Products Pricing Solutions Customers Resources Company Impact

Resource
2 Minute Demo
Center
Download

The CEO’s Guide to Measuring Your

Customers
By Nick Mehta 
Resource
2021 Buyer’s Guide
“If you can’t measure it, you can’t manage it.” -Peter Drucker to Customer
“It’s all about the Benjamins, baby.” -Puff Daddy Success Solutions
Download
Whether you take your leadership lessons from Drucker or Diddy,
you know that a huge part of the CEO’s job is to help your
colleagues understand the “scoreboard” for measuring success.

Over the years, we, as leaders, have developed methods to quantify

most aspects of business:

Finance: GAAP (or IFRS) accounting rules

Sales: Bookings methodologies
Marketing: “Marketing Qualified Leads”
Personal Ego: Twitter followers…

And so on.

And yet, with all of these statistics we still can’t measure what is
usually the greatest “hidden” asset in our business—our customer
base. How are we doing with clients? Are we delivering value for
them? Are they likely to stay with us? Are they fans of us?

If you’ve studied the field, the Net Promoter Score was created to
partially address these questions. But with the trend toward Digital
Transformation, companies are awash in data about their clients
that they could be using to measure client health.

Customer Health Scoring is the concept that you can integrate

together various “signals” about your clients in order to quantify
your customer base.

In this post, I will:

Convince you that this is a CEO-level problem that will benefit

ALL departments (not just the Customer Success department, if
you have one)
Show you how to approach building a Customer Health Scoring
framework
Most importantly, point out what mistakes to avoid
We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about
✓ Accept Cookies
your use of our site with our social media, advertising and analytics partners.
 Why Measure Customers
Products Pricing Solutions Customers Resources Company Impact
As with other areas of measurement, I’d break the value of
quantifying your customers into three conceptual buckets. I’ve
drawn an analogy to Sales in the below table.

Value Sales Customers

Report Report on trend of overall
bookings and pipeline to
the company, board and
investors
Incent Incent sales reps with
commission based upon
bookings
Act Take action on individual
“deals” in the pipeline to
convert them to bookings
What(s) To Measure
Report on trend of overall Customer
Health Scores to the company, board
and investors
Incent team members managing
clients (e.g., Customer Success
Managers, Account Managers)
toward growth in Customer Health
Scores
Take action on customers where you
can improve Customer Health Scores
in some way

Did you pay attention in the last section? Something weird jump
out? Did you notice I said “Customer Health ScoreS,” not “Customer
Health Score?”

One of the biggest mistakes companies make when

implementing Customer Health Scoring is thinking everything
can be distilled down to one number.

One way to think about it is to consider the story of the Blind Men
and the Elephant.

Source: http://68.media.tumblr.com/tumblr_m59kgnTbUJ1qfvq9bo2_r1_1280.jpg

Customer Health is the “elephant.” But there are many views into
health, and each is like one of the men grasping at the elephant. In
our clients, I see seven common types of views into Customer
Health:

1. Vendor Outcomes
2. Vendor Risk
3. Vendor Expansion
4. Client Outcomes
5. Client Experience
6. Client Engagement
7. Client Maturity

Different organizations start with varying subsets of the above

Scorecards:
We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about
✓ Accept Cookies
your use of our site with our social media, advertising and analytics partners.
 Want to track the overall ROI of Customers Success => Vendor
Outcomes Products Pricing Solutions Customers Resources Company Impact

Want to have an early warning on risk in accounts => Vendor

Risk
Sales team driving Customer Success => Vendor Expansion
Want to more closely track your impact to customers => Client
Outcomes
Voice of the Customer team driving Customer Success => Client
Experience
Marketing team driving Customer Success => Client
Engagement
Company effort to get clients at higher levels of sophistication
=> Client Maturity
Vendor Outcomes Scorecards

Clients provide multiple areas of value to vendors, and you should

measure these separately. We wrote recently about this in our CRO’s
Guide to Customer Success where we introduced the Revenue
Helix.

For a typical vendor, the desired outcomes for the vendor include:

Value if the client stays with them

Incremental value if the client expands with them
Incremental value if the client helps the vendor acquire new
clients (e.g., as a reference)

So a Vendor Outcomes Scorecard could have the following top-level

dimensions:

Retention: Are they likely to stay with us?

Expansion: Are they likely to expand in spend or consumption
with us?
Advocacy: Are they likely to be an advocate for us?

And here’s the confounding thing that you know if you’ve managed
clients for a long time:
Clients can be guaranteed to stay with you near-term (because they
are stuck) AND be a negative advocate (a Detractor). Clients can be
engineering you out long-term (not “sticky”) AND short-term be
planning to expand. Clients can be about to churn (Retention Risk)
AND be an Advocate! It’s important to separate out the various
“outputs” of a client relationship into separate metrics.

As an example, see the sample Vendor Outcomes scorecard below.

We’ve created “groups” for Retention, Expansion and Advocacy,
with sample indicators for each:

Retention Indicators
Adoption
We use cookies to personalise contentSophistication Score:
and ads, to provide social Number
media of advanced
features and to analyse our traffic. We also share information about
✓ Accept Cookies
your use of our site withcapabilities
our social media,used.
advertising and analytics partners.
 Support Health Score: Presence or lack of recent poor
support experiences. Products Pricing Solutions Customers Resources Company Impact

Sponsor Score: Relationship with exec sponsor.

Expansion Indicators
Marketing Engagement Score: Attendance to recent
marketing events.
Open Opportunities Score: Presence of open sales
opportunities in CRM.
Utilization Score: Percentage of contracted products or
services used.

Advocacy Indicators
Sentiment Score: Recent survey feedback.
Reference Score: Recent reference activity.
Community Score: Activity in online community.

In general, Vendor-centric Scorecards are the types you’d want to

share internally or with your board (or your CFO!)
Vendor Risk Scorecards

Pivoting a different way, some companies may want to measure

client risk by functional owner—so you can define clear
accountability by department. We defined a strawman of this a few
years ago with our Risk Framework. Examples could include:

Support Health: Does the client have too many cases open?
Repeated cases? Cases aging too long? This could be owned by
the head of support.
Product Health: Does the client have open bugs or critical
enhancement requests? Similarly, the head of product would
be responsible for this score.
Marketing Engagement Health: Is the client engaged in
vendor marketing activities? The marketing leader would be
accountable here.
Product/Service Adoption Health: Is the client using the
vendor’s product/service actively and well? Often, the Customer
Success team would directly drive this.
Services Health: Have the client’s services projects with the
vendor gone well (on time, on budget, on quality, etc.)? A head
of Professional Services might take this on.
And so on

We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about
✓ Accept Cookies
your use of our site with our social media, advertising and analytics partners.
 Vendor Expansion Scorecard
Products Pricing Solutions Customers Resources Company Impact
On the positive side, some companies want to easily expose
opportunity—or “white space” for their sales team.

You can imagine taking each product/service area and using logic
to define the unsold opportunity to sell that offering into the given
customer.

For example, imagine you have two product lines:

Lightsabers
Tricorders

You could define rules for what you expect a client to purchase:

If Industry = “Star Wars”

For Lightsabers
GREEN = 10+
YELLOW = 1-9
RED = 0

For Tricorders
GREEN = 2
YELLOW = 1
RED = 0

If Industry = “Star Trek”

For Lightsabers
GREEN = 2
YELLOW = 1
RED = 0

For Tricorders
GREEN = 10+
YELLOW = 1-9
RED = 0

You could have further overrides based upon health. If a client has
risk issues in a given product, the expansion score for that product
could be set to “NA” until the issues are resolved.

You can then put a very sales-friendly view in front of your reps of
the “selling opportunity” in their accounts:

We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about
✓ Accept Cookies
your use of our site with our social media, advertising and analytics partners.
 Client Outcomes Scorecards
Products Pricing Solutions Customers Resources Company Impact
Conversely, you could imagine putting yourself in the shoes of your
clients and asking how THEY measure the success of the
relationship. This could include:

ROI: Has the client received and observed a Return on

Investment?
TCO: How much time and cost has been put in by the client
(Total Cost of Ownership)?
Outcomes: Beyond ROI, what other outcomes did the client
achieve?
Time-to-value: How long did it take?

But how do you measure these, you may ask?

Some products or services are marvelous in that they inherently

drive quantitative ROI. Billing services can automate a calculation of
“Dollars Billed” or “Collections Driven.” Energy companies can
compute “Efficiency Gained.”

But for most companies, Client Outcomes Scorecards are likely to

be part of a Success Planning process. This likely involves:

Defining a client’s desired goals (ROI, TCO, Outcomes, etc.)

during the sales process
Capturing these (e.g., in a Success Plan)
Handing them through the lifecycle (Pre-sales to Onboarding to
CSM/AM)
Reviewing and scoring them in regular Executive Business
Reviews or via Surveys

This exercise is simple: What would you genuinely share with a

client in a Quarterly Business Review? And the results should be
mutually agreed to with the client.

An example of a Client Outcomes Scorecard is below.

Client Experience Scorecards

But it’s not JUST about the Outcomes. It’s also about how you make
a client “feel.”

To envision a Client Experience Scorecard, think about all of the

“bumps” in a typical client experience:

Poor expectation setting in sales

Long onboarding
Rocky onboarding experience
Bad support experience
Repeated support experiences
Outages
Weak relationship with account team
We use cookies toProduct/service quality
personalise content and ads, to issues
provide social media features and to analyse our traffic. We also share information about
✓ Accept Cookies
your use of our site with our social media, advertising and analytics partners.
 A sample Client Experience Scorecard might look like the following:
Products Pricing Solutions Customers Resources Company Impact
Sales Experience: Survey client after sale to see how rep did in
expectation setting.
Onboarding Time: Measure actual onboarding time versus
promised.
Onboarding Experience: Survey client after onboarding.
Support Experience: Survey client after cases.
Support Frequency: Measure frequency of tickets.
Uptime: Measure service uptime for client.
Relationship: Regular Net Promoter Score survey.
Quality: Count of bugs affecting client.

Client Engagement Scorecards

For many organizations, the focus on Customer Health is managing

“leading indicators.” Often, the leading indicators for customer
retention and expansion tend to be around the level of engagement
between the client and the vendor.

A Client Engagement Scorecard might include:

Product/Service Engagement: How sophisticated is the client’s

usage of the product/service in question?
Marketing Engagement: How often does the customer attend
webinars, events, etc?
Community Engagement: Is the client active in the vendor’s
online community?
Advocacy Engagement: Is the client an active advocate for the
vendor?

Client Maturity Scorecards

Some businesses, particularly “high touch” ones, want to drive

clients toward increasing levels of “maturity” with their product or
service. At the same time, they want to assess and staff clients
differently based upon that maturity level.

A Client Maturity Scorecard could include:

We use cookies toBusiness Processes:

personalise content and ads,Does thesocial
to provide client have
media business
features processes
and to analyse our traffic. We also share information about
✓ Accept Cookies
your use of our site with our social media, advertising and analytics partners.
implemented around the vendor’s product or service?
 Sophistication: How sophisticated is the client’s usage of the
vendor’s product or service? Products Pricing Solutions Customers Resources Company Impact

Tenure: How long has the client been using the vendor’s
product or service?
Training: How many people at the client have been trained on
the vendor’s product or service?
Advocacy: Is the client an active advocate for the vendor?

What (Parts of) Clients To Measure

Continuing the theme, if you have large customers and/or multiple

products, it gets even more complicated. You may have a “sticky”
relationship with one business unit and be about to churn another.
You may have an Advocate in one business unit and a Detractor in
another.

Similarly, a client may be about to churn one product line with you
and be in the process of expanding on another.

Make sure you measure client health at a granular level—the

same level at which your client is measuring you!

Where To Get the Data

Prediction: you’re going to spend the most time and energy as a

company on the easiest problem. You’ll spend months and quarters
of precious time talking about how your “data isn’t clean” and
waiting until you “figure out your data.” In fact, you’re reading this
post right now thinking “Nick, we’re not like the typical company—
our data is a mess.”

Without knowing anything about your business, I can tell you that
you have enough data to start. You likely have some combination of:

Sales data in a Salesforce Automation (sometimes called CRM)

system
Financial data in an Enterprise Resource Planning (ERP) system
Customer feedback data in a Survey system
Services project data in a Professional Services Automation
system
Marketing engagement data in Marketing Automation system
User engagement data in a Community system
We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about
General
your use of our site customer
with our social data a in
media, advertising Data
and Warehouse
analytics partners.
✓ Accept Cookies
 Website activity data in a Marketing Analytics system
Support data in a Support Ticketing systemProducts Pricing Solutions Customers Resources Company Impact

If you’re lucky, you may also have Product Telemetry of some kind.

Now, if you have none of those, stop reading this post and go get
yourself some data! But if you’re like most companies with a bunch
of the above but with issues in quality, you’re not alone. Just from
the most readily available of the data sources we listed, you can
make progress on Customer Health Scoring.
How To Define Your Scores

This is the hard part. Now that you have the data and your
objectives, you need to turn the former into the latter. Below are
some principles to get started:

1. Define Customer Health Scorecards, Not Scorecard: Per the

previous section, define multiple ways of measuring client
health. The beauty is you don’t have to choose! You can mix and
match the same atomic data points (e.g., usage, NPS) into these
separate views on client health.
2. Define Scorecards At the Level Your Clients Experience: Per
the previous section, whether your clients buy at the business
unit level or at the product line level (or both), make your scores
equally granular.
3. Distinguish Leading Indicators from Lagging Indicators: It’s
okay to have Scorecards that track both leading indicators (e.g.,
how engaged is the client in marketing) and lagging indicators
(e.g., renewal forecast). But don’t average them together and
expect meaning.
4. For Each Scorecard, Mix and Match Data: For example, your
Marketing Engagement Scorecard might include a
measurement of their attendance to webinars (from your
Webinar system), their open rate on emails (from your
Marketing Automation system), and their registration for in-
person events (from your Event Management system).
5. Automate Wherever Possible: Manual inputs on Customer
Health (e.g. a CSM’s subjective perspective/scoring on customer
sentiment) are sometimes necessary, but such inputs create
more process for CSMs and are seldom objective. Pull in hard
data from sources (see above) wherever possible to minimize
subjectivity and the need for CSMs to make time-consuming
inputs.
6. Define An Understandable Grading Scheme: While eventually
a numeric system (0-100) may be appropriate for visualizing a
trend, you may want “bands.” We recommend color bands for
intuitive understanding (e.g., Red/Yellow/Green).
7. Leverage Trends But Be Careful: You may want to look at
“changes” to measure health (e.g., a client dropping in usage
could be a bad sign), but you need to watch out for “false
positives” (e.g., a usage drop due to vacations).
8. Look for “Absence of Data”: One of the most powerful signals
you can look for is the negative. Which clients haven’t attended
an event or webinar recently? Which clients didn’t open the
roadmap release email nor attend the roadmap webcast?
Which Decision Maker didn’t respond to your NPS survey?
9. Vary Rules by Customer Segment or Maturity: Boaz Maor
wrote about this recently. You can’t treat all customers the
same in terms of measurement. Make sure you are defining
rules based upon the unique segments of your business.
We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about
✓ Accept Cookies
your use of our site with our social media, advertising and analytics partners.
 10. Leverage Benchmarking Where Appropriate: If you have a
common value (e.g., transactions/day) across clients,Pricing
Products you can
Solutions Customers Resources Company Impact

use benchmarking rules to compare a given client against the

average or median of its peers—and then score based upon this
benchmark.
11. Use Overrides (But Sparingly): While you may normally take a
combination of measures to determine a score (e.g., a
combination of webinar attendance, event attendance and
open rate to define Marketing Engagement), you may need an
“override” in cases where, no matter what the other measures
say, a selected variable trumps all others. For example, if you
get a Detractor NPS response from an Executive Decision
Maker, that may trump all other objective data. That being said,
don’t have too many overrides or your scoring system will be for
naught.
12. Focus on Actionability: A big part of driving Customer Success
as a company is identifying early signs. But equally important is
finding ACTIONABLE early signs. A client that stopped using
your service is interesting but what do you do about it? Perhaps
more interesting is a client who is actively using your service
but not reading your release notes. Near-term, they are healthy.
Long-term, they may not perceive your innovation and may
leave you. And you can do something about it.
13. Don’t Have Too Many Measures: While I gave you many
examples here, don’t overwhelm your team with too many
scoring measures overnight. Start with a few (I’ve seen 6-12
work).
14. Use Comments But Keep Them Important: Comments in a
Scorecard can help provide context for the “why” behind a
score. For example, “Support Health is RED because client has
five open tickets.” But don’t overdo it.
15. Keep Old Scores: While you may decide to change the rules in
terms of how you measure an area, I encourage you to retain
the old data. Hide it, for sure, to not confuse your team. But
keep the old data as it may come in handy down the road.
How Not To Do It

These are pretty much the inverse of the above, but just for
completeness:

1. Don’t Average Averages: Don’t take all of your data about all
aspects of customers, average them together, and expect
meaning out of it. Same with averaging data across products
and business units within a client. You wouldn’t average your
Balance Sheet and Income Statement together and expect
useful information, would you?
2. Don’t Practice False Precision: I like color coding because
numbers sometimes lead you to a false sense of confidence
about how much you know. 87/100 health going to 86 is likely
noise.
3. Don’t Overdo Trending: If you want “RED” every time a client
drops 10% in some metric, you will see a lot of (FALSE) red.
4. Don’t Wait for Perfection: The beauty of having multiple
scorecards is that you can start now and keep adding
incrementally.
Next Steps

So what to do next? If I were you, I’d parallel process:

Run an off-site with your team to define a “roadmap” for how to

We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about
measure different parts of your client base.
your use of our site with our social media, advertising and analytics partners.
✓ Accept Cookies
 In parallel, pick one of the concepts in this article and get going
so you have a starting point. Products Pricing Solutions Customers Resources Company Impact

One final thought: let’s circle back to the “elephant in the room.”
The elephant in this blog post is technology—specifically software.
I’ve intentionally tried to keep this post completely agnostic vis a vis
software, but if you’ve read this far, you probably understand that
measuring your customer base according to the framework I’ve laid
out is completely impossible without some sort of software
solution.

Some companies choose to do this through a patchwork of tools

(and lots of spreadsheets). Others look to all-in-one platforms or
home-built solutions. As the CEO of a Customer Success software
company, you might be surprised to find out that I don’t actually
recommend Gainsight to every company—even though I am wholly
convinced we’re the most sophisticated and full-featured offering in
this category.

No matter what size or stage your company is in, the last step (and a
crucial part of each prong of the parallel process I talked about
above) is a software evaluation. I’ve written two resources that can
help you assess your current situation and plan for implementing
the best possible solution. I highly recommend you look at these
regardless of which stage you’re at in your process:

1. The Essential Guide to Choosing a Customer Success Solution

2. The Buyer’s Guide to Customer Success Solutions

Most businesses say “our customers are our greatest asset.” And yet,
those same companies have no way to measure said asset. It’s time
to fix that.

2 Comments
Leave a reply

Write your response here…

Name * E-Mail * Website

Name E-Mail Website

Save my name, email, and website in this browser for the next time I comment.

SUBMIT COMMENT

Jon Ander
Aug 16th, 2017Reply

Complex but well articulated. Gold dust!

Thank you Nick, Priyanka, and Will

David
Aug 16th, 2017Reply
We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about
✓ Accept Cookies
your use of our site with our social media, advertising and analytics partners.
 Nick,
How does Vendor Outcome Scorecards andProducts
Client Pricing Solutions Customers Resources Company Impact

Engagement Scorecards differ? Vendor and CE sections

both list:
Adoption Sophistication
Marketing Engagement
Advocacy
Community Involvement

More Related Content

Measuring B2B CX In Engagement Metrics How to Score Customer

SaaS: What Are The Health
Metrics That Matter?
Read More  Read More  Read More 

Products Solutions Resources Gainsight

Customer Success Healthcare Resource Library Who We Are
Product Experience Education Gainsight Blog Leadership
Win in business while Insided Security Events & Webinars Customers
being human-first. Customer Success Teams 2-Minute Demo Center Pricing

Platform Product Experience Teams Valuation Calculator Partners

Schedule a Demo
Gainsight Platform Product Adoption Gainsight Community Impact

Marketplace Gainsight Essentials Push to Production Press Releases

   
Time to Value Gainsight Essentials Careers

Industries and Teams Gainsight University

Scale and Efficiency Documentation

Retention For Developers

Expansion Horizon Experience

Customer Success Teams

Product Teams
Customer Experience Teams
Revenue and Sales Teams
IT and Analytics Teams
Executives

© 2023 Gainsight, The Customer Success Company. All rights reserved.  //   350 Bay Street, Suite 100, San Francisco, CA 94133  //  +1 (888) 623-8562
Terms and Privacy  //  Do not sell my personal information  //  Security

We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about
✓ Accept Cookies
your use of our site with our social media, advertising and analytics partners.