assess the significance of each signal

For your business, some indications will be more important than others.  As a result, you will measure or weigh each good and negative indicator based on its significance when calculating customer health scores. A ranking scale from 1 to 10 can be used for this, with 10 representing the elements that your company values the most and 1 representing the ones that are least significant.  

As an illustration, suppose you own an online jewelry store and choose four important metrics: annual sales, recommendations, returns, and responses to customer satisfaction surveys.  You can assign a weight of 10 to purchases, 5 to referrals, 3 to returns, and 3 to positive survey responses.

3. Calculate the Customer Health Score

Now, compute the customer health score using a formula. A common method involves assigning a score between 0-100 based on performance in different areas:

For example, if a customer scores:

• Product Usage: 80
• NPS: 90
• Support Tickets: 40
• Renewals: 70
• Expansion Revenue: 85

Then their Customer Health Score is:

A high score (above 70) suggests a healthy customer, while a low score (below 50) indicates a risk of churn.

4. Establish your ceiling

Choose a high-value client who can act as the benchmark by which all other clients are measured in order to determine your ceiling.  To get the upper limit of your brand's customer health score, you will utilize the customer health score formula.  The formula subtracts points for unfavorable results after multiplying each indicator's frequency by its weight.

Assume, for instance, that your model customer returned one item, made six purchases, recommended two new clients, and gave good answers to six satisfaction questionnaires.  This is how you would calculate their score: (1 return x 3) - (6 positive survey replies x 3 impact weight) + (2 referrals x 5 impact weight) + (6 purchases x 10 impact weight) = 85.

5. Take Proactive Action Based on Scores

After that, you can create a plan to improve the health of clients with moderate-to-good scores and re-engage those with low scores. Improving a customer's health score depends on the individual and the conduct that caused the poor score because every customer category has different demands.   Once you have a clear picture of customer health, take action to improve it. Strategies include:

• For High-Scoring Customers (70+)
  • Offer loyalty rewards or exclusive deals.
  • Encourage them to become brand advocates.
  • Gather testimonials and case studies.
• For Medium-Scoring Customers (50-70)
  • Provide additional training or resources to increase engagement.
  • Schedule account reviews to address concerns.
  • Offer personalized upsell opportunities.
• For Low-Scoring Customers (<50)
  • Reach out personally to understand their concerns.
  • Offer discounts or incentives to improve retention.
  • Identify potential product issues and resolve them quickly.

6. Continuously Refine Your Customer Health Scoring System

Customer needs evolve, so your health scoring model should adapt. Regularly analyze and refine your scoring system by:

• Collecting Customer Feedback – Use surveys to understand gaps.
• Updating Metrics & Weightage – Adjust based on new trends.
• Testing New Indicators – Experiment with additional metrics.
• Leveraging AI & Machine Learning – Use advanced analytics to predict churn.

By continuously refining your model, you ensure its accuracy and relevance.

Conclusion

Measuring customer health scores is essential for improving retention, satisfaction, and long-term business growth. By following these seven steps—defining metrics, segmenting customers, assigning weightage, calculating scores, monitoring trends, taking action, and refining the process you can build a robust system that keeps customers engaged and loyal.

Start implementing customer health scoring today to unlock insights that drive business success!

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